As filed with the Securities and Exchange Commission on March 3, 2014
Registration No. 333-193087

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

PRE-EFFECTIVE AMENDMENT NO. 2

TO THE

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

FOCUS UNIVERSAL INC. 

 (Exact name of Registrant as specified in its charter)

 

                                           Nevada                                             

 (State or other jurisdiction of incorporation or organization)

                            

                                       7310                                           

 (Primary Standard Industrial Classification Code Number)

 

                         46-3355876                   

 (I.R.S. Employer Identification Number)

 

8275 S. Eastern Ave., Ste.200-674, Las Vegas, NV 89123 Phone: (702) 724-2646

 (Address, including zip code, and telephone number, including are code, of registrant’s principal executive offices)

 

Tatyana Popova, C.E.O.

     8275 S. Eastern Ave., Ste.200-674, Las Vegas, NV 89123 Phone: (702) 724-2646

 (Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

Eric Stein, Esq.

Szaferman, Lakind, Blumstein & Blader, PC

101 Grovers Mill Road

Second Floor

Lawrenceville, NJ 08648

(609) 557-0953

 

 As soon as practicable after the effective date of this registration statement                    

 (Approximate date of commencement of the proposed sale to the public)

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  [x]

 

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [  ]

 

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [  ]

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [  ]

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

 

 

 

[1] Estimated solely for purposes of calculating the registration fee under Rule 457.

The Registrant hereby amends this Regist­­ration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

Subject to completion, dated __________, 2014

 

PROSPECTUS

FOCUS UNIVERSAL INC.

SHARES OF COMMON STOCK

2,500,000 Minimum - 30,000,000 Maximum

 

We are offering a minimum of 2,500,000 and a maximum of 30,000,000 shares of our common stock in a direct public offering, without any involvement of underwriters or broker-dealers on a best efforts basis.  The offering price is $0.0125 per share. This registration statement constitutes the initial public offering of the company’s common stock.

 

Funds from this offering will be placed in a separate bank account at Bank of America, NY. There is no escrow, trust or similar account in which your subscription will be deposited.  The bank account is merely a separate interest bearing savings account under our control where we have segregated your funds. Our officers and directors will not use the subscription proceeds prior to satisfaction of the minimum and issuance of the shares for working capital, collateral for the company, or other purposes. You will not have the right to withdraw your funds during the offering. You will only receive your funds back if we do not raise the minimum amount of the offering within 270 days and no creditors attach the funds. If the minimum is not reached by the end of the offering the funds will be promptly returned without interest (see “Plan of Distribution” on page 22 ).  

 

Investing in our common stock involves risks (see "Risk Factors" starting on page 8). Our common stock will be an illiquid security without an active trading market.

 

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue in business. As such we may have to cease operations and you could lose your investment.

The shares of our common stock to be sold by us will be sold on our behalf by our executive officers and directors. Such officers and directors will not receive any compensation or commission on the proceeds from the sale of our shares on our behalf, if any.

We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. We, the Company and its promoters, do not seek to engage in a merger, acquisition or business combination with an unidentified private company or person.

 The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to sell these securities in any state where the offer or sale is not permitted.

 

 

 

Table of Contents

 

 

PROSPECTUS SUMMARY

 

 The following summary highlights selected information contained in this Prospectus.  This summary does not contain all the information that may be important to you.  You should read the more detailed information contained in this Prospectus, including but not limited to, the risk factors beginning on page 8. In addition, certain statements are forward-looking statements, which involve risks and uncertainties. See “Disclosure Regarding Forward-Looking Statements.”

References in this Prospectus to “Focus Universal”, “Company”, “we”, “our”, or “us” refer to Focus Universal Inc.  unless otherwise indicated or the context otherwise requires.

 

Forward-Looking Statements

 

This Prospectus contains forward-looking statements that involve risks and uncertainties.  We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements.  You should not place too much reliance on these forward-looking statements.  Our actual results may differ   materially   from those   anticipated in these forward-looking statements for many reasons, including the risks faced by us described in the "Risk Factors" section and elsewhere in this Prospectus.

 

Our Company

 

We were formed on December 4, 2012. Focus Universal Inc. is a digital marketing agency. We offer a full range of web services, including web marketing services, social and viral marketing campaigns and search engine optimization (SEO) consulting, custom web design, including CRM (customer relationship management) solutions.

 

Our goal is to enable small businesses to outsource their marketing and advertising service needs to us. We guide the customer through the necessary steps to establish their online presence, generate traffic to their websites and increase direct consumer interaction. We provide consulting on a wide variety of issues, from selection of domain name registrars and hosting providers, to the most cost-efficient and effective marketing strategies.

 

We generate revenue from sales of our marketing services made directly to small and medium business customers. We acquire customers through direct business to business marketing, referrals and our primary website, www.focusuniversal.com, which outlines our service offerings.

We have commenced our operations during the nine months ended December 31, 2013. As of December 31, 2013 we have generated $11,875 in revenues and have incurred $5,000 in cost of revenue and $14,818 in operating costs since our inception on December 4, 2012.  To date we have relied upon revenues from our operations and sales of our securities in unregistered private placement transactions to fund our operations.  We are a development stage company with a limited operating history. Accordingly, for the foreseeable future, we will continue to be dependent on revenues from operations and additional financing in order to maintain our operations and continue with our corporate activities. 

 

We face many challenges to continue operations, including, but not limited to our limited operating history, competition, and general economic conditions.  Please review the "Risk Factors" starting on page 8 of this offering.

 

This offering and any investment in our common stock involve a high degree of risk.  If our future  revenues will not be sufficient to cover our operating costs we may be obliged to cease business operations due to lack of funds. If we raise only the minimum amount of proceeds from this offering, we will have limited funds available to build and grow our business.

5

 

 

Our Directors collectively own 100% of the 4,000,000 outstanding shares of our common stock as of the date of this Offering.  If the minimum amount of the shares will be sold, our Directors will own 62.5% of our outstanding common stock.  Accordingly, they will 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.  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.

 

Our principal executive offices are located at 8275 S. Eastern Avenue, Suite 200-674, Las Vegas, NV and our telephone number is (702) 724-2646.  Our primary website address is www.focusuniversal.com. The information on, or that can be accessed through this website is not part of this prospectus.

 

We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act.

 

The Company shall continue to be deemed an emerging growth company until the earliest of:

 

(a) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;

 

(b) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under this title;

 

(c) the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or

 

(d) the date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.’.

 

As an “emerging growth company” Focus Universal can take advantage of all of the reduced regulatory and reporting requirements that will be available to it so long as it qualifies as an “emerging growth company”. Among other things, this means that the Company's independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of the Company's internal control over financial reporting so long as it qualifies as an “emerging growth company”, which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an “emerging growth company”, the Company may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers, which would otherwise have been required to provide in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate the Company.

 

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 $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a “smaller reporting company”, at such time are we cease being an “emerging growth company”, we will be required to provide additional disclosure in our SEC filings.  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

 

6

 

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.

 

The Company has irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Act.

         

The Offering

Following is a brief summary of this Offering:

 

(i)                  If the minimum amount of the shares is sold, we will use the proceeds to pay for offering expenses of $6,348.  Of the $6,348, the amounts to be paid from the proceeds for expenses of the offering are: $3,500 for accounting and audit fees; $1,200 for filing fees; $600 for legal fees; $48 for registration fee; and $1,000 for transfer agent fees. 

 

 

We will use the rest of the funds (net of offering expenses) for paying off our current liabilities, hiring new personnel and implementation of our business plan.

Selected Financial Data

The following financial information summarizes the more complete historical financial information at the end of this Prospectus. The summary information below should be read in conjunction with “Selected Historical Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included elsewhere in this Prospectus.

7

 

 

 

Balance Sheet Data:

 

As of December 31, 2013, we had a working capital deficiency of $(3,943) and accumulated deficit of $(7,943) since inception.

 

RISK FACTORS

You should carefully consider the risks described below and other information contained in this prospectus before making an investment decision. Any of the events discussed in the risk factors below may occur. If they do, our business, results of operations or financial condition could be materially adversely affected.

We face intense competition in our industry. If we are unable to compete successfully, our business will be seriously harmed.

 

The market for our marketing services is highly competitive and has low barriers to entry. Our competitors vary in size and in the variety of services they offer. Many of our current and potential competitors have longer operating histories, significantly greater financial, technical, marketing and other resources and an established client base. These competitors may be able to adapt more quickly to new or emerging social media marketing technologies and changes in customer requirements. They may also be able to devote greater resources to the promotion and sales of their services than we can, or may adopt more aggressive pricing policies. If we fail to compete successfully against our competitors, our revenue could decline and our business could be harmed.

 

We lack an operating history. There is no assurance our future operations will result in profitable revenues.  If we cannot generate sufficient revenues to operate profitably, our business will fail.

 

We were incorporated on December 4, 2012, and as of December 31, 2013 have realized $11,875 in revenues, incurred $5,000 in cost of revenue and $14,818 in operating costs since inception (December 4, 2012). 

 

 

8

 

 

Our auditors have issued a going concern opinion because there is substantial uncertainty that we will continue operations in which case you could lose your investment.

 

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue in business. As such we may have to cease operations and you could lose your investment.

 

Our operating results could be impaired if we become subject to burdensome government regulation and legal uncertainties.

 

We are not currently subject to direct regulation by any domestic or foreign governmental agency, other than regulations applicable to businesses generally.  However, due to the increasing popularity and use of the Internet, it is possible that a number of laws and regulations may be adopted with respect to the Internet, relating to user privacy, content and copyrights. The adoption of any additional laws or regulations may decrease the expansion of the Internet.  A decline in the growth of the Internet could decrease demand for our services and increase our cost of doing business.  Our business, financial condition and results of operations could be seriously harmed by any new legislation or regulation.  

 

We depend on key personnel.

 

 Our future  success  will  depend  in  part  on the  continued  service  of key personnel,  particularly, Tatyana Popova, our  President and Director and Elena Ignatenko, our Secretary, Treasurer, Chief Financial Officer and Director.  We have entered into consulting agreements with Tatyana Popova, our President, and Elena Ignatenko, our Chief Financial Officer, on September 18, 2013. Either party can terminate these contracts with a thirty (30) day advance written notice. If any of our directors and officers will 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 customers and harm the market’s perception of us.

 

Our officers and directors live outside the United States, making it difficult for an investor to enforce liabilities in foreign jurisdictions.

 

We are a Nevada corporation and, as such, are subject to the jurisdiction of the State of Nevada and the United States courts for purposes of any lawsuit, action or proceeding by investors herein.  An investor would have the ability to effect service of process in any action on the company within the United States.  However, since Ms. Popova and Ms.Ignatenko, our officers and directors, reside outside the United States, substantially all or a portion of their assets are located outside the United States.  As a result, it may not be possible for investors to:

 

 

 

 

 

 

 

The lack of public company experience of our management team could adversely impact our ability to comply with the reporting requirements of U.S. securities laws.

 

Ms. Popova and Ms. Ignatenko lack public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by Sarbanes-Oxley Act of 2002. Our CEO has never been responsible for managing a publicly traded company. Such responsibilities include 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.

 

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.

 

Our directors are currently involved in other businesses and not obligated to commit their time and attention exclusively to our business and, accordingly, they may encounter conflicts of interest in allocating their own time, or any business opportunities which they may encounter, between our operations and those of other businesses.

 

Currently, Tatyana Popova, our President, and Director, Elena Ignatenko, our Treasurer, Chief Financial Officer and Director each commit between 20 to 30 hours per week of their time to our business in their capacities as officers and directors. Nevertheless, if the execution of our business plan demands more time than is currently committed by any of our officers, directors, consultants or advisors, they will be under no obligation to commit such additional time, and their failure to do so may adversely affect our ability to carry on our business and successfully execute our business plan.

Additionally, Tatyana Popova, our President, in the course of her other business activities, may become aware of investments, business opportunities or information which may be appropriate for presentation to us as well as to another entity, Most Marketing Inc. to which she owes fiduciary duties, such as loyalty and duty of care. For the past five years Ms. Popova worked as marketing manager at Most Marketing Inc., an online marketing company. Ms. Popova is not an officer or a director of Most Marketing and her fiduciary duties to Most Marketing, such as loyalty and duty of care encompass her responsibilities only as marketing manager within her job description. As a result, conflicts of interest may arise only in the context of a decision by Ms. Popova as to whom particular opportunities, such as a new client engagement, should be presented first.

 

Another example of a conflict of interest is so called “self-dealing" transactions. The concept is that the directors are dealing with themselves, and may not reach an agreement that is fair to the company. If a conflict-of-interest transaction is negotiated and approved by the non-interested directors, in a manner that approximates arms-length negotiations, including the right of the non-interested directors to reject the transaction altogether, the transaction is accepted unless a shareholder proves in court that the transaction is not entirely fair to the company. The burden is on the shareholder to show lack of entire fairness. Otherwise, the transaction is considered invalid if challenged, unless the directors prove in court that the transaction is entirely fair to the company. The burden is on the directors to show entire fairness.

 

We are not aware of potential self-dealing transactions that could possibly occur due to overlapping business of the company and Most Marketing. Focus Universal and Most Marketing have never worked together, had common clients or any contractual relationships. We do not have plans to work or enter in an agreement with Most Marketing in future.

 

 

10

 

 

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 we become 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 do not have any actual or potential conflict of interests with our consultants or advisors. 

 

We do not have a majority of independent directors on our Board and the Company has not voluntarily implemented various corporate governance measures, in the absence of which stockholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.

 

Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or the NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors’ independence, audit committee oversight, and the adoption of a code of ethics. We have not yet adopted any of these other corporate governance measures and since our securities are not yet listed on a national securities exchange, we are not required to do so. Our Board of Directors is comprised of two individuals, both of whom are also our executive officers. As a result, we do not have independent directors on our Board of Directors. 

 

We have not adopted corporate governance measures such as an audit or other independent committee of our board of directors, as we presently do not have independent directors on our board. If we expand our board membership in future periods to include additional independent directors, we may seek to establish an audit and other committee of our board of directors. It is possible that if our Board of Directors included independent directors and if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurance that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, at present in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages or employment contracts to our senior officers are made by a majority of directors who have an interest in the outcome of the matters being decided. However, as  a general rule, the board of directors, in making its decisions, determines first that the terms of such transaction are no less favorable to us that those that would be available to us with respect to such a transaction from unaffiliated third parties. The company executes the transaction between executive officers and the company once it was approved by the Board of Directors.

 

Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions. 

 

Because our Directors, who are also our sole promoters, will own 61.54% of our outstanding common stock, if the minimum amount of the offering will be sold, they could make and control corporate decisions that may be disadvantageous to other minority shareholders.

 

Our Directors own 100% of the outstanding shares of our common stock as of the date of this Offering.  If the minimum amount of the shares will be sold, our Directors will own 61.54% of our outstanding common stock.  Accordingly, they will 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 will 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.

 

11

 

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

 

As of December 31, 2013, we had 4,000,000 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 your proportionate ownership and voting power.

None of the members of our Board of Directors are considered audit committee financial experts. 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.

 

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. Finally, we have not established an Audit Committee of our Board of Directors.

 

We are a development stage 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. 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.

 

Following the completion of this offering, we will be 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 will be time-consuming and will 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 will be 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.

 

12

 

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.

 

The Company is subject to the 15(d) reporting requirements under the Securities Exchange Act of 1934 which does not require a company to file all the same reports and information as fully reporting company.

 

Until our common stock is registered under the Exchange Act, we will not be a fully reporting company, but only subject to the reporting obligations imposed by Section 15(d) of the Securities Exchange Act of 1934.

 

Pursuant to Section 15(d), we will be required to file periodic reports with the SEC, such as annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, once this registration statement is declared effective, including the annual report on Form 10-K for the fiscal year during which the registration statement is declared effective. That filing obligation will generally apply even if our reporting obligations have been suspended automatically under section 15(d) of the Exchange Act prior to the due date for the Form 10-K.

 

After that fiscal year and provided the Company has less than 300 shareholders, the Company is not required to file these reports. If the reports are not filed, the investors will have reduced visibility as to the Company and its financial condition. In addition, as a filer subject to Section 15(d) of the Exchange Act, the Company is not required to prepare proxy or information statements; our common stock will not be subject to the protection of the going private regulations; the company will be subject to only limited portions of the tender offer rules; our officers, directors, and more than ten (10%) percent shareholders are not required to file beneficial ownership reports about their holdings in our company; that these persons will not be subject to the short-swing profit recovery provisions of the Exchange Act; and that more than five percent (5%) holders of classes of your equity securities will not be required to report information about their ownership positions in the securities.

 

We will not be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act until the end of the second fiscal year reported upon in our second annual report on form 10-K.

 

 

13

 

The Sarbanes-Oxley Act of 2002 and the new rules subsequently implemented by the Securities and Exchange Commissions, the Financial Industry Regulatory Authority (“FINRA”) and the Public Company Accounting Oversight Board have imposed various new requirements on public companies, including requiring changes in corporate governance practices.

 

We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. These costs could affect profitability and our results of operations.

 

We are in the process of determining whether our existing internal controls over financial reporting systems are compliant with Section 404. We will not be required to conduct the evaluation of effectiveness of our internal controls until the end of the fiscal year reported upon in our second annual report on Form 10-K. In addition, because we are a smaller reporting company, we are not required to obtain the auditor attestation of management’s evaluation of internal controls over financial reporting. If we obtain and disclose such reports we could continue doing so at our discretion so long as we remain a smaller reporting company.

 

This process of internal control evaluation and attestation may divert internal resources and will take a significant amount of time, effort and expense to complete. If it is determined that we are not in compliance with Section 404, we may be required to implement new internal control procedures and re-evaluate our financial reporting. If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting or financial results, which could adversely affect our ability to comply with our periodic reporting obligations under the Exchange Act.

 

No shares will be issued prior to the minimum offering amount being met. Investors bear risk without enjoying any benefits of share ownership.

 

The funds received from investors will be maintained in a separate bank account until we receive a minimum of $31,250, at which time we will begin to issue shares pursuant to the subscription agreements. We will remove the funds from the separate account and use the same as set forth in the Use of Proceeds section of this prospectus.  No shares will be issued if the minimum amount is not reached. As a result, investors bear the risk of investing without enjoying any benefits of share ownership.

 

Our officers and directors will not use the subscription proceeds prior to satisfaction of the minimum and issuance of the shares for working capital, collateral for the company or other purposes.

 

The funds raised in this offering and held by us during pendency of the offering may be subject to creditor’s claims.

 

We are offering a minimum of 2,500,000 and a maximum of 30,000,000 shares of our common stock in a direct public offering, without any involvement of underwriters or broker-dealers.  The offering price is $0.0125 per share. Funds from this offering will be placed in a separate bank account at Bank of America, NY.  This account is not an escrow, trust or similar account.  It is merely a separate interest bearing savings account under our control where we have segregated your funds.  Your subscription will only be deposited in a separate bank account under our name. Only Tatyana Popova, our Chief Executive Officer, and Elena Ignatenko, our Chief Financial Officer, will have the power to authorize a release of funds from this account upon completion of this offering. The funds will be maintained in the separate bank until we receive a minimum of $31,250 at which time we will remove those funds along with accrued interest and use the same as set forth in the Use of Proceeds section of this prospectus.  The accrued interest will be retained by us as proceeds of this offering. As a result, if we are sued for any reason and a judgment is rendered against us, your subscription could be seized in a garnishment proceeding and you could lose your investment, even if we fail to raise the minimum amount in this offering.  

 

14

 

 

Further, if we file a voluntary bankruptcy petition or our creditors file an involuntary bankruptcy petition, our assets will be seized by the bankruptcy trustee, including your subscription, and used to pay our creditors. If that happens, you will lose your investment, even if we fail to raise the minimum amount in this offering.  As a result, there is no assurance that your funds will be returned to you if the minimum offering is not reached.  Any funds received by us thereafter will immediately used by us.

 

We will have broad discretion in how we use the proceeds of this offering and we may not use these proceeds effectively. This could affect our results of operations and cause the value of our common stock to decline.

 

Our management team will have considerable discretion in the application of the net proceeds of this offering, and you will not have the opportunity, as part of your investment decision, to assess whether we are using the proceeds appropriately. We currently intend to use the net proceeds that we receive from this offering as described in “Use of Proceeds” herein. We may use the net proceeds for corporate purposes that do not improve our results of operations or which cause our stock value to decline.

 

 There is no public (trading) market for our common stock and there is no assurance that the common stock will ever trade on a recognized exchange or dealers’ network; therefore, our investors may not be able to sell their shares.

 

Our common stock is not listed on any exchange or quoted on any similar quotation service, and there is currently no public market for our common stock.  We have not taken any steps to enable our common stock to be quoted on the OTC Bulletin Board, and can provide no assurance that our common stock will ever be quoted on any quotation service or that any market for our common stock will ever develop.  As a result, stockholders may be unable to liquidate their investments, or may encounter considerable delay in selling shares of our common stock.  We have not engaged an underwriter for this Offering, and we cannot assure you that any brokerage firm will act as a market maker of our securities.  A trading market may not develop in the future, and if one does develop, it may not be sustained.  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 new public company with a limited operating  history.  Further, even if a public market develops, the volume of trading in our common stock will presumably be limited and likely be dominated by a few individual stockholders.  The limited volume, if any, will make the price of our common stock subject to manipulation by one or more stockholders and will significantly limit the number of shares that one can purchase or sell in a short period of time.  The market price of our common stock may also fluctuate significantly in response to the following factors, most of which are beyond our control:

 

      -   variations in our quarterly and annual operating results;

     -    changes in general economic conditions;

     -    changes in technologies favored by consumers;

     -    price competition or pricing changes by us or our competitors;

     -    new product offerings or other actions by our competitors; and

     -    the addition or loss of key managerial and collaborative personnel.

 

The equity markets have, on occasion,  experienced  significant price and volume fluctuations that have affected the market prices for many companies' securities and that  have  often  been  unrelated  to the  operating  performance  of these companies. 

Any such fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance.  As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.

15

 

The offering price of the shares was arbitrarily determined and bears no relation to our assets, earnings, book value or other criteria of value. Therefore it should not be used as an indicator of the future market price of the securities.

 

The $0.0125 per share offering price of the common stock being sold under this prospectus has been arbitrarily set. The price does not bear any relationship to our assets, book value, earnings or net worth and it is not an indication of actual value. The offering price should not be regarded as an indicator of the future market price of the 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.

 

If our common stock is accepted for quotation on the OTC Bulletin Board, the application of the “Penny Stock” rules could adversely affect the market price of our common shares and increase your transaction costs to sell those shares.  The Securities and Exchange Commission has adopted Rule 3A51-1, which establishes the definition of a “Penny Stock,” for the purposes relevant to us, as any equity security that has market price of less than $5.00 per share or within an exercise price of less than $5.00 per share, subject to certain exceptions.  For any transaction involving a penny stock, unless exempt, Rule 15G-9 require:

 

      -   that a broker or dealer approve a person's account for transactions in penny stocks; and           

      -   the broker or dealer receive from the investor a written agreement to the transaction, setting forth the

           identity and  quantity of the penny stock to be purchased.

 

 In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

 

      -   obtain financial information and investment experience objectives of the person; and     

      -   make a reasonable determination that the transactions in penny stocks are suitable for that person and the

          person has  sufficient knowledge and experience in financial matters to be capable of evaluating the risks of

          transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:

 

     -   sets forth the basis on which the broker or dealer made the suitability determination; and 

     -   that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

 

You may face significant restrictions on the resale of your shares due to state “blue sky” laws.

 

Each state has its own securities laws, often called “blue sky” laws, which (1) limit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration, and (2) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state.

 

16

 

Before a security is sold in a state, there must be a registration in place to cover the transaction, or it must be exempt from registration. The applicable broker-dealer must also be registered in that state.

 

We do not know whether our securities will be registered or exempt from registration under the laws of any state. A determination regarding registration will be made by those broker-dealers, if any, who agree to serve as market makers for our common stock. There may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our securities. You should therefore consider the resale market for our common stock to be limited, as you may be unable to resell your shares without the significant expense of state registration or qualification.

 

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 Securities and Exchange Act of 1934 (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 recently enacted JOBS Act is intended to reduce the regulatory burden on "emerging growth companies". Focus Universal meets the definition of an "emerging growth company" and so long as it qualifies as an "emerging growth company," it will not be required to:

 

· have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

· comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

 

· submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and

 

· disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

 

17

 

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 $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a “smaller reporting company”, at such time are we cease being an “emerging growth company”, we will be required to provide additional disclosure in our SEC filings.  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.

 

FORWARD-LOOKING STATEMENTS

 

This Prospectus  contains  forward-looking  statements which involve assumptions and describe our future  plans,  strategies  and  expectations,  are  generally identifiable   by  use  of  the  words  "may,"   "will,"   "should,"   "expect," "anticipate,"  "estimate,"  "believe," "intend" or "project" or the negative of these words or other variations on these words or comparable terminology.  These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished.

 

Such  forward-looking  statements  include  statements  regarding,  among  other things, (i) the potential markets for our services, our potential profitability and cash flows, (ii) our growth  strategies,  (iii)  anticipated  trends in the web development and marketing  industry,  (iv) our  future  financing  plans and (v) our  anticipated  needs for working  capital.  This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements.  These statements may be found under “Management's Plan of Operation" and "Description of Our Business and Properties," as well as in this Prospectus generally.  Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under "Risk Factors" and matters described in this Prospectus generally.  In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. 

 

In addition to the information expressly required to be included in this filing, we will provide such further material  information,  if any, as may be necessary to make the required statements,  in light of the circumstances under which they are made, not misleading.

 

18

 

Although  forward-looking  statements  in this  Prospectus  reflect  the good  faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks,  business,  economic and other risks and  uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements.  Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Prospectus.  We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Prospectus, other than as may be required by applicable law or regulation.  Readers are urged to carefully review and consider the various disclosures made by us in our Prospectus which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. 

 

If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

 

USE OF PROCEEDS

Our Offering is being made on a self-underwritten basis - with a minimum of $31,250 in gross proceeds.  The table below sets forth the use of proceeds if $31,250 (i.e. gross proceeds of the minimum offering), $187,500 (i.e. gross proceeds of the 50% of the offering) or $375,000 (i.e. gross proceeds of the maximum offering) of our common stock is sold.

 

Our Offering is being conducted on a best-efforts minimum 2,500,000/ maximum 30,000,000 basis. The offering scenarios presented below are for illustrative purposes only and the actual amount of proceeds, if any, may differ.

 

The net proceeds will be used as follows:

 

for registration fee; and $1,000 for transfer agent fees. We will use the rest of the funds (net of offering expenses) for paying off our current liabilities, hiring new personnel and implementation of our business plan.

 

In the future, in addition to equity financing, we may rely on loans from our Directors and officers to continue our operations; however, there are no assurances that our Directors will provide us with any additional funds.  Currently, we do not have any arrangements for additional financing.  If we are not able to obtain needed financing and generate sufficient revenue from operations, we may have to cease operations.

 

DETERMINATION OF OFFERING PRICE

 

The offering price of $0.0125 of our common stock has been arbitrarily determined in order for us to raise up to a total of $375,000 in this Offering and bears no relationship to any objective criterion of value. The price does not bear any relationship to our assets, book value, historical earnings or net worth. In determining the offering price, management considered such factors as the prospects, if any, for similar companies, anticipated results of operations, present financial resources and the likelihood of acceptance of this offering. No valuation or appraisal has been prepared for our business. We cannot assure you that a public market for our securities will develop or continue or that the securities will ever trade at a price higher than the offering price.

 

DILUTION OF THE PRICE PER SHARE

 

Dilution represents the difference between the offering price and the net tangible book value per share immediately after completion of this Offering.  Net tangible book value is the amount that results from subtracting total liabilities and intangible assets from total assets.  As of December 31, 2013, the net tangible book value of our shares of common stock was $(3,943) or approximately $(0.000986) per share based upon 4,000,000 shares outstanding.

 

If the maximum number of shares is sold:

 

Upon completion of this Offering, in the event all of the shares are sold, the net tangible book value of the 34,000,000 shares to be outstanding will be $364,709, or approximately $0.010727 per share.  The amount of dilution to the shareholders acquiring shares in this offering will be $0.001773 per share.  The net tangible book value of the shares held by our existing shareholder will be increased by $0.011713 per share without any additional investment on their part.  The shareholders acquiring shares in this Offering will incur an immediate dilution from $0.0125 per share to $0.010727 per share.

 

After completion of this Offering, if 30,000,000 shares are sold, the shareholders acquiring shares in this Offering will own approximately 88.24% of the total number of shares then outstanding for which the shareholders acquiring shares will have made cash investment of $375,000, or $0.0125 per share.  Our existing shareholders will own approximately 11.76% of the total number of shares then outstanding, for which they have made contributions of cash of $4,000, or $0.001 per share.

 

If the minimum number of shares is sold:

 

Upon completion of this Offering, in the event 2,500,000 shares are sold, the net tangible book value of the 6,500,000 shares to be outstanding will be $20,959 or approximately $ 0.003225 per share.  The amount of dilution to the shareholders acquiring shares in this offering will be $ 0.009275 per share.

 

The net tangible book value of the shares held by our existing stockholders will be increased by $0.004211 per share without any additional investment on their part. 

 

20

 

The shareholders acquiring shares in this offering will incur an immediate dilution from $0.0125 per share to $ 0.003225 per share.

 

After completion of this Offering, if 2,500,000 shares are sold, the shareholders acquiring shares in this Offering will own approximately 38.46% of the total number of shares then outstanding for which the shareholders acquiring shares have made cash investment of $31,250, or $0.0125 per share.  Our existing shareholders will own approximately 61.54% of the total number of shares then outstanding, for which they have made contributions of cash, totaling $4,000, or $0.001 per share.

 

The following table compares the differences of investment in our shares to the shareholders acquiring shares in this Offering with investment in our shares of our existing stockholders.

Existing stockholders if all of the shares are sold:

 

Purchasers of shares in this Offering if all shares sold:

 

Existing stockholders if the minimum number of shares sold:

Purchasers of shares in this Offering if the minimum number of shares sold:

 

 

21

 

PLAN OF DISTRIBUTION; TERMS OF THE OFFERING

We are offering a minimum of 2,500,000 and a maximum of 30,000,000 shares of our common stock in a direct public offering, without any involvement of underwriters or broker-dealers.  The offering price is $0.0125 per share.

 

Funds from this offering will be placed in a separate bank account at Bank of America, NY.  This account is not an escrow, trust or similar account.  It is merely a separate interest bearing savings account under our control where we have segregated your funds.  Your subscription will only be deposited in a separate bank account under our name. Only Tatyana Popova, our Chief Executive Officer, and Elena Ignatenko, our Chief Financial Officer, will have the power to authorize a release of funds from this account upon completion of this offering.

 

Our officers and directors will not use the subscription proceeds prior to satisfaction of the minimum and issuance of the shares for working capital, collateral for the company or other purposes. The funds will be maintained in the separate bank until we receive a minimum of $31,250 (cleared through the bank) at which time we will remove those funds along with accrued interest and use the same as set forth in the Use of Proceeds section of this prospectus.  The accrued interest will be retained by us as proceeds of this offering. As a result, if we are sued for any reason and a judgment is rendered against us, your subscription could be seized in a garnishment proceeding and you could lose your investment, even if we fail to raise the minimum amount in this offering.  Further, if we file a voluntary bankruptcy petition or our creditors file an involuntary bankruptcy petition, our assets will be seized by the bankruptcy trustee, including your subscription, and used to pay our creditors. If that happens, you will lose your investment, even if we fail to raise the minimum amount in this offering.  As a result, there is no assurance that your funds will be returned to you if the minimum offering is not reached.  Any funds received by us thereafter will immediately be used by us. We will return your funds to you in the form a cashier’s check sent Federal Express on the 181^st day, or 271^st day in case of the extended period.  During the 180 day period, or additional 90 days, no funds will be returned to you. You will only receive a refund of your subscription if we do not raise a minimum of $31,250 within the 180 day period, or additional 90 day period referred to above. There are no finders involved in our distribution.  You will only have the right to have your funds returned if we do not raise the minimum amount of the offering or there would be a change in the material terms of the offering. 

 

The following are material changes that would entitle you to a refund of your money:

 

-        a change in the offering price;

-        a change in the minimum sales requirement;

-        a change in the amount of proceeds necessary to release the funds held in the separate bank account;

-        a change to allow sales to affiliates in order to meet the minimum sales requirement; and

-        an extension of the offering period beyond 270 days.

 

We will sell the shares in this Offering through our Directors, Tatyana Popova and Elena Ignatenko.  They will receive no commission from the sale of any shares.  They will not register as a broker-dealer under Section 15 of the Exchange Act in reliance upon Rule 3a4-1. 

 

Rule 3a4-1 sets forth those conditions under which a person associated with an issuer may participate in the offering of the issuer's securities and not be deemed to be a broker-dealer.  The conditions are that:

 

 

 

22

 

 

Only after our Prospectus is declared effective by the Securities and Exchange Commission (the “Commission”), we intend to distribute this Prospectus to potential investors at meetings and to our friends, business associates and relatives who are interested in us and a possible investment in the Offering.  We will not utilize the Internet to advertise our Offering.

Section 15(g) of the Exchange Act

Our shares are covered by Section 15(g) of the Exchange Act, and Rules 15g-1 through 15g-6 promulgated thereunder. They impose additional sales practice requirements on broker-dealers who sell our securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $160,000 or $300,000 jointly with their spouses).

 

Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules.

 

Rule 15g-2 declares unlawful broker-dealer transactions in penny stocks unless the broker-dealer has first provided to the customer a standardized disclosure document.

 

Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a penny stock transaction unless the broker-dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question.

 

Rule 15g-4 prohibits broker-dealers from completing penny stock transactions for a customer unless the broker-dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.

 

Rule 15g-5 requires that a broker-dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales persons compensation.

 

23

 

This Offering will start on the date of this Prospectus and continue for a period of up to 180 days. The offering will continue until all 30,000,000 shares of common stock are sold, the expiration of 180 days from the date of this prospectus, which period may be extended for up to an additional 90 days at our discretion, or until we elect to terminate the Offering, whichever event occurs first. If the 2,500,000 share minimum has been reached and all 30,000,000 shares are not sold within this period, the offering for the balance of the shares will terminate and no further shares will be sold.

Procedures for Subscribing

 

If you decide to subscribe for any shares in this Offering, you must: (i) execute and deliver a subscription agreement; and (ii) deliver a check, money order or certified funds to us for acceptance or rejection. The subscription agreement and subscription funds can be mailed, couriered or delivered in person.  All checks, money orders or certified funds for subscriptions must be made payable to Focus Universal Inc. The funds from all accepted subscriptions will be deposited into the Bank of America account until we receive a minimum of $31,250 (cleared through the bank) at which time we will remove those funds along with accrued interest and use the same as set forth in the Use of Proceeds section of this prospectus.  The accrued interest will be retained by us as proceeds of this offering. Only Tatyana Popova, our Chief Executive Officer, and Elena Ignatenko, our Chief Financial Officer, will have the power to authorize a release of funds from this account upon completion of this offering.

 

Right to Reject Subscriptions

We have the right to accept or reject subscriptions in whole or in part, for any reason or for no reason.  All monies from rejected subscriptions will be returned immediately by us to the subscriber, without interest or deductions.  Subscriptions for securities will be accepted or rejected within 48 hours after we receive them.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

We are a development stage corporation with limited operations and limited revenues from our business operations.  In order to obtain funds needed to implement our business plan, we are attempting to raise money from this offering. 

 

 

 

24

 

If we raise the minimum amount through this offering, we will be able to achieve the short-term goals of our business plan and to continue operations and remain in business for the next 12 months.  If we are unable to generate revenues for any reason, or if we are unable to make a reasonable profit, we may have to cease operations.  At the present time, we have not made any arrangements to raise additional cash, other than through this offering.  If we need additional cash and cannot raise it, we will either have to suspend implementation of our business plan until we do raise the cash, or cease operations entirely if revenue from operations will not be sufficient to cover our operating costs. 

 

If we raise the maximum amount, we believe we can implement our short term and long-term business plan and achieve profitable operations. However, we cannot guarantee that proceeds from this offering will be sufficient for us to continue as going concern for the next five years.  If we raise less than the maximum amount and we require additional funds, it may be necessary for us to obtain additional funds through a Revenue, Cost of Revenue and Gross Profit

second public offering, a private placement of securities, or loans. We have no other financing plans, other than described above.

 

We estimate that expenses of being a public reporting company with the SEC will be approximately $20,000 per year. This amount includes audit and review fees of our financial statements of $10,000, filing fees (annual and quarterly reports) of $5,000 and legal and other professional fees of $5,000.

 

Limited Operating History; Need for Additional Capital

 

There is limited historical financial information about us upon which to base an evaluation of our performance.  We are in the development stage of operations and cannot guarantee that we will be successful in our business operations.  Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns, such as increases in advertising and marketing costs, administration expenditures associated with daily operations, accounting and audit fees, and legal fees related to filings and regulatory compliance.    

 

We anticipate relying on equity sales of our common stock in order to continue to implement our business plan.  Issuances of additional shares will result in dilution to our existing stockholders.  There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing for to fund our planned business activities.  We may also rely on loans from our Directors; however, there are no assurances that our Directors will provide us with any additional funds.

 

Currently, we do not have any arrangements for additional financing.  We have no assurance that future financing will be available to us on acceptable terms.  If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations.  Equity financing could result in additional dilution to existing shareholders.

 

Results of Operations

 

Focus Universal Inc. is a digital marketing agency. We offer a full range of web services, including internet marketing services, social and viral marketing campaigns and search engine optimization (SEO) consulting, custom web design and CRM (Customer Relationship Management) solutions.

 

Results of operations for the period from December 4, 2012 (Inception) through December 31, 2013

 

We were formed on December 4, 2012. Accordingly, the results of operations during the first fiscal period ended March 31, 2013 (3 full months) are not necessarily indicative of the results of the regular (12 months) full fiscal year. All revenues, cost of revenues and operating expenses during our fiscal 2013 were affected by the shorter reporting period compared to the full year of operations.

 

25

 

 

 

 

Our gross revenue from online marketing and consulting services for the nine-month period ended December 31, 2013 and the period from inception (December 4, 2012) to March 31, 2013 was $11,875 and $nil, respectively. Our cost of revenues for the nine-month period ended December 31, 2013 and the period from inception (December 4, 2012) to March 31, 2013 was $5,000 and $nil, respectively resulting in a gross profit of $6,875 for the nine-month period ended December 31, 2013 and $nil for the period from inception (December 4, 2012) to March 31, 2013.

 

All of our revenues are derived from custom web design, development of online and social media strategy, advertising campaign planning and social media consulting. All the work, except web development, was performed by our officers and directors. The web development was performed by an independent third party contractor. To date we have worked with five clients. We do not have long-term contracts with any of our clients and rely on signing new clients in order to generate additional revenues. If we will not be able to attract new clients our revenue could decline and our business could be harmed. As of today, we have not have any repeat orders from our clients and therefore a loss of any of our clients, or the small group of clients we worked for in the past, will not have a major effect on our current revenues.

 

Operating Expenses

 

The major components of our operating expenses for the nine-month period ended December 31, 2013 and for the period from December 4, 2012 (inception) to March 31, 2013 are outlined in the table below:

 

 

We commenced our operations in December of 2012 and incurred expenses related to implementation of our business plan.  The shorter reporting period in our fiscal 2013 affected categories of operating costs and expenses charged on a monthly basis, such as officer compensation, consulting and rent expenses. Other general and administrative expenses of $3,070 as of December 31, 2013, represent filing fees of $2,030, office expenses of $861, rent of $129 and telephone expense of $50. The organization costs of $348, that  represent the company’s formation expenditures incurred in December of 2012, were reported as other general and administrative expenditures as of March 31, 2013.

 

The President of the Company provides management consulting services to the Company. We have entered into consulting agreements with Tatyana Popova, our President, and Elena Ignatenko, our Chief Financial Officer, on September 18, 2013. Either party can terminate these contracts with a sixty (60) day advance written notice. During the nine-month period ended December 31, 2013, management consulting services of $1,700 were charged to operations.

 

 

26

 

The Chief Financial Officer of the Company provides consulting services to the Company. During the nine-month period ended December 31, 2013, management consulting services of $1,700 were charged to operations. 

 

Since inception, we have sold 4,000,000 shares of common stock at $0.001 per share to our Directors for total proceeds of $4,000.

 

Liquidity and Capital Resources

 

 

 

Liquidity

 

Our internal liquidity is provided by our operations. Our revenue for the period ended December 31, 2013 was $11,875, compared to $Nil for the period from December 4, 2012 (inception) to December 31, 2012. In addition to revenues from operations, we intend to use the proceeds from this offering to finance our ongoing operations and implementation of our short-term (12 months) business plan. We expect to have sufficient funds to sustain our business for 12 months if we receive the minimum and maximum proceeds from the offering, respectively.

If we are not successful in expanding our clientele base, maintaining profitability and positive cash flow, additional capital may be required to maintain ongoing operations. We have explored and are continuing to explore options to provide additional financing to fund future operations as well as other possible courses of action. Such actions include, but are not limited to, securing lines of credit, sales of debt or equity securities (which may result in dilution to existing shareholders),  loans from our directors or other third parties, and other similar actions. There can be no assurance that we will be able to obtain additional funding (if needed), on acceptable terms or at all, through a sale of our common stock, loans from financial institutions, our directors, or other third parties, or any of the actions discussed above. If we cannot sustain profitable operations, and additional capital is unavailable, lack of liquidity could have a material adverse effect on our business viability, financial position, results of operations and cash flows.

 

Cash Flows

 

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

 

 

the period from December 4, 2012 (Inception) through March 31, 2013 are the result of the net cash generated from sales of our web development and online marketing services and changes in our operating  assets and liabilities. This portion of our cash flow represents the most significant source of funding for our operations. The major uses of our operating cash include funding general operating expenses (legal and professional expenses, consulting, office expenses and office rent) and cost of revenues.

 

Cash flows resulting from changes in operating assets and liabilities include an increase in prepaid expenses, accounts payable and accrued liabilities and amounts due to related parties. The increase in amounts due to related parties was due to the increase in the management and consulting fees that were incurred by the company and remained unpaid as of December 31, 2013. The increase in prepaid expenses represents prepaid legal fees (retainer) of $2,500 and prepaid office rent of $179. The increase in accounts payable and accrued liabilities reflected the increase in our general operating expenses incurred during the period ended December 31, 2013 that remained unpaid at the end of the reporting period. In addition, the Company accrued $3,400 due to the Company’s directors and officers for management consulting services provided to the Company to December 31, 2013.

 

 

Cash Flows from Investing Activities

 

We did not use or generate any cash from investing activities during the nine-month period ended December 31, 2013 or the period from December 4, 2012 (Inception) through March 31, 2013.

 

Cash Flows from Financing Activities

 

During the nine-month period ended December 31, 2013 and the period from December 4, 2012 (Inception) through December 31, 2013 the Company sold 4,000,000 shares of common stock at par to the Company Directors for $4,000 in cash.

 

We believe that we need approximately an additional $32,000 (gross) to implement our short-term business plan and meet our working capital requirements over the next 12 months.  Our intention is to obtain this money through this offering. We intend to use the proceeds from this offering to finance our ongoing operations and implementation of our short-term (12 months) business plan (see Plan of Operations, page 31). As of the date of this Registration Statement we do not have any other arrangements of sources of financing beside anticipated proceeds from this offering and proceeds from future sales.

 

We anticipate future capital requirements for financing of our ongoing operations to be approximately $60,000 per year. In addition we will require approximately $200,000 over the five-year period for development and introduction of the new products.

 

Management expects to keep operating costs to a minimum until cash is available through financing or operating activities. Management plans to continue to seek, in addition to equity financing, other sources of financing (e.g. bank loan, line of credit, shareholder loan) on favorable terms; however, there are no assurances that any such financing can be obtained on favorable terms, if at all.   If we are unable to generate profits sufficient to cover our operating costs or to obtain additional funds for our working capital needs, we may need to cease or curtail operations.  Furthermore, there is no assurance the net proceeds from any successful financing arrangement will be sufficient to cover cash requirements during the initial stages of the Company’s operations.

DESCRIPTION OF OUR BUSINESS AND PROPERTIES

You should rely only on the information contained in this Prospectus or any supplement hereto.  We have not authorized anyone to provide you with different information.  If anyone provides you with different information,

 

28

 

 

you should not rely on it.  We are not making an offer to sell the shares in any jurisdiction where the offer is not permitted.  You should not assume that the information contained in this Prospectus is accurate as of any date other than the date on the front cover of this Prospectus regardless of the date of delivery of this Prospectus or any supplement hereto, or the sale of the shares.  Our business, financial condition, results of operations and prospects may have changed since that date.

 

Industry Background

 

Widespread adoption of the internet as a source for attracting prospective customers, customer relations and overall distribution of corporate message has increased the need for an online presence for businesses, from large corporations to small businesses. Prior to the widespread adoption of the Internet, content was primarily distributed through traditional media, such as newspapers, magazines and television. Increased access to the Internet as a result of extensive broadband penetration and the rapid proliferation of connected mobile devices is driving significant growth in demand for online content.

 

As a result, there has been an exponential increase in the number of websites and mobile applications created and the amount of content available digitally. Concurrently, search technology has continued to improve the organization of and access to the broad range of websites and online information, reshaping consumer behavior and expectations for discovering credible and relevant information online.

 

Consumption Trends

 

The Internet has fundamentally changed the consumption of media. In contrast to consumers' relatively passive consumption of traditional media, the proliferation of the Internet and social media has enabled consumers to seek out and interact with content across an increasing number of websites. As a result, consumers are changing the way they discover content online, increasingly typing queries into web search engines to discover and access content from the millions of websites on the Internet. Further, advancements in web search technology and the popularity of social media have enhanced the ability to find specific content associated with personal needs and interests, leading to migration of the consumer base away from content consumed on traditional portals. However, we believe that consumers are often faced with incomplete or inaccurate information because the demand for highly specific, relevant information is outpacing the supply of thoughtfully researched, professionally produced content.

 

Content Creation Trends

 

The rapid evolution of audience behavior, particularly the significant fragmentation and the shift of audiences online, is changing existing content creation models. Historically, traditional media companies have generated high-cost, general interest content targeted towards a mass audience of predominantly offline consumers, and have monetized it through advertising or by selling this content directly to consumers. This traditional cost structure is less effective for creating niche content and for selling targeted advertising to fragmented audiences. At the same time, the widespread adoption of social media and other publishing tools has reduced barriers to publishing online content and has enabled a large number of individuals to create and publish content on the Internet. However, the difficulty in constructing profitable business models from their individual endeavors has relegated online content publication largely to bloggers and passionate enthusiasts whose limited resources have often resulted in varying levels of quality.

 

29

 

Distribution Trends

 

Advancements in social media, search monetization and digital publishing technologies have also dramatically reduced barriers to distributing content. As publishers attempt to meet increasing consumer demand for specific content, the number of websites has proliferated at an exponential scale. Prior to these developments, website publishers, like traditional media companies, relied primarily on marketing to attract audiences.

 

Now consumers primarily use search engines, social recommendations and mobile applications to discover content. Further, content increasingly is distributed and accessed virtually anywhere via smart phones, tablet computers and other mobile devices.

 

Monetization Trends

 

The percentage of advertising spend allocated to online advertising significantly lags the percentage of time spent by people consuming media online. Advertisers are beginning to recognize greater opportunities for Internet advertising and marketers are seeking better ways to reach the fragmented consumer base in a more targeted fashion as advertising dollars move from offline to online media. In addition there is a shift in marketing budgets from traditional media to online media, including search strategies such as search engine optimization, paid social media and search marketing.

Competition

 

The online content and media market we participate in is new, rapidly evolving and intensely competitive. Competition is expected to intensify in the future as more companies enter the space. We compete for business on a number of factors including return on marketing investment, price, access to targeted audiences and quality.

 

Competition in the online advertising and marketing industry is also highly fragmented. Any company that provides one or more of our core services is in direct competition with us. Our competition includes Advertising Firms, Public Relations Companies, Web Design Companies, Graphic Design Companies, and Search Engine Optimization Firms.  Our competitors range in size from small, local independent firms and individuals to very large conglomerates. Such fragmentation can mean that a small business owner can employ more than one advertising and marketing agency to get a needed mix of web design and online marketing services for their desired budget. The online media marketing industry is always evolving with thousands of new competitors entering the market every year. It is becoming very difficult for companies to distinguish themselves in the market and gain new customers.

 

In addition to competition from other firms, the number of potential customers is decreasing as businesses begin to design their own websites and execute inline advertising themselves. There are a large number of companies that provide website templates that are easy to alter once purchased without the need to hire a web design and development company. While basic coding knowledge is needed to effectively customize a template and incorporate social management and monitoring solutions to fit an individual business’s needs, many new businesses are choosing to use an existing template versus paying for a new website design.

 

Our Business

 

Description of Business

 

Focus Universal is an online marketing, advertising and design provider.  We generate our revenue from providing

 

30

 

services that include marketing, advertising and website design to small and medium size businesses. To date, we have focused on providing one-off services such as development of a fully functioning website or creation of a marketing strategy plan to small business clients. We plan to expand our service offerings to include subscription-based service packages.

 

Our current services include:

 

Marketing

 

We offer a wide variety of online marketing service to meet our clients’ needs. Our services include: email marketing; search engine optimization; affiliate marketing; pay per click management; content creation; conversion rate optimization and social media marketing.

 

Paid Search Advertising

Paid search advertising refers to search engine advertising such as Google AdWords (Yahoo and MSN have similar paid search programs available). Search advertisements are targeted to match key search terms (called keywords) entered on search engines. We help our clients manage their search campaigns by:

 

 

 

 

Website Design

 

We offer custom web design services for websites targeted at traditional browser views, as well as sites optimized for consumption on mobile devices. Our custom design service includes the development of a unique website look and layout that is created specifically for our client. Our design team can assist with layout as well as content creation and image sourcing. We also provide consulting services on website usability, where we help clients ensure that their website is effective and easy to use.

 

Plan of Operations

 

We expect to complete our offering within two to six months from the effective date of our registration statement.

 

To date, we have focused on providing individualized services to clients on a contract basis. The average length of our contracts is from one to two months. We do not have any contracts in place that have long-term ongoing commitments from clients.  Our plan over the next twelve months is to expand our client base, to develop a variety of subscription-based services that will allow us to generate a steady stream of revenue and to incorporate online ad management services to our services offered. In addition to our current services, we plan to develop subscription-based services to offer to our existing clients and to new customers starting in the third quarter of 2014. The scope of services offered will depend on the amount raised through this offering.

 

If we raise the minimum amount, we plan to develop and offer the following services:

 

a)      Ad Serving and Management.

Our customers may want to undertake a pay per click campaign to advertise their website or to generate additional revenue from their website by serving online ads. We plan to develop a range of services to address both publishers’ (websites that serve ads from ad networks) and advertisers’ needs. By purchasing

a monthly subscription package, Focus Universal clients will get custom designed ads whether text-only or graphic banners, management, scheduling and prioritizing of their ads, and implementation with online ad serving solutions such as Google DoubleClick for Publishers or Google Adwords. We expect to spend approximately $10,000 to develop this range of services.

 

b)      Website Optimization Monthly Package.

In order to receive the most effective results from website optimization, search engine optimization solutions should be implemented and refined on an ongoing basis. Search engines revise their algorithms at various intervals, regular optimization efforts are important. We plan to offer different packages of monthly website optimization services, based on service hours provided. The allotment of hours may be used towards solutions such as keyword research, SEO copywriting, optimized website coding, naming strategy improvements, internal link building or inbound link building. We expect to spend approximately $2,500 to develop this service.

 

If we do not sell the minimum amount of shares, we will be forced to indefinitely postpone the development and launch of these services.

 

Currently we rely on freelance content creators and other professionals we hire for each specific project. If we raise the maximum amount, we plan to develop and offer the Website Optimization Monthly Package and Ad Serving and Management services, as well as hire a full-time online marketing specialist. To date we rely on our employees and directors who are focused on signing new clients, maintaining and attempting to increase our business with existing clients.  As of the date of this registration statement we had three employees including two

 

32

 

Facebook , Twitter, LinkedIn, Pinterest and any other social networks or forums in which the client is active as a company. From here the client should be able to assess its communication behavior (content types, length, and messaging per target), frequency of communication, a level of engagement, and a sentiment of interest (positive/negative/neutral). We expect to spend approximately $150,000 on this project and launch it within 2 years of completion of the offering, if we raise the maximum amount.

 

Long-term Plan of Operations

 

Our long-term, five-year plan is to expand our client base, introduce new services subject to financing and sufficient cash flow from operations, and continue marketing our services to potential clients. There is no assurance we will be successful in completing our short-term plan of operations or achieving profitable operations necessary to implement our long-term plan.

 

Financing

 

We intend to raise a minimum of $31,250 and up to a maximum of $375,000 of gross proceeds from this Offering.  Management believes that if we raise the minimum amount we will have sufficient cash flow to implement our short-term business plan and to meet our capital requirements for at least the next 12 months.  Management expects to keep operating costs to a minimum until cash is available through financing or operating activities.  If we are unable to generate profits or to obtain additional funds for our working capital needs, we may need to cease or curtail operations.  

 

Emerging Growth Company Status under the JOBS Act

 

Focus Universal Inc. qualifies as an “emerging growth company” as defined in the Jumpstart our Business Startups Act (the “JOBS Act”).

 

The JOBS Act creates a new category of issuers known as "emerging growth companies." Emerging growth companies are those with annual gross revenues of less than $1 billion (as indexed for inflation) during their most recently completed fiscal year. The JOBS Act is intended to facilitate public offerings by emerging growth companies by exempting them from several provisions of the Securities Act of 1933 and its regulations. An emerging growth company will retain that status until the earliest of:

 

 

 

 

33

 

 

 

 

Offering Requirements

 

In addition, during the IPO offering process, emerging growth companies are exempt from:

 

 

 

Other Public Company Requirements

 

Emerging growth companies are also exempt from other ongoing obligations of most public companies, such as:

 

 

 

Description of Property

 

Our principal executive offices are located at 8275 S. Eastern Ave., Ste.200-674, Las Vegas, Nevada and our telephone number is (702) 724-2646.  Our primary website address is www.focusuniversal.com. We do not hold ownership or leasehold interest in any property and pay our office rent on a monthly basis.

 

DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS

 

Our executive officers and Directors and their respective ages as of the date of this Prospectus are as follows:

 

 

 

 

 

The Directors will serve as Directors until our next annual shareholder meeting or until a successor is elected who accepts the position.  Directors are elected for one-year terms.  Officers hold their positions at the will of the Board of Directors, absent any employment agreement.  There are no arrangements, agreements, or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of Focus Universal affairs.

 

Tatyana Popova. 

Ms. Tatyana Popova earned her degree in Financial Management. Throughout her career, she has worked as an accountant and controller, where her duties included general accounting, preparation of monthly, quarterly and annual financial statements and reports, working with auditors and financial institutions. Eleven years ago, Ms. Popova shifted her focus toward the online marketing field, studying the industry before taking a position at a marketing company, Most Marketing Inc. Her duties included online search campaign management, client relations, cross-channel promotions, and analysis of data to determine actionable opportunities for online marketing campaigns. For the past five years, she has worked as an online optimization and marketing manager at the company.

 

Elena Ignatenko.

Ms. Elena Ignatenko has a Master's degree in advertising that strongly focused on marketing, strategic planning and branding. She has been exposed to projects in different fields that strengthened her analytical skills, critical thinking and ability to implement key insights. Ms. Ignatenko's extensive experience in design, management and technical solutions empowers her to manage complex projects with demanding deliverables and sensitive timelines. For the past seven years, she has worked as an independent freelancer on a contract basis, providing marketing services.

 

Committees of the Board of Directors

 

We do not presently have a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board of Directors. Nor do we have an audit committee “financial expert.” As such, our entire Board of Directors acts as our audit committee and handles matters related to compensation and nominations of directors.

 

Potential Conflicts of Interest

 

Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors who also serve as the sole officers of the Company. Thus, there is an inherent conflict of interest.

 

Director Independence

 

We are not subject to listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of “independent directors.” Our determination of independence of directors is made using the definition of “independent director”

 

35

 

 

contained in Rule 5000(a)(19) of the Marketplace Rules of the NASDAQ Stock Market (“NASDAQ”), even though such definitions do not currently apply to us because we are not listed on NASDAQ. We have determined that each of our directors is not “independent” within the meaning of such rules.

 

EXECUTIVE COMPENSATION

 

The following table sets forth information with respect to compensation paid by us to our officers from inception on December 4, 2012 through March 31, 2013, our fiscal year end.

 

Summary Compensation Table

 

We have entered into Consulting Agreements with Tatyana Popova, our President,  and Elena Ignatenko, our Chief Financial Officer, on September 18, 2013 (Exhibits 10.1 and 10.2). As of December 31, 2013, the Company incurred $3,400 in management fees with our President and $200 in consulting fees with our Chief Financial Officer. We do not plan to pay salaries to our officers in the foreseeable future.

 

The following table sets forth information with respect to compensation paid by us to our directors during the period from December 4, 2012 (inception) through March 31, 2013.

 

 

Long-Term Incentive Plan Awards

 

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.

 

Compensation of Directors

 

Our directors do not receive any compensation for serving as a member of the board of directors.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the ownership, as of December 31, 2013, and March 3, 2014 of our common stock by each of our Directors, and by all executive officers and Directors as a group, and by each person known to us who is the beneficial owner of more than 5% of any class of our securities.  As of December 31, 2013, and March 3, 2014, there were 4,000,000 common shares issued and outstanding.  All persons named have sole voting and investment power with respect to the shares, except as otherwise noted.

 

The President of the Company provides management consulting services to the Company. On September 18, 2013 the Company entered into a Consulting Agreement with Mrs. Popova on the following terms:

 

1.     The Consultant will provide services to the Company in her capacity as the President and Chief Executive Officer of the Company. In this capacity the Consultant will fulfill all senior officer duties as required by the Company including sourcing and implementing new business opportunities, raising financing reasonably

2.     required from time to time by the Company, overseeing a coordinator for all required accounting, reporting and disclosure and fulfilling any other needed non-administrative functions (the “Consulting Services”).

3.     In consideration of the provisions of the Consulting Services, the Company shall pay to the Consultant the sum of US$500 per month, on the 15th day of each calendar month for the duration of the Agreement. The first monthly payment shall be due on October 15, 2013.

4.     This Consulting Agreement shall continue indefinitely unless terminated by either party with thirty (30) days advance written notice to the other party.

During the nine-month period management consulting services of $1,700 were charged to operations.

 

The Chief Financial Officer of the Company provides consulting services to the Company. On September 18, 2013 the Company entered into a Consulting Agreement with Mrs. Ignatenko on the following terms: 

1.     The Consultant will provide services to the Company in her capacity as Treasurer and Chief Financial Officer of the Company. In this capacity the Consultant will fulfill all senior officer duties as required by the Company including, but not limited to, accounting, coordination of annual audits and quarterly reviews, management and review of legal documentation and ensuring timely fulfillment of all regulatory filings (the “Consulting Services”).

2.     In consideration of the provisions of the Consulting Services, the Company shall pay to the Consultant the sum of US$500 per month, on the 15th day of each calendar month for the duration of the Agreement. The first monthly payment shall be due on October 15, 2013.

3.     This Consulting Agreement shall continue indefinitely unless terminated by either party with thirty (30) days advance written notice to the other party.

During the nine-month period management consulting services of $1,700 were charged to operations.

In addition during the nine months ended December 31, 2013, the Company issued 4,000,000 shares of common stock at $0.001 per share to its Directors and officers for total proceeds of $4,000.

 

We did not have any promoters besides our directors at any time during the past five fiscal years.

DESCRIPTION OF SECURITIES

Common Stock

 

The authorized capital stock of Focus Universal Inc. consists of 75,000,000 common shares, $0.001 par value. 

 

38

 

Holders of common stock have no preemptive rights to purchase additional shares of common stock or other subscription rights.  The common stock carries no conversion rights and is not subject to redemption or to any sinking fund provisions.  All shares of common stock are entitled to share equally in dividends from sources legally available, therefore, when, as and if declared by the Board of Directors, and upon liquidation or dissolution of Focus Universal, whether voluntary or involuntary, to share equally in the assets of Focus Universal available for distribution to stockholders.

 

The Board of Directors is authorized to issue additional shares of common stock not to exceed the amount authorized by Focus Universal' Articles of Incorporation, on such terms and conditions and for such consideration as the Board may deem appropriate without further stockholder action.

Voting Rights

 

Each holder of common stock is entitled to one vote per share on all matters on which such stockholders are entitled to vote.  Since the shares of common stock do not have cumulative voting rights, the holders of more than 50% of the shares voting for the election of Directors can elect all the Directors if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any person to the Board of Directors.

 

Dividend Policy

 

Holders of Focus Universal common stock are entitled to dividends if declared by the Board of Directors out of funds legally available. Focus Universal does not anticipate the declaration or payment of any dividends in the foreseeable future.  We intend to retain earnings, if any, to finance the development and expansion of our business. Future dividend policy will be subject to the discretion of the Board of Directors and will be contingent upon future earnings, if any, Focus Universal financial condition, capital requirements, general business conditions, and other factors.  Therefore, there can be no assurance that any dividends of any kind will ever be paid.

 

Share Purchase Warrants

 

We have not issued and do not have outstanding any warrants to purchase shares of our common stock.

 

Options

 

We have not issued and do not have outstanding any options to purchase shares of our common stock.

 

Convertible Securities

 

We have not issued and do not have outstanding any securities convertible into shares of our common stock or any rights convertible or exchangeable into shares of our common stock.

 

SHARES ELIGIBLE FOR FUTURE SALE

 

The re-sales of 30,000,000 shares of common stock registered in this Offering must either be registered or rely upon an exemption from registration.

 

No shares held by our "affiliates" (officers, directors or 10% shareholders) are being registered hereunder.  Our 4,000,000 issued and outstanding shares have been held since September, 2013, and are subject to the sale limitations imposed by Rule 144.  Under Rule 144, since our Directors an affiliate as defined in that rule, the shares can be publicly sold, subject to volume restrictions and restrictions on the manner of sale, commencing one year after their acquisition.

 

39

 

The eventual availability for sale of substantial amounts of common stock under Rule 144 could adversely affect prevailing market prices for our securities.

 

ANTI-TAKEOVER PROVISIONS

 

There are no Nevada anti-takeover provisions that may have the effect of delaying or preventing a change in control.

 

LEGAL PROCEEDINGS

 

No officer, Director, or persons nominated for these positions, and no promoter or significant employee of our corporation has been involved in legal proceedings that would be material to an evaluation of our management.  We are not aware of any pending or threatened legal proceedings which involve Focus Universal Inc.

 

During the past ten years, Mrs. Popova and Mrs. Ignatenko have not been the subject of the following events:

 

1.   Any bankruptcy petition filed by or against any business of which Mrs. Popova or Mrs. Ignatenko were a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.

2.   Any conviction in a criminal proceeding or being subject to a pending criminal proceeding.

3. An order, judgment, or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting Mrs. Popova’s, or Mrs. Ignatenko’s involvement in any type of business, securities or banking activities.

4. Found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Future Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

 

DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

Our Directors and officers are indemnified as provided by the Nevada Revised Statutes and our Bylaws.  We have been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.  In the event that a claim for indemnification against  such  liabilities  is asserted by one of our  Directors, officers  or controlling persons in connection with the securities being registered, we will, unless in the  opinion  of our legal  counsel  the  matter has been  settled by controlling  precedent,  submit the question of whether such indemnification is against  public  policy to court of  appropriate  jurisdiction.  We will then be governed by the court's decision.

 

INTEREST OF NAMED EXPERTS AND COUNSEL

 

Our financial statements included in this  Prospectus  and the  Registration Statement  have been audited by Cutler & Co., LLC, our independent registered public accounting firm,  to the  extent  and for the  periods  set  forth in  their  report appearing  elsewhere in this document and in the  registration  statement  filed with the SEC,  and are  included  in reliance  upon such  report  given upon the authority of said firm as experts in auditing and accounting.

 

Szaferman Lakind Blumstein & Blader, PC, our legal counsel, has provided an opinion on the validity of our common stock.  We retained the counsel solely for the purpose of providing this opinion and have not received any other legal services from this firm.

 

40

 

 

ADDITIONAL INFORMATION

 

We have filed with the Commission a Registration Statement on Form S-1 under the 1933 Act with respect to the securities offered by this Prospectus.  This Prospectus, which forms a part of the Registration Statement, does not contain all the information set forth in the Registration Statement, as permitted by the rules and regulations of the Commission.  For further information with respect to us and the securities offered by this Prospectus, reference is made to the Registration Statement.  The Registration Statement and other information may be read and copied at the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.  The Commission maintains a web site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission.

 

 

REPORTS TO SECURITY HOLDERS

 

We have filed with the Commission a registration statement on Form S-1 under the 1933 Act with respect to the securities offered by this prospectus. This prospectus, which forms a part of the registration statement, does not contain all the information set forth in the registration statement, as permitted by the rules and regulations of the Commission. For further information with respect to us and the securities offered by this prospectus, reference is made to the registration statement. Statements contained in this prospectus as to the contents of any contract or other document that we have filed as an exhibit to the registration statement are qualified in their entirety by reference to the to the exhibits for a complete statement of their terms and conditions. The registration statement and other information may be read and copied at the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains a web site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission.

 

Reports to Security Holders

 

After we complete this offering, we will not be required to furnish you with an annual report. Further, we will not voluntarily send you an annual report. We will be required to file reports with the SEC under section 15(d) of the Securities Act. The reports will be filed electronically. The reports we will be required to file are Forms 10-K, 10-Q, and 8-K. You may read copies of any materials we file with the SEC at the SEC’s Public Reference Room or visiting the SEC’s Internet website at http://www.sec.gov.

 

FINANCIAL STATEMENTS

 

41

 

 

 

FOCUS UNIVERSAL INC.

(A Development Stage Company)

 

FINANCIAL STATEMENTS

 

For the Three and Nine Month Periods Ended December 31, 2013

 

The Period from Inception (December 4, 2012) to December 31, 2012

 

The Period from Inception (December 4, 2012) to December 31, 2013

 

(Unaudited)

 

 

 

 

 

42

 

FOCUS UNIVERSAL INC.

(A DEVELOPMENT STAGE COMPANY)

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2013

FOR THE PERIOD FROM INCEPTION (DECEMBER 4, 2012) TO DECEMBER 31, 2012

FOR THE PERIOD FROM INCEPTION (DECEMBER 4, 2012) TO DECEMBER 31, 2013

(Unaudited)

 

 

 

Index to the Financial Statements

 

 

 

43

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Focus Universal Inc.

8275 S. Eastern Ave., Ste.200-674

Las Vegas, NV 89123        

 

We have reviewed the accompanying balance sheet of Focus Universal Inc. (a Development Stage Company) as of December 31, 2013, and the related statements of operations, changes in stockholders’ deficit and cash flows for the three and nine month periods ended December 31, 2013, the period from Inception (December 4, 2012) to December 31, 2012 and the period from Inception (December 4, 2012) to, December 31, 2013. These financial statements are the responsibility of the management of Focus Universal Inc

 

We have conducted our review in accordance with standards established by the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

 

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Because of the Company’s current status and limited operations there is substantial doubt about its ability to continue as a going concern. Management’s plans in regard to its current status are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty

 

 

 

/s/ Cutler & Co., LLC

Cutler & Co., LLC

Arvada, Colorado

 

January 24, 2014

 

F-1

 

_________________________________________________________________________________________

1291 W.64^th Avenue, suite 205B, Arvada, Colorado 80004        Phone: 303.968.3281      Fax: 303.456.7488        www.cutlercpas.com

 

 

 

 

See Accompanying Notes to Financial Statements

 

F-2

 

 

See Accompanying Notes to Financial Statements

 

F-3

 

 

 

 

See Accompanying Notes to Financial Statements

 

F-4

 

 

FOCUS UNIVERSAL INC.

(A DEVELOPMENT STAGE COMPANY)

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2013

FOR THE PERIOD FROM INCEPTION (DECEMBER 4, 2012) TO DECEMBER 31, 2012

FOR THE PERIOD FROM INCEPTION (DECEMBER 4, 2012) TO DECEMBER 31, 2013

(UNAUDITED)

NOTES TO THE FINANCIAL STATEMENTS

 

Note 1 – Organization and Operations

 

Focus Universal Inc. (the “Company”) was incorporated under the laws of the State of Nevada on December 4, 2012.  Focus Universal Inc. offers a full range of web services, including web marketing services, social and viral marketing campaigns, search engine optimization consulting, custom web design, website usability consulting and web analytics implementation.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation – Unaudited Interim Financial Information

 

The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.  Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These unaudited interim consolidated financial statements should be read in conjunction with the financial statements of the Company for the year ended March 31, 2013 and notes thereto contained in the information as part of the Company’s Registration Statement on Form S-1, which was filed with the Securities and Exchange Commission on December 26, 2013.

 

Development Stage Company

 

The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification.  Although the Company has recognized nominal amounts of revenue, it is still devoting substantially all of its efforts on establishing the business.  All losses accumulated since Inception (December 4, 2012) have been considered as part of the Company’s development stage activities.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

 

The Company’s significant estimates and assumptions include the fair value of financial instruments; income tax rate, income tax provision and valuation allowance of deferred tax assets; and the assumption that the Company will continue as a going concern.  Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

 

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

 

Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. 

 

Actual results could differ from those estimates.

 

F-6

 

FOCUS UNIVERSAL INC.

(A DEVELOPMENT STAGE COMPANY)

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2013

FOR THE PERIOD FROM INCEPTION (DECEMBER 4, 2012) TO DECEMBER 31, 2012

FOR THE PERIOD FROM INCEPTION (DECEMBER 4, 2012) TO DECEMBER 31, 2013

(UNAUDITED)

NOTES TO THE FINANCIAL STATEMENTS

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“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 3 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 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.  If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

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.

 

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

 

Cash Equivalents

 

The Company considers all highly liquid investments with a maturity of three months or less to be cash and cash equivalents.

 

Related Parties

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

 

F-7