UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended
SECURITIES EXCHANGE ACT OF 1934
Commission File No.
(Exact Name of Small Business Issuer as specified in its charter)
| (State or other jurisdiction | (IRS Employer File Number) |
| of incorporation) |
| (Address of principal executive offices) | (Zip Code) |
(
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|
The (Nasdaq Capital Market) |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant:
(1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405
of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 7, 2025, registrant had shares outstanding of the registrant's common stock at a par value of $0.001 per share.
FORM 10-Q
FOCUS UNIVERSAL INC.
TABLE OF CONTENTS
| 2 |
PART I. FINANCIAL INFORMATION
References in this document to “us,” “we,” or “Company” refer to Focus Universal Inc.
ITEM 1. FINANCIAL STATEMENTS
FOCUS UNIVERSAL INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Index to the Financial Statements
| 3 |
FOCUS UNIVERSAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses | ||||||||
| Marketable securities | ||||||||
| Deposits – current portion | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Deposits | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Other current liabilities | ||||||||
| Lease liability, current portion | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities: | ||||||||
| Lease liability, less current portion | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Contingencies | ||||||||
| Stockholders' Equity: | ||||||||
| Common stock, par value $ per share, shares authorized; and shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Treasury stock at cost ( and shares held at March 31, 2025 and December 31, 2024, respectively) | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Shares to be issued, common shares | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Stockholders' Equity | ||||||||
| Total Liabilities and Stockholders' Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 4 |
FOCUS UNIVERSAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross Profit | ||||||||
| Operating Expenses | ||||||||
| Selling expense | ||||||||
| Compensation - officers and directors | ||||||||
| Research and development | ||||||||
| Professional fees | ||||||||
| General and administrative | ||||||||
| Total Operating Expenses | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Other Income (Expense): | ||||||||
| Interest income (expense), net | ( | ) | ||||||
| Interest (expense) - related party | ( | ) | ||||||
| Unrealized loss on marketable equity securities | ( | ) | ( | ) | ||||
| Rental income | ||||||||
| Other income (expense), net | ( | ) | ||||||
| Total other income | ||||||||
| Loss from continuing operations | ( | ) | ( | ) | ||||
| Loss from discontinued operations, net of tax | ( | ) | ||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive items | ||||||||
| Foreign currency translation loss | ( | ) | ( | ) | ||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Basic and fully diluted net loss per share: | ||||||||
| Continuing operations | $ | ) | $ | ) | ||||
| Discontinued operations | $ | $ | ) | |||||
| Net loss | $ | ) | $ | ) | ||||
| Weighted Average Number of Common Shares Outstanding: Basic and Diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 5 |
FOCUS UNIVERSAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
(UNAUDITED)
| Common Stock | Treasury Stock | Additional Paid-In |
Shares to be issued Common | Accumulated | Accumulated Other Comprehensive |
Total Stockholders' |
||||||||||||||||||||||||||
| Description | Shares | Amount | at Cost | Capital | Shares | Deficit | Loss | Equity | ||||||||||||||||||||||||
| Balance – December 31, 2024 | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||
| Stock based compensation - options | – | |||||||||||||||||||||||||||||||
| Stock based compensation - shares | ( |
) | ||||||||||||||||||||||||||||||
| Purchase of treasury stock | – | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Stock split rounding up | ( |
|||||||||||||||||||||||||||||||
| Other comprehensive income | – | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Net income | – | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Balance – March 31, 2025 | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-In | Shares to be issued Common | Accumulated | Accumulated Other Comprehensive | Total Stockholders' | ||||||||||||||||||||||||||
| Description | Shares | Amount | at Cost | Capital | Shares | Deficit | Loss | Equity | ||||||||||||||||||||||||
| Balance – December 31, 2023 | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| Stock based compensation - options | – | |||||||||||||||||||||||||||||||
| Stock based compensation - shares | – | |||||||||||||||||||||||||||||||
| Other comprehensive income | – | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance – March 31, 2024 | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 6 |
FOCUS UNIVERSAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
| Bad debt expense | ||||||||
| Depreciation expense | ||||||||
| Unrealized loss on marketable equity securities | ||||||||
| Stock-based compensation – shares | ||||||||
| Stock based compensation – options | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ||||||
| Other receivable | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Operating lease right-of-use asset | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Other current liabilities | ( | ) | ||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Net cash flows used in operating activities from continuing operations | ( | ) | ( | ) | ||||
| Net cash flows provided by operating activities from discontinued operations | ||||||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash flows used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from third party loan | ||||||||
| Proceeds from related party loan | ||||||||
| Repayment on third party loan | ( | ) | ||||||
| Purchases of treasury stock | ( | ) | ||||||
| Net cash flows provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rate | ( | ) | ( | ) | ||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash beginning of period | ||||||||
| Cash end of period | $ | $ | ||||||
| Supplemental cash flow disclosure: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 7 |
FOCUS UNIVERSAL INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
(UNAUDITED)
Note 1 – Organization and Operations
Focus Universal Inc. (“Focus” or the “Company”) was incorporated under the laws of the State of Nevada on December 4, 2012. The Company is a universal smart instrument developer and manufacturer, headquartered in Ontario, California, specializing in the development and commercialization of novel and proprietary universal smart technologies and instruments. Focus Universal Inc. is also a provider of patented hardware and software design technologies for Internet of Things (“IoT”) and 5G. The Company has developed what it believes are five disruptive patented technology platforms with 28 patents and patents pending in various phases and 8 trademarks pending in various phases to solve what it believes are the major problems facing hardware and software design and production within the industry today. These technologies combined have the potential to reduce costs, product development timelines and energy usage while increasing range, speed, efficiency, and security of the IoT and 5G networks. The smartphone or other mobile device serves as the foundation, where the user can see the sensor readouts and together with the Ubiquitor device, performs the functions of multiple traditional scientific and engineering instruments. The Company believes this product could replace the traditional, wired stand-alone instruments at a fraction of their cost.
The Company has multiple subsidiaries, including Perfecular Inc. (“Perfecular”), AVX Design & Integration, Inc. (“AVX,” also doing business as Smart AVX (“Smart AVX”)), Focus Universal (Shenzhen) Technology Company LTD (“Focus Shenzhen”), Lusher Bioscientific, Inc. and Lusher, Inc. (together “Lusher”), and until August, 2024, AT Tech Systems LLC (“AT Tech LLC”), which activities’ have since been discontinued.
Perfecular, a wholly owned subsidiary of Focus, was founded in September 2009 and is headquartered in Ontario, California, and is engaged in designing certain digital sensor products and sells a broad selection of horticultural sensors and filters in North America and Europe.
AVX, incorporated on June 16, 2000, in the state of California, is an IoT installation and management company specializing in high performance audio/video systems, home theaters, lighting control, automation and integration. Services provided by AVX include full integration of houses, apartments, commercial complexes, and office spaces with audio, visual and control systems to fully integrate devices in the low voltage field, specializing in high end residential smart IoT installation projects in areas throughout the Southern California area. AVX’s services also include partial equipment upgrade and installation. AVX also markets and sells our IoT Products, such as high-end LED, live wall panel products and cameras, under the Smart AVX name.
On December 23, 2021, Focus Shenzhen was founded as a mainland China office for manufacturing procurement expertise and research and development support activities. Focus Shenzhen is designed to function as a branch office accessing high level ability to source products and build relationships with manufacturers in China and as a lower cost form of support, research and development as engineers abound in China.]
On January 5, 2022, the Company founded a wholly owned subsidiary named Lusher Bioscientific.
On April 30, 2024, the Company founded a wholly owned subsidiary named Lusher Inc. Lusher Inc. was founded to develop, market, and commercialize automation software, titled One Touch Financial, initially targeting the financial reporting software market sector.
AT Tech Systems was a subsidiary of Focus and
specialized in commercial and industrial smart IoT installation projects in areas throughout Southern California. On August 5, 2024, the
Company and the segment manager of AT Tech Systems LLC reached a tentative oral agreement to terminate his employment, and the employment
of his two team members. The Company discontinued operations of AT Tech Systems on August 21, 2024, with a termination cost of $
| 8 |
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed financial statements of the Company for the three months ended March 31, 2025 and 2024 have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting companies. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company’s financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2024 was derived from the audited financial statements included in the Company’s financial statements as of and for the years ended December 31, 2024 and 2023 contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on February 28, 2025. These financial statements should be read in conjunction with that report.
The accompanying unaudited condensed consolidated financial statements include the accounts of Focus and its wholly-owned subsidiaries, Perfecular, AVX, Focus Shenzhen, Lusher and AT Tech Systems (collectively, the “Company,” “we,” “our,” or “us”). All intercompany balances and transactions have been eliminated upon consolidation. The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the accompanying unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying financial statements include the assumptions impacting right-of use asset and lease liability, useful lives of property and equipment, allowance for doubtful accounts, inventory reserves, and the valuation allowance on deferred tax assets. The Company regularly evaluates its estimates and assumptions.
Allowance for doubtful accounts
The Company estimates an allowance for doubtful
accounts based on historical collection trends and review of the current status of trade accounts receivable. It is reasonably possible
that the Company’s estimate of the allowance for doubtful accounts will change. As of March 31, 2025 and December 31, 2024, allowance
for doubtful accounts amounted to $
Concentrations of Credit and Business Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company limits its exposure to credit loss by investing its cash with high credit quality financial institutions.
| 9 |
Major customers
For the three months ended of March 31, 2025 and 2024, the Company’s revenue received from the following companies were set out as below:
| Three months ended March 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Amount | % of Total Revenue |
Amount | % of Total Revenue | |||||||||||||
| Customer A | $ | $ | ||||||||||||||
| Customer B | ||||||||||||||||
| Customer C | ||||||||||||||||
| Customer D | ||||||||||||||||
| Customer E | ||||||||||||||||
| Customer F | ||||||||||||||||
As of March 31, 2025 and December 31, 2024, the Company’s accounts receivable from the following companies were set out as below:
| March 31, 2025 | December 31, 2024 | |||||||||||||||
| Amount | % of Total Accounts Receivable | Amount | % of Total Accounts Receivable | |||||||||||||
| Customer B | $ | $ | ||||||||||||||
| Customer F | ||||||||||||||||
Major vendors
Two major vendors accounted for more than 98% of our total purchases during the three months ended March 31, 2025 and no major vendor accounted more than 10% of total purchase during the three months ended March 31, 2024.
The Company accounts for stock-based compensation to employees in conformity with the provisions of ASC Topic 718, Stock-Based Compensation. Stock-based compensation to employees consist of stock options, grants, and restricted shares that are recognized in the statement of operations based on their fair values at the date of grant.
The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period during which services are received.
The Company calculates the fair value of option grants utilizing the Black-Scholes pricing model and estimates the fair value of the stock based upon the estimated fair value of the common stock. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest.
The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service period of the award.
| 10 |
Fair Value of Financial Instruments
The Company follows paragraph ASC 825-10-50-10 for disclosures about fair value of its financial instruments and paragraph ASC 820-10-35-37 (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements.
To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
| · | Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| · | Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| · | Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
The following table summarize financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024:
| March 31, 2025 (unaudited) | ||||||||||||||||
| Fair Value | Carrying | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Value | |||||||||||||
| Assets | ||||||||||||||||
| Marketable securities: | ||||||||||||||||
| Stock | $ | $ | $ | $ | ||||||||||||
| Total assets measured at fair value | $ | $ | $ | $ | ||||||||||||
| December 31, 2024 | ||||||||||||||||
| Fair Value | Carrying | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Value | |||||||||||||
| Assets | ||||||||||||||||
| Marketable securities: | ||||||||||||||||
| Stock | $ | $ | $ | $ | ||||||||||||
| Total assets measured at fair value | $ | $ | $ | $ | ||||||||||||
The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts receivable, inventories, other receivable, prepaid expenses, deposit, accounts and accrued expenses, payable, treasury stock payable, short-term loan, other current liabilities, customer deposit, approximate their fair value because of the short maturity of those instruments.
| 11 |
Comprehensive Income (Loss)
Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity. The Company’s other comprehensive loss for the three months ended March 31, 2025 and 2024 was comprised of foreign currency translation adjustments.
Revenue Recognition
Revenue from the Company is recognized under Topic 606 in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and includes the following elements:
| · | executed contracts with the Company’s customers that it believes are legally enforceable; | |
| · | identification of performance obligations in the respective contract; | |
| · | determination of the transaction price for each performance obligation in the respective contract; | |
| · | Allocation of the transaction price to each performance obligation; and | |
| · | recognition of revenue only when the Company satisfies each performance obligation. |
These five elements, as applied to each of the Company’s revenue category, is summarized below:
| · | Product sales – revenue is recognized at the time of sale upon the delivery of the equipment to the customer and completion of performance obligation. | |
| · | Service sales – revenue is recognized based on the service been provided and the agreed upon performance obligation has been completed to the customer. |
Revenue from our project construction is recognized over time using the percentage-of-completion method under the cost approach. The percentage of completion is determined by estimating stage of work completed. Under this approach, recognized contract revenue equals the total estimated contract revenue multiplied by the percentage of completion. Our construction contracts are unit priced, and an account receivable is recorded for amounts invoiced based on actual units produced. The Company discontinued operations of AT Tech Systems in August 2024, and added the operations of Lusher to service the financial reporting software sector, so the Company currently retains two operating and reportable segments which are (1) Perfecular and Lusher and (2) Corporate and IoT Products.
Research and development
Research and development costs are expensed as incurred. Research and development costs primarily consist of efforts to refine existing product models and develop new product models.
Net income (loss) per share is computed pursuant to ASC 260-10-45. Basic net income (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period.
| 12 |
Fully diluted EPS is computed by dividing net income (loss) by the weighted average number of shares of stock and potentially outstanding shares of stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants, unless these shares are covered by anti-dilutive protections. The denominator comprises the Company’s weighted average number of outstanding shares to extent the related shares are dilutive and, if dilutive, and other contracts to issue shares of common stock and stock options. As a result, they are included in the fully diluted EPS computation to the extent that the effect would be dilutive.
As of each period end, all potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.
| Three Months Ended March 31, | 2025 | 2024 | ||||||
| Stock options | ||||||||
Foreign Currency Translation and Transactions
The reporting and functional currency of Focus is the USD. The functional currency of Focus Universal (Shenzhen) Technology Co. LTD, a wholly owned subsidiary of Focus located in China, is the Renminbi (“RMB”).
For financial reporting purposes, the financial statements of the Company’s Chinese subsidiary, which are prepared using the RMB, are translated into the Company’s reporting currency, USD. Assets and liabilities are translated using the exchange rate on the balance sheet date. Revenue and expenses are translated using average exchange rates prevailing during each reporting period. Stockholders’ equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive loss in stockholders’ equity.
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. The resulting exchange difference, presented as foreign currency transaction loss, is included in the accompanying unaudited condensed consolidated statements of operations. The exchange rates used for unaudited condensed consolidated financial statements are as follows:
|
Average Rate for the Three Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| China Yuan (RMB) | RMB | RMB | ||||||
| United States Dollar ($) | $ | $ | ||||||
| Exchange Rate at | ||||||||
| March 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| China Yuan (RMB) | RMB | RMB | ||||||
| United States Dollar ($) | $ | $ | ||||||
| 13 |
Going Concern
The Company has assessed its ability to continue as a going concern
for a period of one year from the date of the issuance of these condensed consolidated financial statements. The Company has a net loss
of $
At March 31, 2025, the Company had cash and cash
equivalents, and short-term investments, in the amount of $
Note 3 – Recent Accounting Pronouncement
In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses. The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation and amortization expense for each caption on the income statement where such expenses are included. The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. We are currently evaluating the provisions of this guidance and assessing the potential impact on our financial statement disclosures.
Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
| 14 |
Note 4 – Inventory
At March 31, 2025 and December 31, 2024, inventory consisted of the following:
| March 31, 2025 | December 31, 2024 | |||||||
| Finished goods | $ | $ | ||||||
| Less: Inventory reserve | ( | ) | ( | ) | ||||
| Inventory | $ | $ | ||||||
Note 5 – Property and Equipment
At March 31, 2025 and December 31, 2024, property and equipment consisted of the following:
| March 31, 2025 | December 31, 2024 | |||||||
| Building improvement | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Equipment | ||||||||
| Software | ||||||||
| Total cost | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense for the three months ended
March 31, 2025 and 2024 amounted to $
Note 6 – Leases
The Company recorded an operating lease expense
of $
On January 16, 2023, Focus Universal (Shenzhen) Technology Co. LTD entered into a thirty-six month commercial lease with a third party for an approximately 2,017 square foot office space. The lease commenced on February 1, 2023 and will end on January 31, 2026. The monthly rent is RMB29,974 (approximately $4,172) with approximately an 11.1% to 12.5% increase rate in each additional year. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term, which is 10%. Lease expense for the lease is recognized on a straight-line basis over the lease term.
| 15 |
On February 22, 2023, Focus Universal (Shenzhen) Technology Co. LTD entered into a thirty-six month commercial lease with a third party for an approximately 3,449 square foot office space. The lease commenced on March 31, 2023 and will end on February 28, 2026. The monthly rent is RMB35,246 (approximately $4,906) with approximately an 11.1% to 12.5% increase rate in each additional year. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term, which is 10%. Lease expense for the lease is recognized on a straight-line basis over the lease term.
On July 8, 2024, the Company entered into a Standard Industrial/Commercial Single-Tenant Lease (the “Lease”) with the Veena Asset Management, LLC to lease the same Focus Universal premises located at 2311 East Locust Court, Ontario, CA 91761 back for one year commencing at the close of escrow of the Purchase Agreement and ending on July 31, 2025, for 14,004 square foot office and warehouse space. Base monthly rent is $16,804, with a total of $58,812 due upon execution of the lease. The Company entered into a First Lease Amendment on March 21, 2025, extending the lease until January 31, 2026, with no other changes to the original terms.
Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. As of March 31, 2025 and December 31, 2024, operating lease right-of use assets and lease liabilities were as follows:
| March 31, 2025 | December 31, 2024 | |||||||
| Operating lease right-of-use assets, net | $ | $ | ||||||
| Lease liabilities, current portion | $ | $ | ||||||
| Lease liabilities, less current portion | $ | $ | ||||||
Lease term and discount rate:
| March 31, 2025 | December 31, 2024 | |||||||
| Weighted average remaining lease term: | ||||||||
| Operating lease | ||||||||
| Weighted average discount rate: | ||||||||
| Operating lease | ||||||||
The minimum future lease payments are as follows:
| Amount | ||||
| Year ending December 31, 2025 | $ | |||
| Year ending December 31, 2026 | ||||
| Total minimum lease payment | ||||
| Less: imputed interest | ( | ) | ||
| Present value of future minimum lease payments | $ | |||
| 16 |
Note 7 – Stockholders’ Equity
Common stock
On January 31, 2025, we effected a
An additional common stock shares were included in the Company’s issued and outstanding shares as a result of rounding-up fractional shares into whole shares as a result of the reverse stock split.
Treasury stock
During the three months ended March 31, 2025,
the Company repurchased shares of its common stock for $
Employee compensation
In prior years, the Company entered into several employment
agreements that require the issuance of common shares for services that vest on a quarterly basis. During the period ended March 31, 2025,
shares with a fair value of $
On February 11, 2022 (the “Vesting Date”), the Company entered into a restricted stock award agreements (the “Award Agreement”) with eight employees for shares of the Company’s common stock subject to the terms and to the fulfillment of the conditions set forth in the Company’s equity incentive plan. The first 20% of the restricted shares were granted and vested on February 11, 2022. An additional 20% of the restricted shares will vest on each anniversary of the Vesting Date until the fourth anniversary of the Vesting Date. The initial fair value of the awards on the date of grant was determined to be $ which is being amortized over the 5 year vesting period. During the year ended December 31, 2024, the Company amortized $ of this amount leaving an unamortized balance of $ at December 31, 2024. During the period ended March 31, 2025, shares of common stock vested and the Company amortized $ of this amount leaving an unamortized balance of $ at March 31, 2025. As of March 31, 2025, of the shares had been vested.
Stock options
On January 2, 2025, each member of the Board was granted options to purchase shares at $ per share with a fair value of $. The options vest monthly over one (1) year, and may be exercised during a -year term. In the aggregate, options were granted with a fair value of $. During the three months ended March 31, 2025, the Company recognized $ of compensation cost relating to the vesting of these options and $ remained unvested which will be amortized over the remainder of 2025.
For the three months ended March 31, 2025 and 2024, the Company’s stock option compensation expenses amounted to $ and $, respectively.
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The fair value of the stock options issued during the periods was determined using the Black-Scholes option pricing model with the following assumptions:
| March 31, 2025 | ||||
| Risk-free interest rate | % | |||
| Expected life of the options | years | |||
| Expected volatility | % | |||
| Expected dividend yield | % | |||
The following is a summary of the option activity from December 31, 2024 to March 31, 2025:
| Number of Options | Weighted average exercise price | Weighted Average Remaining Contractual Life |
Aggregate Intrinsic Value | |||||||||||||
| Outstanding at December 31, 2024 | $ | |||||||||||||||
| Granted | $ | – | – | |||||||||||||
| Exercised | – | – | ||||||||||||||
| Cancelled or forfeited | – | – | ||||||||||||||
| Outstanding at March 31, 2025 | $ | |||||||||||||||
| Exercisable as of March 31, 2025 | $ | |||||||||||||||
Based on the closing fair market value of $4.17 per share on March 31, 2025, intrinsic value of $ was attributed to exercisable but not exercised common stock options at March 31, 2025.
Note 8 – Discontinued Operation
On August 5, 2024, the Company and the segment
manager of AT Tech Systems LLC reached a tentative oral agreement to terminate his employment and the employment of his two direct report
team members. The Company discontinued operations of AT Tech Systems on August 21, 2024 with a termination cost of $
The income (loss) from discontinued operations presented in the statement of operations for the three months ended March 31, 2025 and 2024 as follows:
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| Cost of Revenue | ||||||||
| Gross Loss | ( | ) | ||||||
| Operating Expenses: | ||||||||
| General and administrative | ||||||||
| Total Operating Expenses | ||||||||
| Loss from Operations | ( | ) | ||||||
| Other Income (Expense): | ||||||||
| Other income, net | ||||||||
| Total other income, net | ||||||||
| Net Loss | $ | $ | ( | ) | ||||
Total operating cash flows from discontinued operations
were $
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Note 9 – Segment Reporting
The Company currently has two operating segments. In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company considers operating segments to be components of the Company’s business for which separate financial information is available and evaluated regularly by Management in deciding how to allocate resources and to assess performance. Management reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has determined that it has two operating and reportable segments. The Company consists of two types of operations. (1) AVX and Smart AVX (inclusive of the smart IoT Products sales under Smart AVX) cooperatively run our “LED and IoT Installation Services” segment, which handles our LED and IoT installation and management business specializing in high performance and easy to use LED and display systems, audio/video systems, home theaters, lighting control, automation, and integration. This includes the Focus and Focus Shenzhen collectively operate our “Corporate and R&D” segment focused on R&D development for the IoT, which involves the non-specific financing, executive expense, operations and investor relations of our public entity, and the general shared management and costs across the Company’s subsidiaries that spread across all functional categories and research and development of these IoT technology products and of our smart products into the commercial and home automation sectors. (2) Perfecular and Lusher jointly operate the SEC Financial Software segment, which involves the development, marketing, and production of our SEC Financial Reporting AI-Driven Automation Software package and also includes our universal smart instruments and devices in the hydroponic and controlled agriculture segments.
Asset information by operating segment is not presented as the Chief Executive Officer does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s consolidated financial statements. The management team reviews financial information on a consolidated level and allocates resources based on net loss, which also serves as the key metric for evaluating financial performance.
The following tables summarize the financial information of each operating segment of the Company for the three months ended March 31, 2025:
| For the Three Months ended March 31, 2025 | ||||||||||||
| Perfecular & Lusher | Corporate & IoT | Total | ||||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of revenue | ||||||||||||
| Gross profit | ||||||||||||
| Operating expenses | ||||||||||||
| Selling expense | ||||||||||||
| Compensation – officers and directors | ||||||||||||
| Research and development | ||||||||||||
| Professional fees | ||||||||||||
| General and administrative | ||||||||||||
| Total operating expense | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Total other income | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
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The following tables summarize the financial information of each operating segment of the Company for the three months ended March 31, 2024:
| For the Three Months ended March 31, 2024 | ||||||||||||
| Perfecular & Lusher | Corporate & IoT | Total | ||||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of revenue | ||||||||||||
| Gross profit (loss) | ( | ) | ||||||||||
| Operating expenses | ||||||||||||
| Selling expense | ||||||||||||
| Compensation – officers and directors | ||||||||||||
| Research and development | ||||||||||||
| Professional fees | ||||||||||||
| General and administrative | ||||||||||||
| Total operating expense | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Total other income | ||||||||||||
| Loss from discontinued operations | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Note 10 – Contingencies
In the normal course of business or otherwise, the Company may become involved in legal proceedings. The Company will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonable estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and other directly related costs expected to be incurred. As of the date of this quarterly report, the Company has resolved certain material legal proceedings described in Note 11.
Note 11 – Subsequent Events
On April 28, 2025 Alumni Capital purchased 94,825 of our common shares for $381,224, based on our Equity Line of Credit (ELOC) Purchase Agreement, dated November 16, 2024. The price for these shares was $4.02 based on a 9% discount of the lowest of the 5-day VWAP of $4.41 from the closing date on May 6, 2025, accessible via the Bloomberg terminal.
The Company repurchased 31,670 shares of its common stock for $144,575 with our broker Paulson Securities in the public market at an average price of $4.91 and placed them in treasury. All these shares were purchased as part of publicly announced plans or program and currently, as also noted in the previous 10-K filing.
| 20 |
On August 26, 2024, a former software engineer filed an action against Perfecular Inc., a wholly owned subsidiary of the Company, in the Superior Court for the County of San Bernardino, State of California alleging wrongful termination and other violations of the California Labor Code. The complaint sought unspecified economic and non-economic losses, as well as attorneys’ fees. On April 25, 2025, the Company and the software engineer entered into a confidential settlement agreement which concluded this matter and releases all claims against the Company. This new impact has been accounted for in these financial statements.
On October 28, 2024, MGR Real Estate, Inc. a California corporation, filed an action in the Superior Court of the State of California, County of San Bernardino, against the Company and CFO Irving Kau. The complaint alleged a variety of items including breach of contract and declaratory relief. On April 10, 2025, the Company, Mr. Kau, and MGR Real Estate, Inc. entered into a confidential settlement agreement which concluded this matter and releases all claims against the Company. This reduced impact has been accounted for in these financial statements.
The Company has evaluated all other subsequent events through the date these consolidated financial statements were issued and determined that there were no other subsequent events or transactions that require recognition or disclosures in the consolidated financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in, Item 1 in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements.
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements. Such forward-looking statements are based on current expectations, estimates, and projections about our industry, management beliefs, and certain assumptions made by our management. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth herein and in other reports and documents that we file from time to time with the Securities and Exchange Commission, particularly the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.
Narrative Description of the Business
Focus Universal Inc. (the “Company,” “we,” “us,” or “our”) is a Nevada corporation. We believe we have developed five proprietary technologies utilizing our patent portfolio which we believe solve the most fundamental problems plaguing the internet of things (“IoT”) industry through: (1) increasing overall chip integration by shifting integration from the component level to the device level; (2) creating a faster 5G cellular technology by using ultra-narrowband technology; (3) leveraging ultra-narrowband power line communication (“PLC”) technology; (4) proprietary User Interface Machine auto generation technology; and (5) incorporating all our core technologies into a single chip. Our Universal Smart Technology is designed to overcome instrumentation interoperability and interchangeability. The electronic design starts from a 90% completed common foundation we call our universal smart instrumentation platform (“USIP”), instead of the current method of building each stand-alone instrument from scratch. Our method eliminates redundant hardware and software and results in significant cost savings and production efficiency. We also provide sensor devices and are a wholesaler of various air filters and digital, analog, and quantum light meter systems. The Company holds 28 patents and patents pending in various phases of the patent process.
Our Lusher subsidiary is developing and designing a software to streamline SEC financial reporting for financial reporting and tax firms. Currently, we have completed the SEC financial reporting software in a Microsoft Word format. Our team is focused on streamlining the entire SEC financial reporting process for SEC attorneys, PCAOB accounting firms, and other financial reporting professionals. Our goal is that with a single click, our software automatically retrieves financial data from external accounting systems and generates consolidated financial statements and SEC reports in WORD, PDF, HTML, and XBRL formats—all within just a few minutes. Our developers are trying to eliminate human involvement when it comes to manually updating the numbers. This automation is designed to create an error-free, seamless process. We expect to showcase the software to public in 2025.
Our securities are currently traded on Nasdaq Capital Market effective as of September 23, 2024.
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Our Current Products Include:
We are a wholesaler of various digital, analog, and quantum light meters and filtration products, including fan speed adjusters, carbon filters and HEPA filtration systems.
Ubiquitor Wireless Universal Sensor Device
We have developed a device we call the Ubiquitor, which replaces the functions of traditional digital measurement and sensing products by integrating many digital sensors and measurement tools into one single digital device. We believe the platform represents a technological advancement in the IoT marketplace by integrating large numbers of technologies, including cloud technology, wired and wireless communication technology, software programming, instrumentation technology, artificial intelligence, PLC technology, and sensor networking into a single platform. We believe the result of such integration is a smaller, cheaper, and faster circuit system design than those currently offered in the instrumentation market.
Our USIP technology that will make the Ubiquitor possible is an advanced software and hardware integrated instrumentation platform that uses a large-scale modular design approach. The large-scale modular design approach subdivides instruments into a foundation component (a USIP) and architecture-specific components (sensor nodes), which together replaces the functions of traditional instruments at a fraction of their cost. The USIP has an open architecture, incorporating a variety of individual instrument functions, sensors, and probes from different industries and vendors. The platform features the ability to connect potentially thousands of different sensors or probes, addressing major limitations present in traditional instrumentation systems.
Additional Focus Universal Inc. IoT Products under Smart AVX. Focus Universal Inc. is integrating its own Smart AVX- branded IoT equipment to connect devices across platform systems and to facilitate unified collaboration across audio-visual technologies, digital media technologies, security and surveillance technologies and communication technologies. This approach allows the Company to service its customers for ease of use, design and integration, and installation and maintenance by utilizing technology that integrates our five core technologies.
We have integrated our Smart AVX-branded products across the following strategic sub-sectors: LED Audio-visual Panel Products, large format Smart Multimedia Touch Screens, Pan Tilt Zoom (“PTZ”) Dome Cameras and Network Video Recorders (“NVRs”), and VOIP Phone Services.
| 1. | LED Audio-visual Panel Products. LED panel digital displays have become an integral and modern-day solution that address the communication and display demands of the residential and commercial customer base. Due to the flexible configuration of the LED panels, the modular design that enables the ability to incorporate a design into any size space, the flexibility of the standard size panels to accommodate curvature in the design space, the ability to address transparency in the panel displays and create new areas for delivering media to the public, our LED panel digital displays allow us to easily adapt our display design to spaces of any size and shape, making any customer space a customizable output and connected piece within a system. The option to create full size screens in any space, while addressing any environmental demands, allows us to use state-of-the-art media resulting in immersive, three-dimensional, captivating content delivery within any system. | |
| 2. | Large Format Smart Multimedia Touch Screens. Smart AVX-branded large format touch screens deliver interactive solutions for a wide variety of industries and applications, including education, healthcare, commercial, residential and government applications. While interacting with a touch display is commonplace in public-consumer spaces, we integrate large format Smart touch screens in small business, commercial applications such as dental offices and other business scenarios. These market applications continue to be underserved with touch-enabled devices, and our installation engineers and design staff can customize solutions for unique business and commercial application projects. The Company, through the Smart AVX brand, offers a myriad of customized choices and a long list of options within the current touch screen technology in a refined product. Our products allow future integration of our core platform technologies, such as the LED digital displays, the Ubiquitor, PTZ Dome Cameras and VOIP Phone Systems, allowing for pinch, zoom, scrolling, and videoconferencing within the touch screen format. |
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Lusher Corporate Services, One Touch Financial Software
Financial reporting is the annual and quarterly reporting process by which a public company keeps investors aware of a company’s financial condition, allowing them to have the information they need before making an investment decision.
Because of the depth and nature of the information they contain, reports on Forms 10-K and 10-Q can become time-consuming, especially given the complex processes that require a company’s internal teams to gather large amounts of data across multiple sources. The time and expertise required to complete the process is a substantial burden. SEC reporting deadlines are firm and inflexible.
Delays and mistakes in SEC financial reporting can have far-reaching consequences for companies and their shareholders including. SEC review, enforcement actions, and penalties. Late, inaccurate, or incomplete filings can often lead to a drop in the company’s stock price and a decrease in investor confidence.
Human data entry of hundreds or thousands of financial numbers in the financial report imposes another challenge and presented by regularly occurring human error. This risk is compounded by a frequent requirement to update or revise these hundreds or thousands of numbers during the time-constrained review processes and auditing processes prior to submission.
Given the complexity and volume of data involved, companies are looking for solutions that not only save cost, and reduce the time and effort required to report in a timely manner but also improve accuracy and compliance.
Research and Development Efforts of Power Line Communication
Power Line Communication (“PLC”) technology is a communication technology that enables sending data over existing power cables. One advantage of this technology is that PLC does not require substantial new investment for its communications infrastructure. Rather, PLC utilizes existing power lines, thereby forming a distribution network that already penetrates all residential, commercial and industrial premises. Accordingly, connectivity via PLC technology is potentially the most cost-effective, scalable interconnectivity approach for the IoT. We believe PLC technology can be an integral part of our communication infrastructure for the IoT, which enables reliable, real-time measurements, monitoring, and control. A large variety of appliances may be interconnected by transmitting data through the same wires that provide electrical energy.
Our patented PLC technology uses an ultra-narrowband spectrum channel of less than 1 KHz to establish a long-distance link between transmitter and receiver. Thus, we believe that our proprietary ultra-narrowband PLC technology will offer a promising alternative to wireless networks and provide the backbone communication infrastructure for IoT devices.
The primary design goal of the power line network is electric power distribution, not data transmission. The harsh electrical noise present on power lines and variations in equipment and standards make data transmission over the power grid difficult. These technological challenges have impeded, or even halted, progression of PLC technology.
For a description of our products and services offering, please refer to Item 1. “Business” beginning on page 1 of our Annual Report on Form 10-K for the fiscal year ending December 31, 2024, filed with the Securities and Exchange Commission on February 28, 2025.
Research and Development Efforts of 5G Cellular Technology
Just like our ultra-narrowband technology can be used to effectively reduce noise in powerline communication technology, our internal research suggests that our ultra-narrowband technology can be leveraged to create a type of 5G wireless communication technology that can achieve both low band 5G coverage and an estimated 1 Gbps high band speed. We employ an ultra-narrow spectrum channel (<1KHz) to establish an ultra-long-distance link between the 5G base station and the receiver which reduces noise and interference entering the bandwidth.
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For a description of the ultra-narrowband technology and the 5G applications, see “Part I - Item 1. Business, Section 2. “Creating a faster 5G cellular technology by using ultra-narrowband technology” in our Annual Report on Form 10-K filed with the SEC on February 28, 2025.
Intellectual Property Protection
On November 4, 2016, we filed U.S. patent application number 15/344,041 with the U.S. Patent and Trademark Office (USPTO). The patent was issued on March 20, 2018.
We filed with the USPTO on June 2, 2017 a patent application regarding a process for improving a spectral response curve of a photo sensor. The resulting U.S. Patent No. 10,251,037 was issued on February 26, 2019.
On March 19, 2018, we filed U.S. Patent Application No. 15/925,400. The patent title is a “Universal Smart Device,” which is a universal smart instrument that unifies heterogeneous measurement probes into a single device that can analyze, publish, and share the data analyzed. The resulting U.S. Patent No. 10,251,037 was issued on April 2, 2019.
On November 29, 2019, the Company filed an international utility patent application through the Patent Cooperation Treaty (PCT) as International Patent Application No. PCT/US2019/63880. On September 6, 2022, the International Searching Authority (ISA) issued a favorable International Preliminary Report of Patentability (IPRP) regarding this patent application, which describes the Company’s PLC technology. The IPRP cited only three category “A” documents, indicating that the Company’s application met both the novelty and non-obviousness patentability requirements. Consequently, the Company is optimistic that a patent including claims directed to its PLC technology will be issued in due course and will allow the Company to protect its PLC technology.
In 2021, we hired the law firm of Knobbe, Martens, Olson & Bear, LLP (“Knobbe Martens”) to serve as outside intellectual property counsel for the Company. The firm is working on converting the Company’s provisional patent applications to formal nonprovisional patent applications and expanding existing patent portfolios. In addition, Knobbe Martens is working on filing four previously unfiled patents and pursuing patent coverage in Europe and Australia. In addition, in May 2022, the Company engaged Chang & Hale, LLP as suggested by our counsel at Knobbe Martens to assist with two new patents, noting that Knobbe Martens still remains our main IP counsel. Currently, the Company has 18 pending U.S. nonprovisional patent applications and 9 issued U.S. patents. As a result of our primary IP attorney switching firms from Knobbe Martens to Dority Manning, Focus Universal Inc, hired Dority Manning on July 16, 2024 to serve as outside intellectual property counsel for the Company.
The Company’s patent number 11,488,468 was allowed and subsequently issued on November 1, 2022. The patent is titled “Sensor for Detecting the Proximity of an IEEE 802.11 Protocol Connectable Device.” On November 7, 2023, our patent application titled “Activated Carbon Air Filter” issued as U.S. Patent No. 11,806,654. We also just received an issue notification from the USPTO, indicating that our patent application titled “Electronic Lock and Method of Operation” will issue on November 21, 2023, as U.S. Patent No. 11,823,513. The company has begun to file omnibus patents to combine certain patents under a unified central patent.
Competitors
We have identified several competitors specifically in the wireless sensor node industry, including traditional instruments or device manufacturers. Hach developed and launched the SC1000 Multi-parameter Universal Controller, a probe module for connecting up to 32 digital sensors or analyzers. However, their products are not compatible with smart phones yet; and we believe their price point is still prohibitive to consumers. Monnit Corporation offers a range of wireless and remote sensors. Many of Monnit’s products are web-based wireless sensors that usually are not portable because of their power consumption. Also, the sensors’ real-time updates are slow; and we believe security of the web-based sensor data acquisition may also be a concern. In addition to purchasing the device, consumers usually have to pay monthly fees for using web-based services. We are not trying to compete with traditional instruments or device manufacturers because we utilize our Ubiquitor device in conjunction with our smartphone application, which we believe will be a completely different product category.
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There are many competitors in the SEC Financial Reporting software space, including Workiva, ActiveDisclosure, Datarails, and Carta. We believe that our product will be superior because our pricing will be substantially cheaper than the current competitors in the market. Also, since it is an integration for common desktop applications, software implementation maybe potentially rapid, accessible, and straightforward.
IoT Installation Industry
There are several companies that compete with AVX in smart home installations, including Vivint Smart Home, Savant, Crestron and Control4. However, we believe we can distinguish ourselves from our competitors by offering substantially more customization and interoperability with existing platforms. While our service offerings do not rely on always providing the entire installation for the end client, our Company is able to seamlessly provide accenting, replacement, or conversion home automation systems which are easier to use and interoperate for the end client, and with limited rewiring. Complete installation by Crestron ranges between $100,000 and $500,000 and an installation by Control4 ranges between $70,000 and $250,000. The cheapest competitor we can identify in this sector is Vivint Smart Home, which costs less than $50,000 to install; however, we understand that the Vivint Smart Home focuses on security systems only and that users have no other smart applications, which our smart home product line would include. Our sales staff have encountered a growing client base of unhappy customers with the pre-existing and completely siloed platform systems that reportedly are not easy to use or program, require costly specialty service for simple operations, are subject to lengthy software and hardware backlogs, and despite being based on the same platform, fail to operate compatibly, possessing frequent errors and bugs.
Air Filtration Systems and Meter Products Industry
The air filtration system and meter products industry is a niche industry. Air purification methods are an effective way to control contaminants and improve indoor air quality; and as a result, many national and local governments overseeing indoor air quality and other emissions are enacting stricter workforce health and safety regulations in this area, which drives demand.
Market Potential
We believe universal wireless smart technology will play a critical role for traditional instrument manufacturers, as currently the undertaking of an IoT project is simply too expensive and difficult to develop for medium or smaller companies and carries a 75% failure rate according to Cisco Systems. The cost factor is the first consideration when deciding whether a company wants to develop smart wireless technologies and implement them into their products or use them in their field testing. We also hope to play a role in academic laboratories, particularly with smaller academic laboratories that are sensitive to price. Regarding the larger IoT industry statistics, overall enterprise IoT spending increased to $201 billion in 2022, an increase of 21.5%. The outlook for growth in 2023 is 18.5% from this large base of enterprise spending. More specifically, the IoT sensors market is projected to reach $26 billion by 2026 from $11.1 billion in 2022. The IoT marketplace size assessments usually include the hardware components and the software components, which often contain a Software as a Service (SaaS) model. Additionally, the rising need for reliable high bandwidth communication for IoT devices is expected to rise to $664.75 billion in 2028, spearheaded by the currently predominant services in the 5G category. We would also expect this market to grow with the addition of new categories of services delivering reliable high bandwidth communication for IoT devices and would cannibalize and expand the existing services where the new services proved to be more effective and efficient.
The financial reporting software market size was estimated at 13.9 billion in 2022 and is projected to reach $36.6 billion by 2030. The expanding demand of software solutions to reduce the overall cost of compliance and boost efficiency is one of the main reasons the financial reporting software sector is projected to grow.
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Results of Operations
For the three months ended March 31, 2025 compared to the three months ended March 31, 2024
Revenue, cost of revenue and gross profit
| For the three months ended March 31, 2025 | For the three months ended March 31, 2024 | Increase (Decrease) $ | ||||||||||
| Revenue | $ | 190,255 | $ | 179,505 | $ | 10,750 | ||||||
| Cost of revenue | 159,711 | 89,206 | 70,505 | |||||||||
| Gross Profit | $ | 30,544 | $ | 90,299 | $ | (59,755 | ) | |||||
Our consolidated gross revenue for the three months ended March 31, 2025 and 2024 was $190,255 and $179,505, respectively. Cost of revenue for the three months ended March 31, 2025 was $159,711, compared to $89,206 for the three months ended March 31, 2024. In addition to the increase in revenue and cost of revenue, gross profit decreased to $30,544 compared to $90,299 for the three months ended March 31, 2025 and 2024, respectively.
The major components of our cost and operating expenses for the three months ended March 31, 2025 and 2024 are outlined in the table below:
For the three months ended March 31, 2025 | For the three months ended March 31, 2024 | Increase (Decrease) $ | ||||||||||
| Selling expense | $ | 48,980 | $ | 39,285 | $ | 9,695 | ||||||
| Compensation – officers and directors | 125,387 | 56,793 | 68,594 | |||||||||
| Research and development | 372,258 | 343,277 | 28,981 | |||||||||
| Professional fees | 472,991 | 352,611 | 120,380 | |||||||||
| General and administrative | 282,455 | 512,239 | (229,784 | ) | ||||||||
| Total operating expenses | $ | 1,302,071 | $ | 1,304,205 | $ | (2,134 | ) | |||||
Selling expenses for the three months ended March 31, 2025 were $48,980, compared to $39,285 for the three months ended March 31, 2024. Selling expenses were mainly from third party advertising fees and marketing related fees. The increase in selling expenses was due to an increase in advertising fees.
Compensation – officers and directors were $125,387 and $56,793 for the three months ended March 31, 2025 and 2024, respectively.
Research and development costs were $372,258 and $343,277 for the three months ended March 31, 2025 and 2024, respectively.
Professional fees were $472,991 during the three months ended March 31, 2025, compared to $352,611 during the three months ended March 31, 2024. The increase in these professional fees compared to the prior period was due to a increase in legal fees for employment litigation defense.
General and administrative expenses for the three months ended March 31, 2025 was $282,455 compared to $512,239 during the three months ended March 31, 2024. The increase of general and administrative expenses was primarily due to the Company received its employee retention credit from internal revenue service in 2025.
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Other Income (expense)
Other income for the three months ended March 31, 2025 was $20,149, compared to $3,072 for the three months ended March 31, 2024.
Loss from discontinued operations, net of tax
Loss from discontinued operations, net of tax was $0 and $104,763 during the three months ended March 31, 2025 and 2024, respectively. The decrease was due to the discontinued operations of AT Tech Systems LLC in August 2024.
Net Losses
During the three months ended March 31, 2025 and 2024, we incurred net loss of $1,251,378 and $1,315,597 respectively, due to the factors discussed above.
Liquidity and Capital Resources
Working Capital
March 31, 2025 | December 31, 2024 | |||||||
| Current Assets | $ | 2,502,879 | $ | 3,846,363 | ||||
| Current Liabilities | (769,258 | ) | (876,975 | ) | ||||
| Working Capital | $ | 1,733,621 | $ | 2,969,388 | ||||
Cash Flows
The table below, for the periods indicated, provides selected cash flow information:
| For the three months ended March 31, 2025 | For the three months ended March 31, 2024 | |||||||
| Net cash used in operating activities | $ | (1,220,049 | ) | $ | (892,089 | ) | ||
| Net cash used in investing activities | (23,380 | ) | (5,044 | ) | ||||
| Net cash provided by (used in) financing activities | (144,575 | ) | 550,000 | |||||
| Effect of exchange rate | (5,714 | ) | (2,285 | ) | ||||
| Net change in cash | $ | (1,393,718 | ) | $ | (349,418 | ) | ||
Cash Flows from Operating Activities
Our net cash outflows from operating activities of $1,220,089 for the three months ended March 31, 2025 was primarily the result of our net loss of $1,251,378 and changes in our operating assets and liabilities offset by the add-back of non-cash expenses, and operating activities from discontinued operations.
Our net cash outflows from operating activities of $892,089 for the three months ended March 31, 2024 was primarily the result of our net loss of $1,315,597 and changes in our operating assets and liabilities offset by the add-back of non-cash expenses, and operating activities from discontinued operations.
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We expect that cash flows from operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our net revenues and operating results, utilization of new revenue streams, in line with our shifting revenue streams, collection of accounts receivable, and timing of billings and payments.
Cash Flows from Investing Activities
For the three months ended March 31, 2025 we had cash outflow from investing activities of $23,380 from the purchase of property and equipment of $23,380. For the three months ended March 31, 2024, we had cash outflow from investing activities of $5,044 from the purchase of property and equipment of $5,044.
Cash Flows from Financing Activities
For the three months ended March 31, 2025, we had cash outflows of $144,575 due to purchase of treasury stock of $144,575. For the three months ended March 31, 2024, we had cash inflows of $550,000 due to proceeds from third party loan of $300,000, proceeds from related party loan of $300,000 and repayment on third party loan of $50,000.
On November 11, 2024, we entered into a Share Purchase Agreement with Alumni Capital LP, a Delaware limited partnership. Pursuant to the Purchase Agreement, we have the right, but not the obligation to cause Alumni Capital to purchase up to $20,000,000 common stock, par value $0.00001, at certain purchase price during the period beginning on the execution date of the Agreement and ending on the earlier of (i) the date which Alumni Capital has purchased $20,000,000 of the Company’s common stock pursuant to the Purchase Agreement or (ii) November 11, 2027. As of the date of issuance of the unaudited consolidated financial statement, the Company has only executed a purchase notice for 94,825 shares to Alumni Capital, based on our Purchase Agreement, dated November 16, 2024, but the Closing Date has not been completed and proceeds have not been received.
Going Concern
The Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these condensed consolidated financial statements. The Company has a net loss of $1,251,378 for the three months ended March 31, 2025. In addition, the Company had an accumulated deficit of $27,033,686 as of March 31, 2025, and negative cash flow from operating activities of $1,220,049 for the three months ended March 31, 2025. Substantial doubt about the Company’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the Company will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company currently suffered recurring loss from operations, generated negative cash flow from operating activities, has an accumulated deficit and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These conditions raise substantial doubt as to its ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2024, has also expressed substantial doubt about the Company’s ability to continue as a going concern.
At March 31, 2025, the Company had cash and cash equivalents, and short-term investments, in the amount of $2,217,268. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings, and it expects to continue to rely on these sources of capital in the future. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing, or grant unfavorable terms in future licensing agreements.
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Off-Balance Sheet Arrangements
As of March 31, 2025, we did not have any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation SK.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
Our Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a15(e) and 15d15(e) under the Securities and Exchange Act of 1934, at the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our Company, particularly during the period when this report was being prepared.
Our management concluded we did not maintain effective controls over the Company’s financial reporting. The material weaknesses in our internal control over financial reporting, caused principally by inadequate staffing and technical expertise in key positions, resulted in overly relying on outside consultants to make numerous adjustments to our financial statements. Additionally, the significant deficiencies or material weaknesses could result in future material misstatement of the consolidated financial statements that would not be prevented or detected. Management has concluded that the identified control deficiencies constitute a material weakness.
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Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting during our most recent fiscal quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Internal Controls
Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity's disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors or mistakes or intentional circumvention of the established process.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 26, 2024, a former software engineer filed an action against Perfecular Inc., a wholly owned subsidiary of the Company, in the Superior Court for the County of San Bernardino, State of California alleging wrongful termination and other violations of the California Labor Code. The complaint sought unspecified economic and non-economic losses, as well as attorneys’ fees. On April 25, 2025, the Company and the software engineer entered into a confidential settlement agreement which concluded this matter and releases all claims against the Company.
On October 28, 2024, MGR Real Estate, Inc. a California corporation, filed an action in the Superior Court of the State of California, County of San Bernardino, against the Company and CFO Irving Kau. The complaint alleged a variety of items including breach of contract and declaratory relief. On April 10, 2025, the Company, Mr. Kau, and MGR Real Estate, Inc. entered into a confidential settlement agreement which concluded this matter and releases all claims against the Company. The impact has been accounted for in these financial statements.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
No unregistered shares of common stock were sold during the three months ended March 31, 2025.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No senior securities were issued and outstanding during the three-month periods ended March 31, 2025 or 2024.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to our Company.
ITEM 5. OTHER INFORMATION
Our common stock trades on the Nasdaq Capital Market under the symbol “FCUV.”
During the quarter ended March 31, 2025, no
director or officer of the Company
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ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q
Exhibits
The following financial information is filed as part of this report:
| (a) | (1) FINANCIAL STATEMENTS |
| (2) SCHEDULES | |
| (3) EXHIBITS. The following exhibits required by Item 601 to be filed herewith are incorporated by reference to previously filed documents: |
|
Exhibit Number |
Description |
| 31.1 | Certification of CEO pursuant to Sec. 302 |
| 31.2 | Certification of CFO pursuant to Sec. 302 |
| 32.1 | Certification of CEO pursuant to Sec. 906 |
| 32.2 | Certification of CFO pursuant to Sec. 906 |
| 101.INS | XBRL Instances Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Focus Universal Inc. | |||
| Dated: May 7, 2025 | By: |
/s/ Desheng Wang Desheng Wang Chief Executive Officer | |
| Dated: May 7, 2025 | By: |
/s/ Irving H. Kau Irving H. Kau Chief Financial Officer | |
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