What changed in this filing

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Item 1A. Risk Factors

2025-02-28 compared with 2024-04-01 · 101 added, 149 removed, 642 unchanged (28% of the section changed)

Risks Related to our Business and Industry

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

order to alleviate as a going concern.

Our current liquidity position raises substantial doubt about our ability to continue as a

going concern.

If we are able to improve our liquidity position by completing the sale of our facility, we may alleviate our going concern.

While we believe the sale of the facility and the sale of real estate as a whole to be less speculative as a whole, we acknowledge that

the transaction still remains to be completed and the risks remain in completion of that transaction.

The accompanying consolidated financial

statements do not include any adjustments that might result.

We have a history of operating losses and

we may not be able to sustain profitability.

going concern basis, and we may not be able to sustain profitability.

We were incorporated on December 4, 2012;

December 31, 2023, we had an accumulated deficit of $22,582,170.

If we are not successful in growing revenues and controlling costs, we

will not maintain profitable operations or positive cash flow, and even if we achieve profitability in the future, we may not be able

to sustain profitability in subsequent periods.

Because we have a limiting operating history

with positive revenues, you may not be able to accurately evaluate our operations.

We were incorporated on December 4, 2012, and

have had limited profitable operations to date.

Therefore, we have a limited profitable operating history upon which to evaluate the merits

of investing in our company.

The likelihood of success must be considered in light of the problems, expenses, difficulties, complications

and delays encountered in connection with the operations that we plan to undertake.

These potential problems include, but are not limited

to, unanticipated problems relating to the ability to generate sufficient cash flow to operate our business, and additional costs and

expenses that may exceed current estimates.

However, we expect to continue generating revenues.

Additionally, we recognize that if the

effectiveness of our business plan is not forthcoming, we will not be able to continue business operations.

If we are unsuccessful in

addressing these risks, our business will most likely fail.

as of December 31, 2024, we had an accumulated deficit of $25,782,308.

Our current liquidity position raises substantial doubt about our

ability to continue as a 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 consolidated financial statements.

The Company has a net loss of $3,200,138 and $4,718,142 for the years

ended December 31, 2024 and 2023, respectively.

In addition, the Company had an accumulated deficit of $25,782,308 and $22,582,170 as

of December 31, 2024 and 2023, respectively, and negative cash flow from operating activities of $4,656,754 and $3,528,762 for the years

ended December 31, 2024 and 2023, respectively.

If we are not successful in growing revenues and controlling costs, we will not achieve

profitable operations or positive cash flow, and even if we achieve profitability in the future, we may not be able to sustain profitability

in subsequent periods.

We require significant funding to develop, manufacture and market

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major suppliers that could make it so smaller companies like us experience volatility in costs and/or availability issues.

we have not yet manufactured in large numbers, our management team might not have the expertise to mitigate such price fluctuations or

availability concerns.

Thus, suppliers could stop selling to us because of demand.

Even though it is possible to find alternative suppliers,

changing to new suppliers could delay production and affect the quality of certain products.

We expect added

volatility as new import tariffs may be imposed on imports from China, Mexico and Canada.

Because this is a recent development, we have

not been able to fully assess this risk or its effects in the manufacturing and import of our products.

Also, since we have not yet manufactured

in large numbers, our management team might not have the expertise to mitigate such price fluctuations or availability concerns.

suppliers could stop selling to us because of demand.

Even though it is possible to find alternative suppliers, changing to new suppliers

could delay production and affect the quality of certain products, and there is no guarantee that new tariffs will not be levied upon

goods imported from such new suppliers.

Changes in tariffs, import or export restrictions,

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If Hydrofarm changes the term to CIF (Cost, Insurance, and Freight) United States, then we would

be responsible for the shipping costs and the tariff costs, which may reduce our gross margin.

Thus, we may incur increases in costs due

to changes in tariffs, import or export restrictions, other trade barriers, or unexpected changes in regulatory requirements, any of which

could reduce our gross margins.

Moreover, volatile economic conditions may impact the ability of our suppliers to make timely deliveries;

and if a supplier fails to make a delivery, there is no guarantee that we will be able to timely locate an alternative supplier of comparable

quality at an acceptable price.

Since the beginning of 2018, there has been increasing

rhetoric, in some cases coupled with legislative or executive action, from several U.S.

and foreign leaders regarding tariffs against

imports of certain materials.

It is difficult to anticipate the impact on our business caused by the proposed tariffs or whether the proposed

changes in tariffs will materialize in the future.

Given the relatively fluid regulatory environment in China and the United States, there

could be additional tax, tariffs, or other regulatory changes in the future.

Any such changes could directly and materially adversely

impact our business, financial condition, and operating results.

be responsible for the shipping costs and the tariff costs, which may reduce our gross margin, specially now that new tariffs may be imposed

on goods imported from China.

Thus, we may incur increases in costs due to changes in tariffs, import or export restrictions, other trade

barriers, or unexpected changes in regulatory requirements, any of which could reduce our gross margins.

Moreover, volatile economic conditions

may impact the ability of our suppliers to make timely deliveries;

and if a supplier fails to make a delivery, there is no guarantee that

we will be able to timely locate an alternative supplier of comparable quality at an acceptable price.

Since the beginning of 2025, the U.S.

executive orders to increase tariffs against imports from Chinese, Mexican and Canadian goods, but it is difficult to determine at this

time if more tariffs will be imposed on goods imported from other countries.

It is difficult to anticipate the impact on our business

caused by the increased tariffs or whether additional changes in tariffs will materialize in the future.

Given the relatively fluid regulatory

environment in China and the United States, there could be additional tax, tariffs, or other regulatory changes in the future, and China

could retaliate against the tariffs recently imposed by the U.S.

Any such changes could directly and materially adversely impact our business,

financial condition, and operating results.

Our failure to respond to rapid change in

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refusal to purchase our products and services;

perception by end-users with respect to the quality of our wireless sensors in an industry historically dominated by wired sensors;

perception by end-users with respect to the quality of our wireless

sensors in an industry historically dominated by wired sensors;

inadequate development of smartphone infrastructure to keep pace with increased levels of use;

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We may also be subject

to claims of breach of contract for such unauthorized disclosure or access, investigation and penalties by regulatory authorities and

to claims for breach of contract for such unauthorized disclosure or access, investigation and penalties by regulatory authorities and

potential claims by persons whose information was disclosed.

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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.

material weakness in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial

If we are unsuccessful in implementing or following our remediation plan, we may not be able to timely or accurately report

our financial condition, results of operations or cash flows or maintain effective disclosure controls and procedures.

If we are unable

to report financial information timely and accurately or to maintain effective disclosure controls and procedures, we could be subject

to, among other things, regulatory or enforcement actions by the SEC, any one of which could adversely affect our business prospects.

of the Company’s annual or interim financial statements will not be prevented or detected on a timely manner.

A material weakness in our internal control over

financial reporting could adversely impact our ability to provide timely and accurate financial information.

If we are unsuccessful in

implementing or following our remediation plan, we may not be able to timely or accurately report our financial condition, results of

operations or cash flows or maintain effective disclosure controls and procedures.

If we are unable to report financial information timely

and accurately or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or

enforcement actions by the SEC, any one of which could adversely affect our business prospects.

Our executive officers and directors collectively

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Our CEO and one of our directors, Dr.

Desheng Wang,

owns 33.343% of the outstanding shares of our common stock as of the date of this report.

Wang, owns 32% of the outstanding shares of our common stock as of the date of this report.

Two of our directors together own over 50%

of the outstanding shares of our common stock.

Accordingly, our directors have a significant influence in determining the outcome of

all corporate transactions or other matters, including mergers, consolidations, and the sale of all or substantially all of our assets.

They also have the power to prevent or cause a change in control.

The interests of our directors may differ from the interests of the

other stockholders and thus result in corporate decisions that are disadvantageous to other shareholders.

Management currently beneficially

owns most of our outstanding common stock.

Consequently, management can influence control of the operations of the Company and, acting

together, will have the ability to influence or control substantially all matters submitted to stockholders for approval, including:

Accordingly, our directors have a significant influence in determining the outcome of all

corporate transactions or other matters, including mergers, consolidations, and the sale of all or substantially all of our assets.

also have the power to prevent or cause a change in control.

The interests of our directors may differ from the interests of the other

stockholders and thus result in corporate decisions that are disadvantageous to other shareholders.

Management currently beneficially owns most of

our outstanding common stock.

Consequently, management can influence control of the operations of the Company and, acting together, will

have the ability to influence or control substantially all matters submitted to stockholders for approval, including:

Election of our board of directors;

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

In 2018, we registered 19,904,706 shares of our

common stock for more than 300 shareholders, which is substantially more than the 18,018,039 shares of common stock that are currently

free trading.

Any increase in freely trading shares, or the perception that such shares will or could come onto the market could have

an adverse effect on the trading price of the stock.

No prediction can be made as to the effect, if any, that sales of these shares, or

the availability of such shares for sale, will have on the market prices prevailing from time to time.

Nevertheless, the possibility that

substantial amounts of common stock may be sold in the public market may adversely affect prevailing market prices for our common stock

and could impair our ability to raise capital through the sale of our equity securities or impair our shareholders’ ability to sell

on the open market.

As of January 31, 2025, we had 3,378,104 freely

trading shares, after the Company’s Board of Directors approved a 10 to 1 reverse stock split.

Any increase in freely trading shares,

or the perception that such shares will or could come onto the market could have an adverse effect on the trading price of the stock.

No prediction can be made as to the effect, if any, that sales of these shares, or the availability of such shares for sale, will have

on the market prices prevailing from time to time.

Nevertheless, the possibility that substantial amounts of common stock may be sold

in the public market may adversely affect prevailing market prices for our common stock and could impair our ability to raise capital

through the sale of our equity securities or impair our shareholders’ ability to sell on the open market.

You could be diluted from our future issuance

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in the public market that our stockholders might sell shares of common stock also could depress the market price of our common stock.

There are approximately 64,771,817 shares of our common stock outstanding as of April 1, 2024, of which approximately 26,989,222 shares

are currently freely tradable.

There are approximately 7,153,647 shares of our common stock outstanding as of December 31, 2024, of which approximately 3,417,793 shares

are freely tradable.

Certain existing holders of most of our common

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We have never paid any cash dividends and currently

do not intend to pay any dividends for the foreseeable future.

do not intend to pay any cash 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.

for in our financing plan, our funding sources may likely prohibit the payment of a cash dividend.

Because we do not intend to declare

cash dividends, any gain on an investment in Focus Universal Inc.

will need to come through appreciation of the stock’s price.

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Our common stock is currently

listed on the Nasdaq Global Market under the symbol “FCUV,” but we can provide no assurance that we will be able to maintain

listed on the Nasdaq Capital Market under the symbol “FCUV,” but we can provide no assurance that we will be able to maintain

an active trading market on this or any other exchange in the future.

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to use common stock as consideration to attract and retain talent or engage in business transactions (including mergers and acquisitions).

In 2021, our common stock was listed on the Nasdaq Capital Market.

Our stock was uplisted onto the Nasdaq Global Market on January 28,

On March 20, 2024 and March 22, 2024, we received two separate letters from the Listing Qualifications Department (the “Staff”)

of the Nasdaq Stock Market (“Nasdaq”).

The March 20, 2024 letter was notifying the Company that based upon the closing bid

price for the last 30 consecutive business days, the Company no longer meets the Nasdaq Listing Rule 5450(a)(1) (the “Bid Price

In addition, on March 22, 2024, Nasdaq notified the Company that since the Company’s Market Value of Listed Securities

(“MVLS”) has fallen below $50,000,000 the Company no longer satisfies the requirements to qualify for the Nasdaq Global Market

pursuant to Nasdaq Listing Rule 5450(b)(2)(A) (the “MVLS Rule”).

The notification received has no immediate effect on the

Company’s Nasdaq listing.

In accordance with Nasdaq

Listing Rule 5810(c)(3)(A) and 5810(c)(3)(C) (the “Compliance Period Rule”), the Company has been provided an initial period

of 180 calendar days, or until September 16, 2024 and September 18, 2024, (the “Compliance Date”), to regain compliance with

the Bid Price Rule and the MVLS Rule, respectively.

If, at any time before the Compliance Date, the bid price of the Company’s security

is at least $1 for a minimum of ten consecutive business days, the Staff will provide written confirmation of compliance to the Company

and this matter will be closed with respect to the Bid Price Rule.

Concurrently, if, at any time before the Compliance date the Company’s

MVLS is over $50,000,000 or more for a minimum of ten consecutive business days then this matter will be closed with respect to the MVLS

If the Company is not

in compliance with the Bid Price Rule by September 16, 2024, the Company may be afforded a second 180 calendar day period to regain compliance.

Pursuant to Rule 5810(c)(3)(A)(i)-(ii), to qualify, the Company would be required to transfer to The Nasdaq Capital Market and then meet

the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital

Market, with the exception of the bid price requirement, and would need to provide written notice of its intention to cure the deficiency

during the second compliance period, by effecting a reverse stock split, if necessary.

For the MVLS Rule, if the Company does not regain

compliance by September 18, 2024, then the Company will be required to transfer to the Nasdaq Capital Market where the MVLS is $35,000,000.

The Company will continue

to actively monitor the closing bid price of its common stock and will evaluate available options, including, without limitation, submitting

a transfer application to the Nasdaq Capital Market and/or seeking to effect a reverse stock split, in order to resolve the deficiency

and regain compliance with the Bid Price Rule and the MVLS Rule.

The Company’s common stock will continue to be listed and traded

on The Nasdaq Global Market during the first 180-day compliance period that ends on the Compliance Date, subject to the Company’s

compliance with the other continued listing requirements of the Nasdaq Global Market.

Our shares of common stock are only recently

listed on NASDAQ, and we may not be able to maintain the continued listing standards.

As previously reported, the Company has met the continued listing requirements for Nasdaq Capital Market by submitting a transfer application

from the Nasdaq Global Market to the Capital Market and providing written notice of its intention to cure the deficiency during the second

compliance period to regain compliance with Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Rule”).

The Company was provided

a second compliance period of 180 calendar days or until March 17, 2025, to regain compliance with the Bid Price Rule.

If, at any time

before the Compliance Date, the bid price of the Company’s security is at least $1 for a minimum of ten consecutive days then this

matter should be closed with respect to the Bid Price Rule.

In an effort to regain

compliance with Nasdaq’s Bid Price Rule, on January 31, 2025, the Company effected a 1 for 10 reverse stock split pursuant to Nevada

Revised Statutes (“NRS”) Section 78.207 which also caused a decrease of the Company’s authorized shares of common stock

by the same ratio from 150,000,000 to 15,000,000.

We may not be able to maintain the continued

NASDAQ listing standards.

NASDAQ requires companies to fulfill specific

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bid price requirement or prevent future non-compliance with NASDAQ’s continued listing requirements.

Risks Related to Our Acquisition of AVX

If we are unable to manage our anticipated

post-acquisition growth effectively, our business could be adversely affected.

We anticipate that because of the significant

expansion of our operations and addition of operating subsidiaries, new personnel may be required in all areas of our operations to continue

to implement our post-acquisition business plan.

Our future operating results depend to a large extent on our ability to manage this expansion

and growth successfully.

For us to continue to manage such growth, we must put in place legal and accounting systems and implement human

resource management and other tools.

We have taken preliminary steps to put this structure in place.

However, there is no assurance that

we will be able to successfully manage this anticipated rapid growth.

A failure to manage our growth effectively could materially and

adversely affect our profitability.

Risks Related to AVX

Increasing competition within our industry

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The reason we believe that we could become competitive in this market segment is because we anticipate integrating the Ubiquitor device,

and our platforms into AVX’s smart home installations.

However, there is no guarantee that we can integrate the Ubiquitor device

into AVX’s smart home installations.

However, there is no guarantee that we can integrate the Ubiquitor device into AVX’s

smart home installations.

If we are unable to integrate the Ubiquitor device into smart home installations, we will not be able to achieve

the competitive price and performance we anticipate achieving success in AVX’s future smart home installations.

Alternatively, we

may not be able to achieve a smart home installation at a cost-effective price that is sufficient to distinguish us from amongst the competition

in this market segment.

If we are unable to integrate the Ubiquitor device into smart home installations, we will not

be able to achieve the competitive price and performance we anticipate achieving success in AVX’s future smart home installations.

Alternatively, we may not be able to achieve a smart home installation at a cost-effective price that is sufficient to distinguish us

from amongst the competition in this market segment.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors