As filed with the Securities and Exchange Commission on April
11, 2018
Registration No. 333-214455
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT No. 2
to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
FOCUS UNIVERSAL INC.
(Exact name of registrant as specified in
its charter)
Nevada
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46-3355876
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.)
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Incorporation or organization)
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20511
East Walnut Drive North, Walnut, CA
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91789
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(Address of principal executive offices)
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(Zip Code)
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(Address, including
zip code, and telephone number,
Including area code, of registrant’s
principal executive offices)
Registrant’s telephone number, including
area code (626) 272-3883
Copy to:
Gilbert J. Bradshaw, Esq.
Wilson & Oskam, LLP
9110 Irvine Center Drive
Irvine, CA 92618
Tel: (917) 830-6517/Fax: (917) 791-8877
gbradshaw@wilsonoskam.com
Nevada Business Center, LLC
701 S. Carson St. Suite 200
Carson City, NV 89701
(775) 887-8853
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
Approximate date of commencement of proposed
sale to the public:
From time to time after this registration
statement is declared effective.
If
any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box:
þ
If
this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the
same offering.
¨
If
this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If
this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging
growth company" in Rule 12b-2 of the Exchange Act. (check one)
Large accelerated filer:
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Accelerated filer:
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Non-accelerated filer:
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Smaller reporting company:
þ
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Emerging Growth Company:
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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 7(a)(2)(B) of the Securities Act.
o
CALCULATION OF REGISTRATION FEE
Title of Each
Class of Securities to be Registered
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Shares
to be
Registered (1)
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Proposed
Offering Price
Per Share (2)
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Proposed
Maximum
Aggregate Offering
Price (3)
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Amount
of
Registration
Fee (4)(5)
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Common stock, par value $0.001 per share
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16,904,706
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$2.50
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$42,261,765
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$5,261.59
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___________________
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(1)
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We are registering a total of 16,904,706 shares of our
common stock of which 6,904,706 shares are being registered for resale that have been issued to the stockholders of Perfecular
Inc. in exchange for its acquisition by the Company on December 30, 2015 and 10,000,000 additional shares that we will sell directly
to the public on the OTCQB marketplace.
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(2)
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The offering price was estimated solely for the purpose
of computing the amount of the registration fee in accordance with Rule 457(o). Our common stock is not traded on any national
exchange, but is traded as of the date of this prospectus on the OTCQB marketplace. The offering price is based on the average
of the bid and the ask price of our common stock on that market on March 30, 2018 and as set forth by our executives.
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(3)
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Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(c) under the Securities Act.
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(4)
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Estimated solely for the purpose of computing the amount
of the registration fee pursuant to Rule 457(o) under the Securities Act.
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(5)
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The Registrant
previously paid $33,428.70 of the registration fee in connection with prior filings of
this Registration Statement.
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The registrant hereby amends this registration statement
on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
The information
in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell
these securities and is not soliciting an offer to buy these securities in any state where the sale is not permitted.
PRELIMINARY PROSPECTUS
SUBJECT
TO COMPLETION ON _______, 2018
FOCUS UNIVERSAL INC.
16,904,706 SHARES OF COMMON STOCK
We are an emerging growth company. This prospectus relates
to the offer and sale, from time to time, of up to 16,904,706 shares of the common stock of Focus Universal Inc., a Nevada corporation
(“Focus Universal,” “the Company,” “we,” “us,” and “our,”). We are
registering a total of 16,904,706 shares of our common stock of which 6,904,706 shares are being registered for resale that have
been issued to the stockholders of Perfecular Inc. in exchange for its acquisition by the Company on December 30, 2015 and 10,000,000
additional shares that we will sell directly to the public. Each selling stockholder may be considered an “underwriter”
within the meaning of the Securities Act of 1933, as amended.
We are selling up to 10,000,000 shares
of common stock in this offering. We, therefore, will receive proceeds from the sale of some of the shares being registered.
The selling stockholders may sell common
stock from time to time in the principal market on which the stock will be traded at the prevailing market price or in negotiated
transactions. See “Plan of Distribution” for more information about how the selling stockholders may sell the shares
of common stock being registered pursuant to this prospectus. The selling stockholders have informed us that they do not have any
agreement or understanding, directly or indirectly, with any person to distribute the common stock.
We have paid and will pay the expenses
incurred in registering the shares, including legal and accounting fees. See “Plan of Distribution.”
Our common stock is currently quoted on
the OTCQB market under the symbol “FCUV.” On March 30, 2018, the last quoted price of our common stock as reported
on the OTCQB was $2.49 per share.
An investment in our common stock is
speculative and involves a high degree of risk. Investors should carefully consider the risk factors and other uncertainties described
in this prospectus before purchasing our common stock. See “
Risk Factors
” beginning on page 3.
NEITHER THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL, ACCURATE, OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
AVAILABLE INFORMATION
This prospectus constitutes
a part of a registration statement on Form S-1 (together with all amendments and exhibits thereto, the “Registration Statement”)
filed by us with the SEC under the Securities Act of 1933, as amended (the “Securities Act”). As permitted by the rules
and regulations of the SEC, this prospectus omits certain information contained in the Registration Statement, and reference is
made to the Registration Statement and related exhibits for further information with respect to Focus Universal Inc. and the securities
offered hereby. With regard to any statements contained herein concerning the provisions of any document filed as an exhibit to
the Registration Statement or otherwise filed with the SEC, in each instance reference is made to the copy of such document so
filed. Each such statement is qualified in its entirety by such reference.
Unless otherwise specified, the
information in this prospectus is set forth as of April 10, 2018, and we anticipate that changes in our affairs
will occur after such date. We have not authorized any person to give any information or to make any representations, other
than as contained in this prospectus, in connection with the offer contained in this prospectus. If any person gives you any
information or makes representations in connection with this offer, do not rely on it as information we have authorized. This
prospectus is not an offer to sell our common stock in any state or other jurisdiction to any person to whom it is unlawful
to make such offer.
PROSPECTUS SUMMARY
This summary highlights information
contained elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information that may be
important to you. You should read this entire prospectus and should consider, among other things, the matters set forth under “Risk
Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our
consolidated financial statements and related notes thereto appearing elsewhere in this prospectus before making your investment
decision. This prospectus contains forward-looking statements and information relating to Focus Universal. See “Cautionary
Note Regarding Forward Looking Statements” on page 13.
Focus Universal Inc.
(the “Company”,
“we”, “us” or “our”) is a Nevada corporation that is a provider of handheld sensor devices
and wholesaler of various air filters.
We are based in Walnut, California,
and were incorporated in Nevada in 2012. In December 2013, we filed an S-1 registration statement that went effective on March
14, 2014.
Our website is www.focusuniversal.com.
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Registration
Statement on Form S-1.
We market of high-tech electronic devices.
We sell handheld sensor systems and filters wholesale to distribution platforms and are working on developing a universal sensor
node and gateway system that use the data processing capabilities of a smartphone to display readings of multiple probe modules.
We are also researching the development of an anti-counterfeit authentication technology that we believe could address the problem
of counterfeit production by attempting to authenticate consumer goods.
Our principal executive offices are
located at 20511 East Walnut Drive North, Walnut, CA and our telephone number is (626) 272-3883 and our website is www.focusuniversal.com.
JOBS Act
Recently the United States Congress passed
the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), which provides for certain exemptions from various
reporting requirements applicable to public companies that are reporting companies and are “emerging growth companies.”
We are an “emerging growth company” as defined in Section 3(a) of the Exchange Act (as amended by the JOBS Act, enacted
on April 5, 2012), and we will continue to qualify as an “emerging growth company” until the earliest to occur of:
(a) the last day of the fiscal year during which we have total annual gross revenues of $1,000,000,000 (as such amount is indexed
for inflation every five years by the SEC) or more; (b) the last day of our fiscal year following the fifth anniversary of the
date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act;
(c) the date on which we have, during the previous three-year period, issued more than $1,000,000,000 in non-convertible debt;
or (d) the date on which we are deemed to be a “large accelerated filer,” as defined in Exchange Act Rule 12b–2.
Therefore, we expect to continue to be an emerging growth company for the foreseeable future.
Generally, a registrant that registers any
class of its securities under Section 12 of the Exchange Act is required to include in the second and all subsequent annual reports
filed by it under the Exchange Act a management report on internal control over financial reporting and, subject to an exemption
available to registrants that meet the definition of a “smaller reporting company” in Exchange Act Rule 12b-2, an auditor
attestation report on management’s assessment of internal control over financial reporting. However, for so long as we continue
to qualify as an emerging growth company, we will be exempt from the requirement to include an auditor attestation report in our
annual reports filed under the Exchange Act, even if we do not qualify as a “smaller reporting company”. In addition,
as an emerging growth company, we are able to avail ourselves to the reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements and to not present to our stockholders a nonbinding advisory vote on executive compensation,
obtain approval of any golden parachute payments not previously approved or present the relationship between executive compensation
actually paid and our financial performance. We have irrevocably elected to comply with new or revised accounting standards even
though we are an emerging growth company.
The Offering
This prospectus covers shares being offered for sale by the
selling shareholders, which shares were acquired by the shareholders of Perfecular Inc. in connection with its acquisition on December
30, 2015. This also covers an additional 10,000,000 shares which will be offered for sale by the Company. The holders of shares
of our common stock described in this paragraph are the selling stockholders under this prospectus.
ABOUT THIS OFFERING
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Securities Being Offered
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Up to 6,904,706 shares of our common stock to be sold by selling stockholders and 10,000,000 shares being sold by the Company.
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Common Stock Outstanding Prior to the Offering
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34,574,706
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Common Stock Outstanding After the Offering
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44,574,706
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Offering Price Per Share
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The shares offered under this prospectus by the selling
stockholders may be sold at
a fixed price of
$2.50 per share for the duration of the offering
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The Company will sell up to 10,000,000 shares at a
price of $2.50 per share pursuant to the terms below.
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Terms of the Offering
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The company will offer and sell
the shares of its common stock at a price of $2.50 per share. The Company may sell the securities covered by this
prospectus in any of three ways (or in any combination thereof): (i) to or through underwriters or dealers; (ii) directly
to one or more purchasers; or (iii) through agents.
We may distribute the securities
covered by this prospectus from time to time in one or more transactions at a fixed price of $2.50 per share unless
modified by a post-effective amendment of this registration statement.
Each time we offer and sell securities
covered by this prospectus, we will make available a prospectus supplement or supplements that will describe the method
of distribution and set fort the terms of the offering, including: (i) the name or names of any underwriters, dealers,
or agents and the number of shares of securities underwritten or purchased by each of them; (ii) if a fixed price
offering, the public offering price of the securities and the proceeds to us; (iii) any options under which underwriters
may purchase additional securities from us; (iv) any underwriting discounts or commissions or agency fees and other items
constituting underwriters’ or agents’ compensation; (v) terms and conditions of the offering; (vi) any discounts,
commissions or concessions allowed or reallowed or paid to dealers; and (vii) any securities exchange or market on which
the securities may be listed.
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Termination of the Offering
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The offering will conclude upon the earliest of: (1) such time when all of the 10,000,000 shares of common stock have been sold by the Company; (2) such time as all of the common stock becomes eligible for resale without volume limitations pursuant to Rule 144 of the Securities Act; (3) when the Selling Stockholders have all sold their shares; or (4) at a time when our company, in its sole discretion, decides to terminate the registration of the shares.
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Use of Proceeds
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Any proceeds that we receive from sales of the shares will be used to manufacture more high tech devices and to market to business distribution channels, for general advertising and marketing expenses, and for other general corporate purposes.
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Risk Factors
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An investment in our common stock is highly speculative and involves a high degree of risk. See “Risk Factors” beginning on page 3.
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Fees and Expenses
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We will pay all expenses incident to the registration of such shares, except for sales commissions and other expenses of selling stockholders.
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RISK FACTORS
An investment in our common stock is
highly speculative, involves a high degree of risk and should be made only by investors who can afford a complete loss. You should
carefully consider the following risk factors, together with the other information in this prospectus, including our financial
statements and the related notes, before you decide to buy our common stock. If any of the following risks actually occurs, then
our business, financial condition or results of operations could be materially adversely affected, the trading of our common stock
could decline, and you may lose all or part of your investment therein.
We lack an operating history. There
is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate
profitably, our business will fail.
We were incorporated on December 4,
2012, and as of December 31, 2017, we had an accumulated deficit of $1,978,794. We have a limited operating history
upon which an evaluation of our future success or failure can be made. Based upon current plans, we expect to continue
generating revenues. However, our revenues may not be sufficient to cover our operating costs. We cannot guarantee that we
will be successful in generating significant revenues in the future. Failure to achieve a sustainable sales level will cause
us to go out of business.
We require significant funding to manufacture and market
our Ubiquitor wireless sensor.
We may ultimately require up to $20 million to fund
the manufacturing and marketing strategy for our product. Once we achieve this fund-raising goal, we intend to position ourselves
in the small device market, establishing the price at below a few hundred dollars. Due to superior functionality and low price,
we expect to capture this section of the market fairly easily, while our product and service matures, and the Company becomes
better known, we will seize the high-end market. None of this will be possible if we fail to obtain the funding we require.
We depend on key personnel.
Our future success will depend in part
on the continued service of key personnel, particularly, Desheng Wang our Chief Executive Officer and our President Edward Lee.
If any of our directors and officers will
choose to leave the company, we will face significant difficulties in attracting potential candidates for replacement of our key
personnel due to our limited financial resources and operating history. In addition, the loss of any key employees or the inability
to attract or retain qualified personnel could delay our plan of operations and harm our ability to provide services to our current
customers and harm the market’s perception of us.
We outsourced our product manufacturing
and procurement, decreasing quality and reliability and protectability
We have fully
outsourced all manufacturing and have no direct control over the manufacturing processes of our products. This lack of control
may increase quality or reliability risks and could limit our ability to quickly increase or decrease production rates. It also
creates liability in that we could lose control of our intellectual property that is not properly protected.
Demand for
our products is uncertain and depends on our currently unproven ability to create and maintain superior performance
Our future operating
results will depend upon our ability to provide our products or services and to operate profitably in an industry characterized
by intense competition, rapid technological advances and low margins. This, in turn, will depend on a number of factors, including:
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Our ability to generate significant sales and profit margin from the Ubiquitor device;
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Worldwide market conditions and demand for web services, sensor devices and other products we may continue to add as we move forward;
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Our success in meeting targeted availability dates for our products and services;
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Our ability to develop and commercialize new intellectual property and to protect existing intellectual property;
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Our ability to maintain profitable relationships with our distributors, retailers and other resellers;
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Our ability to maintain an appropriate cost structure;
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Our ability to attract and retain competent, motivated employees;
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Our ability to comply with applicable legal requirements throughout the world; and
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Our ability to successfully manage litigation, including enforcing our rights, protecting our interests and defending claims made against us.
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These factors
are difficult to manage, satisfy and influence and we cannot provide any assurance that we will be able to sustain profits in the
future.
Our Ubiquitor
Product could fail to gain traction in the marketplace for a number of reasons that would adversely impact our financial results
and cause our investors to lose money
Future successful sales of our Ubiquitor
entail numerous risks such as:
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Any lack of market acceptance of the Ubiquitor;
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Failure to maintain acceptable arrangements with product suppliers, particularly in light of lower than anticipated volumes;
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Manufacturing, technical, supplier, or quality-related delays, issues or concerns, including the loss of any key supplier or failure of any key supplier to deliver high quality products on time;
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Competition;
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Potential declines in demand for sensor devices; and
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Risks that third parties may assert intellectual property claims against our products.
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In order to compete successfully, we
must accurately forecast demand, closely monitor inventory levels, secure quality products, continuously drive down costs, meet
aggressive product price and performance targets, create market demand for our brand and hold sufficient, but not excess, inventory.
There is a risk that the market will not adapt to using
the smartphone as a substitute platform for sensor devices, causing our products to fail in the marketplace.
There is a risk that the market will not
receive the smartphone technology, which we will be using as our platform. The vast majority of products on the small sensor device
market do not currently use smartphones to collect and analyze sensor data. There is no guarantee that using smartphone technology
will cut production costs and be well received. If our platform using smartphone technology is not well received, there is a risk
that device manufacturers will develop new monitoring and operating components that are incompatible with our current platform
instead of developing the traditional sensors that are compatible with our technology. Updating our platform to stay compatible
with new components could increase our costs unexpectedly.
Using wireless transmission technologies such as WI-FI
and Bluetooth may create security risks
There is also a risk of failure based on
the wireless transmission of data used by our smartphone platform. If there is instability in a wireless network, Bluetooth sensor,
or other network problems that are out of our control, our new platform may not be well received. Our smartphone platform relies
on the wireless transmission of data through WIFI networks and Bluetooth sensors. These networks are often deemed less secure than
a hard-wired network. The security of a wireless network is often out of our control. However, any breach of security could result
in the market and sensor device manufacturers to fail to embrace our platform.
Our business involves the use, transmission
and storage of confidential information, and the failure to properly safeguard such information could result in significant reputational
harm.
We may at times collect, store and transmit
information of, or on behalf of, our clients that may include certain types of confidential information that may be considered
personal or sensitive, and that are subject to laws that apply to data breaches. We believe that we take reasonable steps to protect
the security, integrity and confidentiality of the information we collect and store, but there is no guarantee that inadvertent
or unauthorized disclosure will not occur or that third parties will not gain unauthorized access to this information despite our
efforts to protect this information, including through a cyber-attack that circumvents existing security measures and compromises
the data that we store. If such unauthorized disclosure or access does occur, we may be required to notify persons whose information
was disclosed or accessed. Most states have enacted data breach notification laws and, in addition to federal laws that apply to
certain types of information, such as financial information, federal legislation has been proposed that would establish broader
federal obligations with respect to data breaches. We may also be subject to claims of breach of contract for such unauthorized
disclosure or access, investigation and penalties by regulatory authorities and potential claims by persons whose information was
disclosed. The unauthorized disclosure of information, or a cyber-security incident involving data that we store, may result in
the termination of one or more of our commercial relationships or a reduction in client confidence and usage of our services. We
may also be subject to litigation alleging the improper use, transmission or storage of confidential information, which could damage
our reputation among our current and potential clients and cause us to lose business and revenue.
Our business depends on our ability
to keep manufacturing costs low and we may lack the expertise necessary to negotiate and maintain favorable pricing, supply, business
and credit terms with our potential vendors.
It may be difficult
to negotiate or maintain favorable pricing, supply, business or credit terms with our potential vendors, suppliers and service
providers. In addition, product manufacturing costs may increase if we fail to achieve anticipated volumes. There can be no assurance
that we will be able to successfully manage these risks. In summary, we can offer no assurance that we will be able to obtain a
sufficient (but not excess) supply of products on a timely and cost effective basis. Our failure to do so would lead to a material
adverse impact on our business.
The lack of public company experience
of our management team could adversely impact our ability to comply with the reporting requirements of U.S. securities laws.
Dr. Wang lacks public company experience,
which could impair our ability to comply with legal and regulatory requirements such as those imposed by Sarbanes-Oxley Act of
2002. Our CEO has never been responsible for managing a publicly traded company. Such responsibilities include complying
with federal securities laws and making required disclosures on a timely basis. Any such deficiencies, weaknesses or lack of compliance
could have a materially adverse effect on our ability to comply with the reporting requirements of the Securities Exchange Act
of 1934, as amended, which is necessary to maintain our public company status. If we were to fail to fulfill those obligations,
our ability to continue as a U.S. public company would be in jeopardy in which event you could lose your entire investment in our
company.
Our officers, directors, consultants
and advisors are involved in other businesses and not obligated to commit their time and attention exclusively to our business
and therefore they may encounter conflicts of interest with respect to the allocation of time and business opportunities between
our operations and those of other businesses.
Our Chief Executive Officer Mr. Desheng
Wang is currently involved in other businesses and not obligated to commit his time and attention exclusively to our business and,
accordingly, he may encounter conflicts of interest in allocating his own time, or any business opportunities that he may encounter,
between our operations and those of other businesses. Furthermore, if the execution of our business plan demands more time than
is currently committed by him, he will be under no obligation to commit such additional time, and his failure to do so may adversely
affect our ability to carry on our business and successfully execute our business plan.
Another example of a conflict of interest
is so called “self-dealing" transactions. If a conflict-of-interest transaction is negotiated and approved, in a manner
that approximates arms-length negotiations, the transaction is accepted unless a shareholder proves in court that the transaction
is not entirely fair to the company or its shareholders. The burden is on the shareholder to show lack of entire fairness. Otherwise,
the transaction is considered invalid if challenged, unless the director proves in court that the transaction is entirely fair
to the company. The burden is on the director to show entire fairness.
If, as a result of before mentioned conflicts,
we are deprived of business opportunities or information, the execution of our business plan and our ability to effectively compete
in the marketplace may be adversely affected. If we become aware of such conflict of interests we will take an immediate action
to resolve it. Each conflict of interest will be handled by the company based on the nature of the conflict and the individual
involved in it.
We do not have any actual or potential conflict of interests
with our consultants or advisors.
We do not have a majority of independent
directors on our Board and the Company has not voluntarily implemented various corporate governance measures, in the absence of
which stockholders may have more limited protections against interested director transactions, conflicts of interest and similar
matters.
Federal legislation, including the Sarbanes-Oxley
Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate
management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have
been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or the NASDAQ Stock
Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national
securities exchanges are those that address board of directors’ independence, audit committee oversight, and the adoption
of a code of ethics. We have not yet adopted any of these other corporate governance measures and since our securities are not
yet listed on a national securities exchange, we are not required to do so. Our Board of Directors is comprised of one individual.
As a result, we do not have independent directors on our Board of Directors.
We have not adopted corporate governance
measures such as an audit or other independent committee of our board of directors, as we presently do not have independent directors
on our board. If we expand our board membership in future periods to include additional independent directors, we may seek to establish
an audit and other committee of our board of directors. It is possible that if our Board of Directors included independent directors
and if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurance
that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible
conduct. For example, at present in the absence of audit, nominating and compensation committees comprised of at least a majority
of independent directors, decisions concerning matters such as compensation packages or employment contracts to our officers are
made by a director who has an interest in the outcome of the matters being decided.
However, as a general rule, the board of
directors, in making its decisions, determines first that the terms of such transaction are no less favorable to us that those
that would be available to us with respect to such a transaction from unaffiliated third parties. The company executes the transaction
between executive officers and the company once approved by the Board of Directors.
Prospective investors should bear in mind
our current lack of corporate governance measures in formulating their investment decisions.
We
have concluded that we have not maintained effective internal control over financial reporting through the year
ended December 31, 2017 and December 31, 2016. Significant deficiencies and material weaknesses in our internal
control could have material adverse effects on us.
It is important
for us to maintain effective internal control over financial reporting, which is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
For a discussion
of our internal control over financial reporting and a description of the identified material weakness, see “Management’s
Report on Internal Control Over Financial Reporting” included in Item 9A of this Report. A material weakness is a deficiency,
or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that
a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely
basis.
A material weakness
in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information.
We plan to implement a number of remediation steps to address the material weakness as described in Item 9A of this Report. If
we are unsuccessful in implementing or following our remediation plan, we may not be able to timely or accurately report our financial
condition, results of operations or cash flows or maintain effective disclosure controls and procedures. If we are unable to report
financial information timely and accurately or to maintain effective disclosure controls and procedures, we could be subject to,
among other things, regulatory or enforcement actions by the SEC, any one of which could adversely affect our business prospects.
We currently have identified significant
deficiencies in our internal control over financial reporting that, if not corrected, could result in material misstatements of
our financial statements.
In
connection with the audit of our financial statements as of and for the year ended December 31, 2017 and 2016, we
identified significant deficiencies in our internal control over financial reporting and a general understanding of U.S.
GAAP. As such, there is a reasonable possibility that a misstatement of our financial statements will not be prevented or
detected on a timely basis.
As we have thus
far not needed to comply with Section 404 of the Sarbanes-Oxley Act, neither we nor our independent registered public accounting
firm has performed an evaluation of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley
Act. In light of the deficiency, we believe that it is possible that certain control deficiencies may have been identified if such
an evaluation had been performed.
We are working
to remediate the deficiencies or material weaknesses. We have taken steps to enhance our internal control environment and plan
to take additional steps to remediate the material weaknesses. Specifically:
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We have hired additional outside consultants and will hire qualified personnel in our accounting department, especially to add an experienced accountant in a controller capacity. We will continue to evaluate the structure of the finance organization and add resources as needed;
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we are implementing additional internal reporting procedures, including those designed to add depth to our review processes and improve our segregation of duties;
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we are updating our systems so that we may collect the necessary information to enable us to more effectively monitor and comply with applicable filing requirements on a timely basis;
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we are in the process of documenting, assessing and testing our internal control over financial reporting as part of our efforts to comply with Section 404 of the Sarbanes-Oxley Act.
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Although we plan
to complete this remediation process as quickly as possible, we are unable, at this time to estimate how long it will take, and
our efforts may not be successful in remediating the deficiencies or material weaknesses.
Because one of our Directors, who
is also our sole promoter, owns over 49% of our outstanding common stock he could make and control corporate decisions that may
be disadvantageous to other minority shareholders.
One of our Directors owns over 49% of the
outstanding shares of our common stock as of the date of this reporting. Accordingly, Directors have a significant influence in
determining the outcome of all corporate transactions or other matters, including mergers, consolidations and the sale of all or
substantially all of our assets. They also have the power to prevent or cause a change in control. The interests of our directors
may differ from the interests of the other stockholders and thus result in corporate decisions that are disadvantageous to other
shareholders.
Our executive officers and directors
collectively have the power to control our management and operations, and have a significant majority in voting power on all matters
submitted to the stockholders of the company.
Management currently beneficially owns
a majority of our outstanding common stock. Consequently, management has the ability to influence control of the operations of
the Company and, acting together, will have the ability to influence or control substantially all matters submitted to stockholders
for approval, including:
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Election of our board of directors;
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Removal of directors;
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Amendment to the Company’s Articles of Incorporation or Bylaws; and
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Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination.
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These stockholders have complete control
over our affairs. Accordingly, this concentration of ownership by itself may have the effect of impeding a merger, consolidation,
takeover or other business consolidation, or discouraging a potential acquirer from making a tender offer for the Common Stock.
You could be diluted from our future
issuance of capital stock and derivative securities.
As of December 31, 2017,
we had 34,574,706 shares of common stock outstanding and no shares of preferred stock outstanding. We are authorized to issue
up to 75,000,000 shares of common stock and no shares of preferred stock. To the extent of such authorization, our Board of
Directors will have the ability, without seeking stockholder approval, to issue additional shares of common stock or
preferred stock in the future for such consideration as the Board of Directors may consider sufficient. The issuance of
additional common stock or preferred stock in the future may reduce your proportionate ownership and voting power.
None of the members of our Board
of Directors are considered audit committee financial experts. If we fail to maintain an effective system of internal control over
financial reporting, we may not be able to accurately report our financial results. As a result, current and potential shareholders
could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.
Members of our Board of Directors are inexperienced
with U.S. GAAP and the related internal control procedures required of U.S. public companies. Management has determined that our
internal audit function is also significantly deficient due to insufficient qualified resources to perform internal audit functions.
Finally, we have not established an Audit Committee of our Board of Directors.
We are a smaller reporting company with
limited resources. Therefore, we cannot assure investors that we will be able to maintain effective internal controls over financial
reporting based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
in Internal Control-Integrated Framework. A material weakness is a deficiency, or a combination of deficiencies, in internal control
over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim
financial statements will not be prevented or detected on a timely basis. For these reasons, we are considering the costs and benefits
associated with improving and documenting our disclosure controls and procedures and internal controls and procedures, which includes
(i) hiring additional personnel with sufficient U.S. GAAP experience and (ii) implementing ongoing training in U.S. GAAP requirements
for our CFO and accounting and other finance personnel. If the result of these efforts are not successful, or if material weaknesses
are identified in our internal control over financial reporting, our management will be unable to report favorably as to the effectiveness
of our internal control over financial reporting and/or our disclosure controls and procedures, and we could be required to further
implement expensive and time-consuming remedial measures and potentially lose investor confidence in the accuracy and completeness
of our financial reports which could have an adverse effect on our stock price and potentially subject us to litigation.
The requirements of being a public
company may strain our resources and distract our management.
We are required to comply with various
regulatory and reporting requirements, including those required by the Securities and Exchange Commission. Complying with these
reporting and other regulatory requirements is time-consuming and may result in increased costs to us and could have a negative
effect on our business, results of operations and financial condition.
As a public company, we are subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and requirements of the Sarbanes-Oxley
Act of 2002, as amended, or SOX. These requirements may place a strain on our systems and resources. The Exchange Act requires
that we file annual, quarterly and current reports with respect to our business and financial condition. The SOX requires that
we maintain effective disclosure controls and procedures and internal controls over financial reporting. Compliance with these
rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming
or costly and increase demand on our systems and resources.
These activities may divert management’s
attention from other business concerns, which could have a material adverse effect on our business and results of operations.
In addition, changing laws, regulations
and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing
legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are
subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice
may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend
to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general
and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance
activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory
or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and
our business may be harmed.
We also expect that being a public company
and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and
we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also
make it more difficult for us to attract and retain qualified members of our Board of Directors, particularly to serve on our audit
committee and compensation committee, and qualified executive officers.
The Company is subject to the 15(d)
reporting requirements under the Securities Exchange Act of 1934, which does not require a company to file all the same reports
and information as fully reporting company.
Pursuant to Section 15(d), we are required
to file periodic reports with the SEC, such as annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports
on Form 8-K, once our registration statement is declared effective, including the annual report on Form 10-K for the fiscal year
during which the registration statement is declared effective. That filing obligation will generally apply even if our reporting
obligations have been suspended automatically under section 15(d) of the Exchange Act prior to the due date for the Form 10-K.
After that fiscal year and provided the
Company has less than 300 shareholders, the Company is not required to file these reports. If the reports are not filed, the investors
will have reduced visibility as to the Company and its financial condition. In addition, as a filer subject to Section 15(d) of
the Exchange Act, the Company is not required to prepare proxy or information statements; our common stock will not be subject
to the protection of the going private regulations; the company will be subject to only limited portions of the tender offer rules;
our officers, directors, and more than ten (10%) percent shareholders are not required to file beneficial ownership reports about
their holdings in our company; that these persons will not be subject to the short-swing profit recovery provisions of the Exchange
Act; and that more than five percent (5%) holders of classes of your equity securities will not be required to report information
about their ownership positions in the securities.
We will not be required to evaluate
our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act until the end of the second fiscal year
reported upon in our second annual report on form 10-K.
The Sarbanes-Oxley Act of 2002 and the
new rules subsequently implemented by the Securities and Exchange Commissions, the Financial Industry Regulatory Authority (“FINRA”)
and the Public Company Accounting Oversight Board have imposed various new requirements on public companies, including requiring
changes in corporate governance practices.
We expect these rules and regulations to
increase our legal and financial compliance costs and to make some activities more time-consuming and costly. These costs could
affect profitability and our results of operations.
We are in the process of determining whether
our existing internal controls over financial reporting systems are compliant with Section 404. We will not be required to conduct
the evaluation of effectiveness of our internal controls until the end of the fiscal year reported upon in our second annual report
on Form 10-K. In addition, because we are a smaller reporting company, we are not required to obtain the auditor attestation of
management’s evaluation of internal controls over financial reporting. If we obtain and disclose such reports we could continue
doing so at our discretion so long as we remain a smaller reporting company.
This process of internal control evaluation
and attestation may divert internal resources and will take a significant amount of time, effort and expense to complete. If it
is determined that we are not in compliance with Section 404, we may be required to implement new internal control procedures and
re-evaluate our financial reporting. If we are unable to implement these changes effectively or efficiently, it could harm our
operations, financial reporting or financial results, which could adversely affect our ability to comply with our periodic reporting
obligations under the Exchange Act.
There is a very limited public (trading)
market for our common stock and; therefore, our investors may not be able to sell their shares.
Our common stock is listed on the over-the-counter
exchange, and is thinly traded. As a result, stockholders may be unable to liquidate their investments, or may encounter considerable
delay in selling shares of our common stock. If an active trading market does develop, the market price of our common stock is
likely to be highly volatile due to, among other things, the nature of our business and because we are a new public company with
a limited operating history. Further, a few individual stockholders dominate our shares. The limited trading volume subjects the
price of our common stock to manipulation by one or more stockholders and will significantly limit the number of shares that one
can purchase or sell in a short period of time. The market price of our common stock may also fluctuate significantly in response
to the following factors, most of which are beyond our control:
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variations in our quarterly and annual operating results;
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changes in general economic conditions;
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changes in technologies favored by consumers;
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price competition or pricing changes by us or our competitors; and
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the addition or loss of key managerial and collaborative personnel.
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The equity markets have, on occasion, experienced
significant price and volume fluctuations that have affected the market prices for many companies' securities and that have often
been unrelated to the operating performance of these companies. Any such fluctuations may adversely affect the market price of
our common stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares,
or may be forced to sell them at a loss.
Our common stock has not been widely
traded, and the price of our common stock may fluctuate substantially.
To date, there has been a limited public
market for shares of our common stock, with limited trading. An active public trading market may not develop or, if developed,
may not be sustained. The current market price of our common stock and any possible subsequent listing on another larger securities
exchange, if and when we are successful in doing so, will be affected by a number of factors, including those discussed above.
Risks Related to this Offering and Ownership of Our Common
Stock - Because a majority of the outstanding shares of our common stock will be sold in this offering and will be freely tradable
without restriction or further registration under the Securities Act, any substantial number of shares of common stock that may
be sold in the market following this offering could cause the market price of our common stock to decline significantly, even if
our business is performing well.
Our common stock is traded on the OTCQB and the market for our
common stock is “thinly-traded,” meaning that the number of persons interested in purchasing our common stock at or
near bid prices at any given time may be relatively small or non-existent. Sales of a substantial number of shares of our common
stock in the public market following this offering could cause the market price of our common stock to decline.
Almost all of the 16,904,706 shares of common stock sold in
this offering upon issuance will be freely tradable without restriction or further registration under the Securities Act. As a
result, the lack of a robust resale market may require a stockholder who desires to sell a large number of shares of common stock
to sell the shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock.
Substantial future sales of our common stock, or the perception
in the public markets that these sales may occur, may depress our stock price.
Sales of substantial shares of
our common stock in the public market, or the perception that these sales could occur, could adversely affect the price of our
common stock and could impair our ability to raise capital through the sale of additional shares. All outstanding shares of our
common stock are freely tradable without restriction under the Securities Act of 1933 (the "Securities Act"), except
for any shares of our common stock that may be held or acquired by our directors, executive officers and other affiliates, as
that term is defined in the Securities Act, which are subject to restrictions under the Securities Act. Certain existing holders
of a majority of our common stock have rights, subject to certain conditions, to require us to file registration statements covering
their shares or to include their shares in registration statements that we may file for ourselves or other shareholders. If the
offer and sale of these shares are registered, they will be freely tradable without restriction under the Securities Act. In the
event such registration rights are exercised and a large number of shares of common stock are sold in the public market, such
sales could reduce the trading price of our common stock.
In the future, we may also issue our securities if we need to
raise capital in connection with a capital raise or acquisitions. The number of shares of our common stock issued in connection
with a capital raise or acquisition could constitute a material portion of our then-outstanding shares of our common stock
Future sales of our common stock
by existing stockholders could cause our stock price to decline.
If our existing stockholders sell substantial
shares of our common stock in the public market, then the market price of our common stock could decrease significantly.
The perception in the public market that our stockholders might sell shares of common stock also could depress the market price
of our common stock. There are approximately 34,574,706 shares of our common stock outstanding, of which approximately 610,000
shares are currently freely tradable. We may in the future issue and register additional shares of our common stock that might
be freely transferable at the time of such transaction.
A decline in the price of shares of our
common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity
securities.
We do not intend to pay dividends and there will be less
ways in which you can make a gain on any investment in Focus Universal Inc.
We have never paid any cash dividends and
currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently
not provided for in our financing plan, our funding sources may likely prohibit the payment of a dividend. Because we do not intend
to declare dividends, any gain on an investment in Focus Universal Inc. will need to come through appreciation of the stock’s
price.
You may face significant restrictions on the resale of
your shares due to state “blue sky” laws.
Each state has its own securities laws,
often called “blue sky” laws, which (1) limit sales of securities to a state’s residents unless the securities
are registered in that state or qualify for an exemption from registration, and (2) govern the reporting requirements for broker-dealers
doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place
to cover the transaction, or it must be exempt from registration. The applicable broker-dealer must also be registered in that
state.
We do not know whether our securities will
be registered or exempt from registration under the laws of any state. A determination regarding registration will be made by those
broker-dealers, if any, who agree to serve as market makers for our common stock. There may be significant state blue sky law restrictions
on the ability of investors to sell, and on purchasers to buy, our securities. You should therefore consider the resale market
for our common stock to be limited, as you may be unable to resell your shares without the significant expense of state registration
or qualification.
Focus Universal is an “emerging
growth company” under the Jumpstart Our Business Startups Act. We cannot be certain if the reduced reporting requirements
applicable to emerging growth companies will make our shares of common stock less attractive to investors.
Focus Universal is and will remain an "emerging
growth company" until the earliest to occur of (a) the last day of the fiscal year during which its total annual revenues
equal or exceed $1 billion (subject to adjustment for inflation), (b) the last day of the fiscal year following the fifth anniversary
of its initial public offering, (c) the date on which Focus Universal has, during the previous three-year period, issued more than
$1 billion in non-convertible debt securities, or (d) the date on which Focus Universal is deemed a "large accelerated filer"
(with at least $700 million in public float) under the Securities and Exchange Act of 1934 (the "Exchange Act").
For so long as Focus Universal remains
an "emerging growth company" as defined in the JOBS Act, it may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not "emerging growth companies" as described in further
detail in the risk factors below. Focus Universal cannot predict if investors will find its shares of common stock less attractive
because Focus Universal will rely on some or all of these exemptions. If some investors find Focus Universal's shares of common
stock less attractive as a result, there may be a less active trading market for its shares of common stock and its stock price
may be more volatile.
If Focus Universal avails itself of certain
exemptions from various reporting requirements, its reduced disclosure may make it more difficult for investors and securities
analysts to evaluate Focus Universal and may result in less investor confidence.
The recently enacted JOBS Act is intended
to reduce the regulatory burden on "emerging growth companies". Focus Universal meets the definition of an "emerging
growth company" and so long as it qualifies as an "emerging growth company," it will not be required to:
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have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
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comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
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submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
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disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.
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In addition, Section 107 of the JOBS Act
also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth
company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
However, Focus Universal is choosing to "opt out" of such extended transition period, and as a result, Focus Universal
will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for
non-emerging growth companies. Section 107 of the JOBS Act provides that its decision to opt out of the extended transition period
for complying with new or revised accounting standards is irrevocable.
Notwithstanding the above, we are also
currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer, or
a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75
million and annual revenues of less than $50 million during the most recently completed fiscal year.
In the event that we are still considered
a “smaller reporting company”, at such time are we cease being an “emerging growth company”, we will be
required to provide additional disclosure in our SEC filings. However, similar to “emerging growth companies”, “smaller
reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from
the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide
an attestation report on the effectiveness of internal control over financial reporting; are not required to conduct say-on-pay
and frequency votes until annual meetings occurring on or after January 21, 2013; and have certain other decreased disclosure obligations
in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in
annual reports. Decreased disclosures in our SEC filings due to our status as an “emerging growth company” or “smaller
reporting company” may make it harder for investors to analyze the Company’s results of operations and financial prospects.
FOCUS UNIVERSAL INC.
CAUTIONARY STATEMENT REGARDING FORWARD
LOOKING STATEMENTS
This Registration Statement contains forward-looking
statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s
plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such
as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”,
“estimates”, “predicts”, “potential” or “continue” or the negative of these terms
or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause
our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These
risks include, by way of example and not in limitation:
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the uncertainty of profitability based upon our history of losses;
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risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern;
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risks related to our international operations and currency exchange fluctuations; and
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other risks and uncertainties related to our business plan and business strategy.
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This list is not an exhaustive list of
the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers
should not place undue reliance on our forward-looking statements. Forward looking statements are made based on management’s
beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements
if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.
Our financial statements are stated in
United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references
to “common stock” refer to the common shares in our capital stock.
As used in this Registration Statement,
the terms “we”, “us”, “our”, the “Company” and “Focus Universal” mean
Focus Universal Inc. unless otherwise indicated.
USE OF PROCEEDS
This prospectus relates to shares of our
common stock that may be offered and sold from time to time by the selling stockholders. We may receive gross proceeds, assuming
we sell the entire number of shares of our common stock that we have the right, but not the obligation, to sell to the investing
public. See “Plan of Distribution” elsewhere in this prospectus for more information.
We currently expect to use the net proceeds from the sale of
the shares to manufacture more high tech devices and to market to business distribution channels, for general advertising and marketing
expenses, and for other general corporate purposes. We will have broad discretion in determining how we will allocate the proceeds
from any sales of the common stock.
Even if we sell all of the shares of our common stock we are
offering we will need to obtain additional financing in the future in order to fully fund all of our planned operations, including
attracting and retaining highly talented professionals and developing full-scale manufacturing operations with comprehensive quality
control procedures. We may seek additional capital in the private and/or public equity markets, pursue government contracts and
grants as well as business development activities to continue our operations, respond to competitive pressures, develop new products
and services, and to support new strategic partnerships. We are evaluating additional equity financing opportunities on an ongoing
basis and may execute them when appropriate. However, there can be no assurances that we can consummate such a transaction, or
consummate a transaction at favorable pricing.
We will realize gross proceeds from
the Offering of $6,250,000 if only 25% of the offering is achieved, $12,500,000 if only 50% of the offering is achieved, $18,750,000
if only 75% of the offering is achieved, and $25,000,000 if 100% of the offering is achieved. We anticipate the proceeds will
generally be used as detailed below. The estimate set forth below is not intended to represent the order of priority in which
the proceeds may be applied.
Estimated Use of Proceeds for 25%, 50%,
75%, and 100% of Offering
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25% Offering
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50% Offering
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75% Offering
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100% Offering
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Use
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Dollar Amount
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Percentage
of Gross Proceeds
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Dollar Amount
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|
Percentage
of Gross Proceeds
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|
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Dollar Amount
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Percentage
of Gross Proceeds
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|
|
Dollar Amount
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Percentage
of Gross Proceeds
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Research and Development
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$
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2,380,000
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38.08%
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$
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5,000,000
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40.00%
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$
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7,545,000
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40.24%
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$
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10,000,000
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40.00%
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Manufacturing Devices
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$
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2,500,000
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40.00%
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$
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2,375,000
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19.00%
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$
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3,562,500
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19.00%
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$
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4,750,000
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19.00%
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Rent
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$
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0
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0.00%
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$
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0
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0.00%
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|
|
$
|
0
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0.00%
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|
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$
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0
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0.00%
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Equipment
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$
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0
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0.00%
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$
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625,000
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5.00%
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|
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$
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937,500
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5.00%
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|
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$
|
1,250,000
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5.00%
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Marketing and Business Development
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$
|
1,250,000
|
|
|
|
20.00%
|
|
|
$
|
2,500,000
|
|
|
|
20.00%
|
|
|
$
|
3,750,000
|
|
|
|
20.00%
|
|
|
$
|
5,000,000
|
|
|
|
20.00%
|
|
Accounting, Audit and Legal
|
|
$
|
125,000
|
|
|
|
1.92%
|
|
|
$
|
125,000
|
|
|
|
1.00%
|
|
|
$
|
142,500
|
|
|
|
0.76%
|
|
|
$
|
250,000
|
|
|
|
1.00%
|
|
Working Capital
|
|
$
|
0
|
|
|
|
0.00%
|
|
|
$
|
1,875,000
|
|
|
|
15.00%
|
|
|
$
|
2,812,500
|
|
|
|
15.00%
|
|
|
$
|
3,750,000
|
|
|
|
15.00%
|
|
Gross Proceeds from the Offering
|
|
$
|
6,250,000
|
|
|
|
100.00%
|
|
|
$
|
12,500,000
|
|
|
|
100.00%
|
|
|
$
|
18,750,000
|
|
|
|
100.00%
|
|
|
$
|
25,000,000
|
|
|
|
100.00%
|
|
Research and Development – To fully
develop our business plan, we intend to continue researching and developing the design, manufacture, marketing and promotion of
our Ubiquitor platform. For these purposes we intend to use approximately $7,000,000 to fund our research and the development
of our products.
Rent – On April 24, 2017,
we entered into a two-year industrial/commercial lease within a larger multi-tenant industrial complex with Walnut Park Business
Center, LLC. We leased a 2,800-square foot warehouse with a 1,400-square foot office space inside which will allow us
to assemble our products as well as efficiently run our administrative operations in the same building. The lease commenced on
May 1, 2017 and will end on April 30, 2019. We will pay $3,500 per month until May 1, 2018 when the rent will increase to $3,605
per month. The warehouse is located at 820511 East Walnut Drive North, Walnut, California. Rent expense under this lease will
be recognized over the life of the lease term on a straight-line basis. Straight-line monthly rent expense over the life of the
lease will be $3,553.
Marketing and Business Development –
We intend to use approximately $3,500,000 to put together an internal sales team dedicated to our marketing and business
development strategies, focusing on marketing our products directly to wholesalers; and to promoting our technology and the Ubiquitous
platform directly to Chinese manufacturers.
Accounting, Audit and Legal – Being
an emerging growth company under the JOBS Act means that we have certain cost related to accounting, auditing and legal fees.
If we achieve the Maximum Offering, we intend to use up to $175,000 to cover such costs.
Working Capital – We intend to use
a portion of the proceeds, equivalent to $2,625,000 to fund our working capital and capital expenditure requirements.
Equipment – To develop our business we intend to use
$875,000 for the purchase or lease of necessary manufacturing and assembling equipment. Our products are manufactured in China
but will be assembled in the United States in our warehouse.
The foregoing represents our best estimate
as to how the proceeds of the Offering will be expended. We reserve the right to redirect any portion of the funds either among
the items referred to above, or such other projects as our management considers to be in our best interest.
MARKET PRICE FOR OUR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
(a) Market Information
Our shares of common stock are not traded
on a national exchange; rather, they are traded on the OTCQB marketplace under the symbol “FCUV”. On March 30,
2018, the closing bid price for one share of common stock was $2.49. The following table sets forth, for the periods
indicated, the high and low trade prices for our common stock as reported on the OTCQB marketplace. During 2016 and 2017 our
common stock did not trade above $4.00.
On September 23, 2014, our common stock
was verified for trading on OTCQB under the trading symbol FCUV. Prior to that time, there was no public market for our stock.
The following table sets forth for the indicated periods the high and low intra-day sales price per share for our common stock
on the OTCQB for the four quarters of 2016 and for the four quarters of 2017.
|
|
High
|
|
|
Low
|
|
2016: First Quarter
|
|
$
|
1.50
|
|
|
$
|
1.50
|
|
2016: Second Quarter
|
|
$
|
1.50
|
|
|
$
|
1.50
|
|
2016: Third Quarter
|
|
$
|
1.50
|
|
|
$
|
1.50
|
|
|
|
|
|
|
|
|
|
|
2016: Fourth Quarter
|
|
$
|
1.50
|
|
|
$
|
1.50
|
|
2017: First Quarter
|
|
$
|
3.57
|
|
|
$
|
3.57
|
|
2017: Second Quarter
|
|
$
|
3.57
|
|
|
$
|
3.57
|
|
|
|
|
|
|
|
|
|
|
2017: Third Quarter
|
|
$
|
3.57
|
|
|
$
|
0.25
|
|
2017: Fourth Quarter
|
|
$
|
2.49
|
|
|
$
|
0.25
|
|
Holders.
As of April 10, 2018, there
were 18 record holders (including our two directors) of 34,574,706 shares of the Company's common stock. At December 31,
2017, there were 18 record holders (including our two directors) of 34,574,706 shares of the Company’s common
stock.
DIVIDEND POLICY
We cannot provide any assurance that we will
declare or pay cash dividends on our common stock. Any future determination to declare cash dividends will be made at the discretion
of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital
requirements, general business conditions and other factors that our board of directors may deem relevant.
CAPITALIZATION
The following table sets forth
our capitalization as of December 31, 2017 and as adjusted to give effect to the issuance of 10,000,000
shares offered hereby at a purchase price of $2.50 per share.
|
|
Actual
December
31,
2017
|
|
|
As adjusted
December
31,
2017
|
|
Long-term debt:
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Stockholders’equity:
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
34,575
|
|
|
|
44,575
|
|
Additional paid-in capital
|
|
|
1,871,618
|
|
|
|
26,836,618
|
|
Accumulated deficit
|
|
|
(1,978,794
|
)
|
|
|
(1,978,794
|
)
|
Total stockholders’ equity (deficit)
|
|
|
(72,601
|
)
|
|
|
24,902,399
|
|
Total capitalization
|
|
$
|
(72,601
|
)
|
|
$
|
24,902,399
|
|
DILUTION
The net tangible book value (deficit)
of our company as of December 31, 2017 was $(72,601) or less than ($0.01) per share of common stock. Net tangible book value
(deficit) per share is determined by dividing the tangible book value (deficit) of the company (total tangible assets less total
liabilities) by the number of outstanding shares of our common stock on December 31, 2017.
Our net tangible book value (deficit)
per share will be impacted by the 10,000,000 shares of common stock which may be sold by our company. The amount of dilution
will depend on the number of shares sold by our company. The following example shows the dilution to new investors at an offering
price of $2.50 per share.
We are registering 10,000,000 shares of
common stock for sale by our company. If all shares are sold at the offering price of $2.50 per share, less estimated offering
expenses of $35,000, our net tangible book value as of December 31, 2017 would have been $24,902,399 or approximately $0.56 per share.
Such an offering would represent an immediate increase in net tangible book value to existing stockholders of $0.56 per share
and an immediate dilution to new stockholders of $1.94 per share. The following table illustrates the per share dilution:
Assumed public offering price per share
|
|
|
|
|
|
$
|
2.50
|
Net tangible book value (deficit) per share before this
offering
|
|
$
|
0.00*
|
|
|
|
|
Increase attributable to new investors
|
|
$
|
0.56
|
|
|
|
|
Net tangible book value per share after this offering
|
|
|
|
|
|
$
|
0.56
|
|
|
|
|
|
|
|
|
Dilution per share to new stockholders
|
|
|
|
|
|
$
|
1.94
|
*Denotes a net deficit per share of less
than $(0.01)
Holders of our Common Stock
As of December 31, 2017, 34,574,706 shares of our common
stock were outstanding and held of record by approximately 18 shareholders of record.
Securities Authorized for Issuance Under Equity Compensation
Plans
We have not adopted an Equity Compensation Plan.
DESCRIPTION OF THE BUSINESS
Company Background.
Focus Universal Inc.
(the “Company”,
“we”, “us” or “our”) is a Nevada corporation involved in two separate industries: (1) a
provider of handheld sensor devices and wholesaler of various air filters; and (2) a universal smart instrument platform developer.
We are based in the city of Walnut,
California, and were incorporated in Nevada in 2012. In December 2013, we filed an S-1 registration statement that went effective
on March 14, 2014.
Our website is www.focusuniversal.com.
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual
Report on Form 10-K.
Focus
Universal Inc.
is a universal smart instrumentation platform developer and universal smart device manufacturer. We are
also a wholesaler of various air filtration systems.
We are also researching, developing,
and manufacturing a universal smart instrument device and working on specializing in the development and commercialization of
such universal smart technologies and instruments. We define universal smart technology as commercial technology with an integrated
platform, which provides a unique and universal solution for test and measurement made up of off-the-shelf parts.
We are
working on developing a universal sensor node and gateway system that use the data processing capabilities of a smartphone to
display readings of multiple probe modules.
Our universal smart instrumentation
technology features a Universal Smart Instrumentation Platform (“USIP”) generalizes instruments into a reusable foundation
representing a majority part of the instruments, and architecture-specific components (sensor modules), 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 thousands of sensors or probes. This technology addresses major limitations with traditional hardware and represents
another technological advancement in the Internet of Things marketplace. We call this device the “Ubiquitor” because
it can be used to wirelessly measure and test a variety of electrical and physical phenomena such as voltage, current, temperature,
pressure, sound, light, and humidity.
The
Ubiquitor, which we have created and have manufactured in limited quantities,
utilizes a standard desktop computer with
Mac OS, Windows OS, an Android-based or iOS-based smartphone, or mobile tablet device as a platform that communicates with a group
of sensors or probes manufactured by different vendors in a manner that requires the user to have little or no knowledge of their
unique characteristics. The data readout is displayed on the computer, smartphone, or tablet display in a program or application
we have created for Windows PC and are creating for MacOS. We are designing the application software (the “App”)
to have a graphical representation of control and indicator elements common in real instruments such as knobs, buttons, dials,
and graphs, etc. Our developers are designing and implementing a soft control touch screen interface which supports real-time
data monitoring and facilitates instrument control and operation.
Until March 31, 2016, we offered a full
range of web services, including web marketing services, social and viral marketing campaigns, search engine optimization consulting,
and web analytics implementation. We generated our revenue from providing these services to small and medium sized businesses.
We focused on providing one-off services, such as development of a fully functioning website or creation of a marketing strategy
plan, to small business clients.
Through a merger with Perfecular Inc.,
we strategically expanded our services to the manufacture and marketing of high-tech electronic devices. We sell handheld sensor
systems and filters wholesaler to distribution platforms and are working on developing the App and the Ubiquitor. We are
also researching the development of an anti-counterfeit authentication technology that we believe could address the problem of
counterfeit production by attempting to authenticate consumer goods.
On December 29, 2014, Xu Tang and Desheng
Wang, two non-affiliates, acquired over 90% equity of the Company. That same date, the officers and directors, Ms. Tatyana
Popova resigned as Chief Executive Officer and President of the Company and Ms. Elena Ignatenko resigned as Treasurer, Secretary,
Chief Financial Officer, principal accounting officer, and principal financial officer of the Company. Upon such resignations,
Desheng Wang was appointed as the Chief Executive Officer and Secretary of the Company, Xu Tang was appointed as the President
of the Company, Yan Chen was appointed as the Senior Vice President, and Messrs. Wang, Tang, and Chen accepted such appointments.
On April 2, 2018 Duncan Lee was appointed
as the Chief Financial Officer of the Company.
On October 21, 2015 Xu Tang entered into
a stock purchase agreement whereby Mr. Tang collectively sold 3,260,000 shares of the Company’s Common Stock to eight
unrelated persons using private funds to purchase the shares. This represented at the time 49.5% of the Company’s outstanding
common stock and represented a material change in control of the Company’s ownership.
To the Company’s knowledge, there
were no arrangements or understandings among members of both the former and new control groups and their associates with respect
to election of directors or other matters.
Effective as of October 21, 2015, Xu Tang
and Yan Chen resigned from their positions as President and Senior Vice President, respectively, of the Company. There were
no disagreements between the Company and Messrs. Tang and Chen. On that same date, Dr. Edward Lee was been appointed to serve
as President of the Company and still serves in that capacity.
Also, effective as of October 21, 2015,
Dr. Jennifer Gu and Dr. Edward Lee were appointed as directors of the Company, and Dr. Gu and Dr. Lee accepted such appointments.
Thereupon, each of Xu Tang and Yan Chen resigned as directors of the Company.Both Dr. Jennifer Gu and Dr. Edward Lee became
members of the Company’s Board of Directors, and the entire Board of Directors now consists of Dr. Desheng Wang, Dr. Jennifer
Gu, and Dr. Edward Lee.
In 2015, we leased a warehouse in Los
Angeles County, California. We have relocated our headquarters to the Los Angeles area to expand our existing operations. On
April 24, 2017 we leased 2,800 square feet at 201511 East Walnut Drive North, Walnut, California. This lease will extend through
April 30, 2019 and we pay $3,500 per month.
Scientific Instrument Research, Development and Sales
Industry Background and Overview
Through our acquisition of Perfecular Inc.,
we entered into the scientific instrument industry, specifically the instrument sensor industry. Instrument sensors are devices
specifically designed and constructed for sensing and measuring physical variables that are useful in: (i) industrial operations;
(ii) environmental, commercial and medical applications; (iii) research and development in a variety of industries; and (iv) the
daily lives of electronics consumers.
We believe that instrument sensors are
important in modern science, having applications in both the industrial and educational fields. In recent years, significant progress
has been made in instruments and instrumentation systems. The performance of measuring and monitoring instruments has improved
considerably in the computer age. Analog instruments are used to indicate the magnitude of the quantity in the form of pointer
movements. Digital instruments, on the other hand, specify the quantity in a digital readout format, they can be read easily,
and are more accurate than the analog multi-meters because the pointer movements can be easily misread and are often not permanently
stored, reducing interpolation and reading errors. Digital instruments offer significant advantages over analog devices. The
auto-polarity function of digital devices prevents various problems. Parallax error which occurs when the pointer of an analog
instrument is viewed from a different angle, which may cause users to see and read a different value are eliminated as well. Digital
instruments are free from wear and potential shock failures because they have no moving parts. With the advancements in technology
of integrated circuits, digital instruments are becoming increasingly compact and accurate. Key market players of analog and digital
instruments include Thermo Fisher Scientific, Danaher Corporation, Mettler Toledo, Metrohm USA, Hanna Instruments, Agilent
Technologies, and Perkin Elmer.
Most modern instruments are digital. They are designed for measuring
various physical quantities in objects; and consist of the following functional components:
|
·
|
Data acquisition. This is the process
of sampling signals that measure real world physical conditions and converting the resulting samples into digital numeric values
that can be manipulated by a microprocessor. The components of data acquisition systems include:
|
|
a.
|
Sensors, to convert physical parameters to electrical signals;
|
|
|
|
|
b.
|
Signal conditioning circuitry, to convert sensor signals into a form that can be converted to digital
values;
|
|
|
|
|
c.
|
Analog-to-digital converters, to convert conditioned sensor signals to digital values. It normally
operates on conditioned signals, that is, signals that have already been filtered and amplified by analog circuits.
|
|
·
|
Storage and communication components.
Application-specific input/output (I/O) components. In digital instrumentation systems, the transmission of data between devices
is realized relatively easily by using serial or parallel transmission techniques.
|
|
|
|
|
·
|
Ancillaries such as displays and power
supplies and application specific software.
|
Traditional hardware-centered instrumentation systems are made
up of multiple stand-alone instruments that are interconnected to carry out a determined measurement or control an operation. They
have fixed vendor-defined functionality, are very powerful and large, expensive, and cumbersome. They also require a lot of power,
and often have excessive amounts of features that are not user friendly. Users generally cannot extend or customize them easily.
The knobs and buttons on the instrument, the built-in circuitry, and the functions available to the user, are specific to the nature
of the instrument.
Instrument inter-operability and connectivity allow the Ubiquitor
to communicate and work with other instruments manufactured by different vendors, in a manner that requires the user to have little
or no knowledge of the unique characteristics of those instruments. Traditional instruments, including traditional hardware-centered
instrumentations and software centered virtual instrumentations, are specifically designed, constructed and refined to perform
one or more specific tasks. Most of the instruments on the market come with a variety of connectivity technologies and do not have
the built-in firmware or software to support the connectivity and inter-operability of instruments without drastically revising
the application software across instrument brands. Unfortunately, while the instrument drivers simplify software development and
maintenance, they did not address hardware obsolescence since each manufacturer has their own drivers and application and none
are compatible, current applications are limited only to large, expensive test and measurement instruments.
A universal instrument is a versatile device which combines
many individual instrument functions, sensors and probes in a single unit. It has a primary purpose, but also incorporates other
instrument’s functionalities. One instrument could perform many different measurements and control and substitute many other
instruments. It utilizes a variety of probes to connect to the device for a wide variety of process measurement and control. A
universal instrument offers superior sensor or probe compatibility, versatility, inter-operability, connectivity and scalability.
Theoretically, it is feasible to design a universal instrument which is compatible with all sensors or probes on the market, and
capable of monitoring and controlling any combination of sensors or probes.
Despite the undoubted usefulness of the
universal instruments, one of the major obstacles that prevent the universal instruments from being adopted by end users is their
cost. The end user who just needs a $10 traditional instrument for his applications certainly does not have the motivation
to spend $1000 for functions he does not need. Functionality always needs to be balanced against cost. The knobs and buttons on
analog instruments, the built-in circuitry, and the functions available to the user, are specific to the nature of the
instrument, making them very expensive and hard to adapt.
Smartphones and tablets have been considered
recreational devices for communicating, playing games and streaming videos, but they are also one of the most powerful tools engineers
use for designing, validating, and producing products. These ubiquitous smartphones perform better than most instrumentation in
many fields. Because of their network connectivity, smartphones and tablets are great tools for remotely viewing measurements.
In addition, the processing capabilities have exploded in recent years with processors and data capability rivaling that of
very recent laptop computers. Thus, their small size and processing power also makes them effective for portable measurements.
The ubiquity of wireless connectivity, unlimited data plans, and more powerful cellular networks combined with increasing
functionality and the speed of connected devices and mobile networks will further drive consumer demand for more cost effective
wireless smartphone based instruments. Building an application for a smartphone or tablet and turning a smartphone or tablet
to an instrument is not a trivial task. Many of the industrial instrument manufacturers have limited or no expertise programming
for mobile platforms and designing wireless hardware. To help industrial instrument manufacturers take advantage of these
smart devices, Perfecular Inc., has dedicated many years of research and development efforts into designing, manufacturing, marketing
and promoting wireless smart technology and products for industrial measuring instruments.
Our universal smart development
protocol focuses not only on the design of the hardware and software modules, but also on the design of the overall universal
smart instruments system, guided by the structured, universal and modular principles. We make our development open to industrial
instrument manufacturers, software, and hardware developers.
Compatibility: The compatibility in universal
smart instrument system refers not only to the compatibility between the same types of industrial sensor instruments from
different manufactures, but also to the compatibility between various industrial instrument types. The full inter-operability
and absolute instrument interchangeability is constantly addressed in our development protocol.
Universality: It is our goal to incorporate
as many functionalities of the traditional industrial sensor instruments into a single unit, allowing different data acquisition
sensor modules to execute on the same mobile platform. Thus, the interoperability between various sensors or probes can be
achieved.
Upgradeability: Most traditional industrial
instrument sensor interfaces are unidirectional applications, meaning the instrument performs its task and transmits results to
the interface device in one direction only. They only perform monitoring tasks and share a majority of functions of the bi-directional
controlling instruments, however, they cannot be upgraded to controllers. End users have to purchase a new controlling instrument
for their applications. Taking advantage of the secure bi-directional wireless communications and interface supported by smartphones
or mobile devices, universal smart instruments, which deliver data back-and-forth between the smartphones and industrial sensors,
can be readily modified or upgraded by adding the corresponding actuators for controlling applications. Sensors or probes
measure the output performance of the device being controlled and give feedback to the input actuators that can make corrections
towards the desired performance.
Expandability and Scalability: Similar
to existing sensor network technology, our universal smart instruments are more flexible than sensor networks. They
can currently monitor and control hundreds of different sensors or probes. They automatically identify and configure the corresponding
graphical user interfaces that are connected to the Universal Smart Instruments. End users are free to add or removes sensors
or probes from the universal smart instruments. All communication protocols supported by smartphones are integrated in
the software design including WI-FI, blue tooth, cellular network technology and wired form through the audio port on the smartphone.
Security: Universal smart instruments
have the sensor security built-in data acquisition module and help companies meet sensor security requirements, preventing unauthorized
users from accessing the sensor measurements and control. Unauthorized access of the universal smart instruments sensors is forbidden.
Modularity: Increasing instrument complexity
is driving instruments to become more modular. The knobs and buttons on the instrument, the built-in circuitry, and the functions
available to the user used in traditional stand-alone instruments duplicate these components for each instrument, adding cost
and size. Universal smart instruments divide all instruments into three parts: smartphones including their application software,
wireless communication module (we called the universal smart device), which is not needed in the wired form, and task-specific
data acquisition module. The smartphone is used and purchased, no research and development is needed. Universal smart devices
were developed and manufactured by Perfecular Inc. Both hardware and software, including wired or wireless communication protocols,
were developed and well tested. The only work needed to be done is the design and manufacture of the task-specific data acquisition,
which is just a fraction of the traditional stand-alone instrument design. The high degree of modularity saves a lot of time in
development, maintenance, and support. Modular hardware and software limits the time needed to test products so developers can
spend more of their energy on innovation.
Fast prototyping
:
Our
cost effective, fully production-ready wireless hardware and software have a huge market advantage in shorting design, build, test
and fix cycles.
Reducing inventory: A vast majority of the instrument modules
in the traditional instruments can be replaced by the smartphone and our Ubiquitors, reducing instrument inventory.
Plug-and-Play Operation:
Sensors can be used in any combination and plugged into a Ubiquitor, and ready for use without special ordering or software
configuration.
Simplification and Standardization:
With
the integration of the universal smart technology in the instrumentation, instrument design and manufacturing are simplified, and
only data acquisition modules are required to be designed and manufactured.
Cloud instrumentation:
Users can access the universal smart cloud-enabled instrument via its web interface from any web-enabled device, to control the
instrument, monitor and collect data, or change settings
.
Sensor Family
:
The essential characteristics that constitute an interchangeable and interoperable "sensor family" are all compatible
with the Ubiquitor. Since members of a sensor family share the same Ubiquitor, a sensor change is all a universal smart instrument
requires to switch from one device to another without revising the universal smart app and redesigning the Ubiquitor.
No
Smart App and Wireless Communication Programming: Users and instrument manufacturers are free to add, remove or change a sensor
module for the special industrial application without needing to create their own smart app.
Instrumentation is a large industry that spans a variety of
industries including commercial, industrial, military, medical, healthcare, scientific and even for consumer’s use in their
daily life. The industrial control and factory automation market is expected to reach USD $202.42 Billion by 2020 at a compound
annual growth rate (“CAGR”) of 6.73% from 2015 to 2020.
1
The smart sensor market alone is expected to
grow to USD $57.77 Billion by 2022, at a CAGR of 18.1% between 2016 and 2022.
2
McKinsey Global Institute estimated that the impact of
the Internet of Things on the global economy might be as high as $6.2 trillion by 2025.
3
Cisco predicts the global
Internet of Things market will be $14.4 trillion by 2022.
4
1
http://www.marketsandmarkets.com/Market-Reports/factory-industrial-automation-sme-smb-market-541.html
2
http://www.marketsandmarkets.com/Market-Reports/smart-sensor-market-43119772.html
3
http://www.mckinsey.com/industries/high-tech/our-insights/the-internet-of-things-sizing-up-the-opportunity
4
http://www.forbes.com/sites/louiscolumbus/2015/12/27/roundup-of-internet-of-things-forecasts-and-market-estimates-2015/#2305058e48a0
Instrument manufacturers face enormous
economic pressure because they cannot afford proper research and development resources and do not possess the programming expertise
to program for mobile platforms while designing smartphone compatible wireless hardware. In addition, moving the traditional instruments
to the cloud creates an imminent need to reduce overall costs of their products and gain a competitive edge in the marketplace.
We have dedicated ten years of research and development efforts on designing, manufacturing, marketing and promoting our universal
wireless smart technology and products. We believe that our universal smart technology will save customers money, time and resources
– when implemented and adopted efficiently. From the customer’s perspective, a smartphone is the crucial and integral
part of the universal smart technology and is used to replace a large fraction of traditional instrument hardware, end users do
not need to spend extra money on which they already purchased.
Our Approach to Measurement and Sensing
We offer a different approach that links handheld devices and
sensors with common smartphone computing power through an application on the smartphone in both IOS and Android devices. Tapping
into the computing power of a smartphone enables a measurement device to increase its capabilities.
We also offer an array of traditional handheld meters through
our wholesale distribution platform.
Ubiquitor Wireless Universal Sensor Device
Our “Ubiquitor,” device will
be a handheld fully modular system with a universal sensor node and gateway system that will use a smartphone as the output display
module that displays the readings of various probe modules. We have initial functioning prototype devices created and intend to
develop this into full-scale production. The Ubiquitor will be a wireless sensor device that combines measuring tools with smartphone
technology to quickly deliver sensor node data on desktop and mobile phone screens. The Ubiquitor’s sensor analytics system
will integrate event-monitoring, storage and analytics software in a cohesive package that provides a holistic view of sensor data
it is reading.
The physical hardware consists of:
|
1.
|
The sensor probes, which come in hundreds of different varieties of sensor instruments in the form of a USB stick, with both male and female ports; and
|
|
2.
|
The main hardware gateway, a small cell phone size device with integrated circuits.
|
This device can connect up to 2.5 kilometers
of sensor instruments, and integrate data using embedded software to display the data and all analytics onto a digital screen (desktop
or mobile displays) using a Wi-Fi connection. Most types of probes can connect to the hardware. If the sensor size is bigger than
the standard probe size, it is possible to simply use a USB cable to connect the probe and the hub. All data and analytics are
displayed on a single screen, with tools that record and keep track of all measurements, and sort and display analytic information
in easy to read charts.
The Ubiquitor is a general platform that
collects data in real time, up to 100hz per second, and thus is intended to be adapted to many industry uses.
The Ubiquitor is a multipurpose wireless
intelligent sensor device. Its greatest advantage is universal compatibility. Currently, the Ubiquitor device could simultaneously
accommodate more than 256 different types of sensor heads. Therefore, users could use their smartphones to simultaneously
operate and monitor over 256 kinds of sensor readings. With Perfecular’s technology, users only need to obtain the sensor
heads, facilitating ease and convenience of use. Using a smartphone, users can collect and analyze data in real time.
By using the smartphone as a substitute
platform, we believe we will achieve the following efficiencies:
|
1.
|
Cut production costs.
Smartphone technology
will advance and become more widely used than the vast majority products on the small sensor device market. By utilizing smartphone
technology, the Ubiquitor will add superior functionality and performance, improve the product’s quality and cutting
production costs.
|
|
2.
|
Reduce the effort required to develop a new sensor product.
With the Ubiquitor, we believe that there will be no need for device manufacturers to research and develop the new monitoring
and operating components because they will just need to develop new sensor heads based on our software technology.
|
|
3.
|
Reduce clutter.
It is anticipated that the Ubiquitor dispenses with the hassle of hooking up cables, since it is based on wireless transmission of data.
|
Other Traditional Handheld Meters
We also offer an array of traditional handheld meters through
our wholesale distribution platform.
Filter and Handheld Meter Wholesaler
In addition to developing Universal
Smart Instrument sensors, we are a wholesaler of various filtration products and digital handheld sensors. We source our products
from manufacturers in China and then sell to a major U.S. distributor who resell our products directly to consumers through retail
distribution channels. Specifically, we sell the following products:
Fan Speed Adjuster device
. We
provide a fan speed adjuster device to retailers and distributors. Designed specifically for centrifugal fans with brushless motors,
our adjuster device helps ensure longer life by preventing damage to fan motors by adjusting the speed of centrifugal fans without
causing the motor to hum. These devices are rated for 350 watts max, have 120VAC voltage capacity and feature an internal, electronic
auto-resetting circuit breaker.
Carbon filter devices.
We also
sell two types of carbon filter devices to distributors. These Carbon filter devices are professional grade filters specifically
designed and used to filter air in greenhouses that might be polluted by fermenting organics. One of these filters can be attached
to a centrifugal fan to scrub the air in a constant circle or can be attached to an exhaust line as a single pass filter, which
moves air out of the growing area and filters unwanted odors and removes pollens, dust, and other debris in the air. The other
filter is designed to be used with fans from 0-6000 C.F.M.
HEPA filtration device.
We provide
an organic air high efficiency particulate arrestance (“HEPA”) filtration device at wholesale prices to distributors
and retailers. Manufactured, tested, certified, and labeled in accordance with current HEPA filter standards, this device is targeted
towards greenhouses and grow rooms and designed to keep insects, bacteria, and mold out of grow rooms. We sell these devices in
various sizes.
Digital light meter.
We provide
a handheld digital light meter that is used to measure luminance in fc units, or foot-candles. The meter we sell is designed to
be full cosine corrected for the angular incidence of light (meaning if you are not holding the sensor perpendicular to the light
source, the sensor will still read the light correctly). The meter has a built-in low battery indicator and is designed to accurately
measure to 40,000 FC.
Quantum par meter.
We provide
a handheld quantum par meter used to measure photosynthetically active radiation (“PAR”). This fully portable handheld
PAR meter is designed to measure PAR flux in wavelengths ranging from 400 to 700 nm. It is designed to measure up to 10,000 umol.
Strategy
Strategy and Marketing Plan
We have designed, manufactured, marketed
and distributed our electronic measurement devices, such as temperature humidity meters, digital meters, quantum PAR meters, pH
meters, TDS meters and CO2 monitors, for many years and have many loyal customers. The universal smart technology has been applied
to our existing traditional devices and demonstrated functionality and hardware cost savings. We believe we have achieved hardware
cost savings in the range of 70% to 90%. Prototypes were sent to our customers for demonstrations and evaluation. Currently, we
are in the stage of producing a pilot manufacturing run. The first round of pilot production was completed in May, 2016. The second
round of pilot production was completed in July 2016.
Smartphones are an integral part of our
wireless universal smart technology system. Both wireless and wired communication connectivity are used and targeted on different
applications. In wired connectivity, the data acquisition module is connected through the audio port in the smartphone. The smartphone
is used to replace a traditional instrument. Compared with the wireless solution, the wireless communication module or even the
power supply used for data acquisition module are eliminated in the design, as a consequence of this some hardware costs are saved.
End users are not able to access the sensors or probes remotely. We believe that the instruments based on wired universal smart
technology are not as convenient as their wireless counterparts. Currently, in the industry, however, wired instruments are cheaper.
We believe that being the first ones in
the market provides a significant and sustained market-share advantage over later competitors. We first focus on our existing instruments
and convert them to universal smart devices and market them to our existing customers.
We are putting together an internal sales
team with the proceeds of the offering in order to get established for the marketing efforts.
We believe that wireless universal
smart technology will play a critical role for traditional industrial instrument manufacturers, as it is too expensive and difficult
to develop industrial instrument sensors for medium or smaller companies. The cost factor is the first consideration when deciding
whether a company wants to develop smart wireless technologies and implement them in their products. There are hundreds of
thousands of instrument manufacturers and trillion-dollar revenues for this manufacturing industry in China. We plan to
open a sales department in China dedicate to promoting our technologies to local instrument manufacturers.
Smartphones have been seamlessly integrated
into our daily life. A large number of functions and services have become accessible to the masses through the use of smart phones.
The proliferation of the smartphone and its user-friendly interface, which allows access to digital information, will cause these
devices to become a crucial part of our wireless universal smart instruments.
Our goals over the next three years include:
|
·
|
Raise capital to move to full manufacturing and production for our Ubiquitor device;
|
|
·
|
Partner with manufacturers and promote the adoption of our Ubiquitor platform;
|
|
·
|
Acquire a stable market share of the handheld wireless sensor device market;
|
|
·
|
Continue to develop market share in our wholesale distribution of sensors and filters; and
|
|
·
|
Utilize our internet marketing strategies to market our handheld sensors and filters.
|
In order to achieve these goals, we intend to focus on the following
initiatives:
|
·
|
Position the Ubiquitor product as the industry standard in universal wireless sensor reading technology;
|
|
·
|
Establish strategic supply chain channels to facilitate efficient production operations; and
|
|
·
|
Communicate the product and service differentiation through direct networking and effective marketing.
|
Distribution Method
We intend to continue to engage in relationships
with Chinese manufacturers and then distribute our products to distributors and retailers directly from the Chinese manufacturers
and then we intend to distribute the Ubiquitor by selling directly to traditional instrument manufacturers. We believe that traditional
instrument manufacturers will adopt this technology since the Ubiquitor device is intended to consolidate various other sensors.
We intend to manufacture and market the
Ubiquitor and sell it directly to consumers or distributors using internet marketing and also using channels such as Amazon.com
and to launch the product through crowdfunding sites like indiegogo and kickstarter.com. We also intend to establish a marketing
department overseas in China.
Raw Materials
The electronic components used in the Ubiquitor
are common and can be easily purchased. Production and assembly lines are also available worldwide.
Manufacturing and Production
We have a limited production facility in
California where small and medium sized circuit board production can take place until we have enough sales to convert manufacturing
to a large-scale manufacturing facility in China, where we have key strategic relationships with manufacturing facilities.
Competitors
There are several competitors we have identified
in the wireless sensor node industry, including traditional instruments or devices manufacturers such as Hanna Instruments or Extech
Instruments.
Hach developed and launched SC1000 Multi-parameter
Universal Controller, a probe module for connecting up to 8 SC sensors and 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
or remote sensors. Many of Monnit’s products are web-based wireless sensors usually are not portable because of the power
consumption. Also, the sensors real-time updates are slow and we believe security of the web-based sensor data acquisition also
may be a concern. In addition to purchasing the device, consumers usually have to pay monthly fee for using web-based services.
We are not trying to compete with traditional
instruments or device manufacturers because we utilize our Ubiquitor universal smart device in conjunction with our generic instruments
smartphone application, which we believe will be a completely different product category.
Patent, Trademark, License and Franchise
Restrictions and Contractual Obligations and Concessions
On November 4, 2016 we filed a
U.S. patent application number 15/344,041 with the U.S. Patent and Trademark Office. On March 5, 2018, we issued a press
release announcing that the U.S. Patent and Trademark Office had issued an Issue Notification for U.S. Patent Application No.
9924295 entitled “Universal Smart Device,” which covers a patent application regarding the Company’s
Universal Smart Device. We hope this full patent application protects the Ubiquitor universal sensor device. It is
anticipated that the publication will occur within six months. The USPTO had previously issued a Notice of Allowance for the same
patent. Barring any unforeseen circumstances, this patent, when issued, will be valid until 2036. We do not own, either
legally or beneficially, any trademarks.
Research and Development Activities
Other than time spent researching our proposed
business we have not spent any funds on research and development activities to date. We do not currently plan to spend any funds
on research and development activities in the future.
Compliance with Environmental Laws
We are not aware of any environmental laws
that have been enacted, nor are we aware of any such laws being contemplated for the future, that impact issues specific to our
business.
Employees
As of the date of this Registration
Statement we have eight full-time and two part-time employees, the Company’s officers, our President Dr. Edward
Lee, our Chief Executive Officer, and Secretary, Desheng Wang, and our Chief Financial Officer, Duncan Lee. Our
officers and directors are responsible for planning, developing and operational duties, and will continue to do so throughout
the early stages of our growth. Our seven full-time employees are working in the warehouse orchestrating the development and
distribution of our handheld sensor devices as well as our filters.
Reports to Securities Holders
We provide an annual report that includes
audited financial information to our shareholders. We will make our financial information equally available to any interested parties
or investors through compliance with the disclosure rules for a small business issuer under the Securities Exchange Act of 1934.
We are subject to disclosure filing requirements including filing Form 10-K annually and Form 10-Q quarterly. In addition, we will
file Form 8K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the
above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and
copy any materials that we file with the Securities and Exchange Commission, ("SEC"), at the SEC's Public Reference Room
at 100 F Street NE, Washington, DC 20549.
The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov)
that contains reports, proxy and information statements, and other information regarding issuers that file electronically with
the SEC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be
read in conjunction with our audited financial statements and notes thereto included herein. In connection with, and because we
desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995,
we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in
any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate to future operations, strategies, financial results
or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject
to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or
our behalf. We disclaim any obligation to update forward-looking statements.
Narrative Description of the Business
Focus Universal Inc. (“the Company”,
“we”, “us” or “our”) currently conducts business as a handheld sensor systems and filters
wholesaler to distribution platforms. We are working on developing a universal sensor node and gateway system that use the data
processing capabilities of a smartphone to display readings of multiple probe modules. We are also researching the development
of an anti-counterfeit authentication technology that we believe could address the problem of counterfeit production by attempting
to authenticate consumer goods.
Through a merger with Perfecular Inc.,
we strategically expanded our business to the manufacture and marketing of high-tech electronic devices. We realized that Internet
marketing would not be sufficient to generate sales of our products, particularly the Ubiquitor product. We are going to focus
on all types of marketing, particularly marketing directly to established consumer distributions retailers. For this reason,
during the first quarter of 2016 we decided to emphasize our sales of handheld sensors and air filters and discontinue our marketing
and advertising business segment. Through the development and creation of our Ubiquitor device, we anticipate that sales and marketing
involved with bringing this product to market will require us to hire a number of new employees in order to gain traction in the
market as well as continue to expand such sales of our existing sensor and air filter products.
For years ended December 31, 2017 and
2016, we generated significant amount of revenue from sales of broad selection of garden equipment which was the primary business
for Perfecular and is now our primary business.
Our current services include:
Scientific Instrument Research
and Development and Sales
Engineers and scientists use instrumentation
to observe, understand, and manage real-world data and phenomena, events, and processes related to their industries or areas of
expertise. Instrumentation systems that we are researching and developing measure and control electrical signals, such as voltage,
current and power, as well as temperature, pressure, speed, flow, volume, torque, light sensing, and vibration for example. Common
general-purpose instruments in our market segment include, for example, voltmeters, signal generators, oscilloscopes, data loggers,
spectrum analyzers, cameras, and temperature and pressure monitors and controllers. Systems that perform measurement and control
can be generally categorized as test, measurement, and embedded systems.
A New Approach to Measurement and Sensing
We offer a different approach than
what is currently on the market because we are attempting to establish a demand for devices that link handheld devices and sensors
with common smartphone computing power through an application on the smartphone in both IOS and Android devices. Tapping into
the computing power of a smartphone enables a measurement device to increase its capabilities.
We also offer an array of traditional
handheld measurement and control meters through our wholesale distribution platform.
Filter and Handheld Meter Wholesaler
We are a wholesaler of various filtration
products and digital meters. We source our products from manufacturers in China and then sell to a major U.S. distributor who
resells our products directly to consumers through retail distribution channels. Specifically, we sell the following products:
Fan Speed Adjuster device
. We
provide a fan speed adjuster device to retailers and distributors. Designed specifically for centrifugal fans with brushless motors,
our adjuster device helps ensure longer life by preventing damage to fan motors by adjusting the speed of centrifugal fans without
causing the motor to hum. These devices are rated for 350 watts max, have 120VAC voltage capacity and feature an internal, electronic
auto-resetting circuit breaker.
Carbon filter devices
. We also
sell two types of carbon filter devices to distributors. These Carbon filter devices are professional grade filters specifically
designed and used to filter air in greenhouses that might be polluted by fermenting organics. One of these filters can be attached
to a centrifugal fan to scrub the air in a constant circle or can be attached to an exhaust line as a single pass filter, which
moves air out of the growing area and filters unwanted odors and removes pollens, dust, and other debris in the air. The other
filter is designed to be used with fans from 0-6000 C.F.M.
HEPA filtration device
. We provide
an organic air high efficiency particulate arrestance (“HEPA”) filtration device at wholesale prices to distributors
and retailers. Manufactured, tested, certified, and labeled in accordance with current HEPA filter standards, this device is targeted
towards greenhouses and grow rooms and designed to keep insects, bacteria, and mold out of grow rooms. We sell these devices in
various sizes.
Digital light meter
. We provide
a handheld digital light meter that is used to measure luminance in fc units, or foot-candles. The meter we sell is designed to
be full cosine corrected for the angular incidence of light (meaning if you are not holding the sensor perpendicular to the light
source, the sensor will still read the light correctly). The meter has a built-in low battery indicator and is designed to accurately
measure to 40,000 FC.
Quantum par meter
. We provide
a handheld quantum par meter used to measure photosynthetically active radiation (“PAR”). This fully portable handheld
PAR meter is designed to measure PAR flux in wavelengths ranging from 400 to 700 nm. It is designed to measure up to 10,000 umol.
Ubiquitor Wireless Universal Sensor Device
We have fully researched and developed
a device we call the “Ubiquitor,” which is a handheld fully modular system with a universal sensor node and gateway
system that uses a smartphone as the output display module that displays the readings of various probe modules. We have completed
an initial production run of 1,000 devices and intend to develop this into full-scale production as soon as possible. The Ubiquitor
is a wireless sensor device that combines measuring tools with smartphone technology to quickly deliver sensor node data on desktop
and mobile phone screens. The Ubiquitor’s sensor analytics system will integrate event-monitoring, storage and analytics
software in a cohesive package that we hope will provide a holistic view of sensor data it is reading.
After sending our circuit boards to
China for soldering at an unaffiliated manufacturing facility, we assembled the initial production run at our facilities here
in the City of Industry. This initial production run will allow us to show large distributors and consumers the capabilities of
the Ubiquitor which we hope will generate demand.
The physical hardware consists of:
|
1.
|
The sensor probes, which come
in hundreds of different varieties of sensor instruments in the form of a USB stick,
with both male and female ports; and
|
|
2.
|
The main hardware gateway,
a small cell phone size device with integrated circuits.
|
This device is intended to connect
up to 2.5 kilometers of sensor instruments, and integrate data using embedded software to display the data and all analytics onto
a digital screen (desktop or mobile displays) using multiple types of wireless connections (i.e., Wi-Fi, Bluetooth, 3G and 4G).
Most types of probes can connect to the hardware. If the sensor size is bigger than the standard probe size, it is possible to
simply use a USB cable to connect the probe and the hub. All data and analytics are displayed on a single screen, with tools that
record and keep track of all measurements, and sort and display analytic information in easy to read charts.
The Ubiquitor is a general platform
that collects data in real time, up to 100hz per second, and thus is intended to be adapted to many industry uses.
The Ubiquitor is a multipurpose wireless
intelligent sensor device that will be intended to achieve universal compatibility. Currently, the Ubiquitor device could simultaneously
accommodate more than 256 different types of sensor heads. Users could use their smartphones to simultaneously operate and monitor
over 256 kinds of sensor readings. With Perfecular’s technology, users only need to obtain the sensor heads, facilitating
ease and convenience of use. Using a smartphone, users can collect and analyze data in real time. We have not yet started research
and development of a second generation Ubiquitor device, but once we demonstrate the market for this product intend to begin such
research and development.
Intellectual Property Protection
On November 4, 2016 we filed a U.S.
patent application number 15/344,041 with the U.S. Patent and Trademark Office. We hope this full patent application protects
the Ubiquitor universal sensor device. On March 5, 2018, Focus Universal Inc. (the "Company") issued a press release
announcing that the U.S. Patent and Trademark Office has issued an Issue Notification for U.S. Patent Application No. 9924295
entitled “Universal Smart Device,” which covers a patent application regarding the Company’s Universal Smart
Device.
Competitors
There are several competitors we have
identified in the wireless sensor node industry, including traditional instruments or devices manufacturers such as Hanna Instruments
or Extech Instruments.
Hach developed and launched SC1000
Multi-parameter Universal Controller, a probe module for connecting up to 8 SC sensors and 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 or remote sensors. Many of Monnit’s products are web-based wireless sensors usually are not portable because of
the power consumption. Also, the sensors real-time updates are slow and we believe security of the web-based sensor data acquisition
also may be a concern. In addition to purchasing the device, consumers usually have to pay monthly fee for using web-based services.
We are not trying to compete with traditional
instruments or device manufacturers because we utilize our Ubiquitor universal smart device in conjunction with our generic instruments
smartphone application, which we believe will be a completely different product category.
Market Potential
We believe that wireless universal
smart technology will play a critical role for traditional instrument manufacturers, as it is too expensive and difficult to develop
for medium or smaller companies. The cost factor is the first consideration when deciding whether a company wants to develop smart
wireless technologies and implement them in their products or use them in their field testing. We also hope to play a role in
academic laboratories, particularly with smaller academic laboratories who are sensitive to price.
Results of Operations
For the year ended December 31, 2017 compared to the
year ended December 31, 2016
Revenue, cost of sales and gross profit
Our consolidated gross revenue for
the year ended December 31, 2017 and 2016 was $898,084 and $1,121,978, respectively. Our cost of revenues for the year ended December
31, 2017 and 2016 was $726,252 and $866,559, respectively, resulting in a gross profit of $171,832 and $255,419 for the year ended
December 31, 2017 and 2016, respectively. Revenue decreased due to decrease in demand from the Company’s customers. The
sales concentrate on one customer which consists of 99% of the revenue. The Company’s sales fluctuate based on the customer’s
demand.
For years ended December 31, 2017 and
2016, we generated significant amount of revenue from sales of broad selection of garden equipment which was the primary business
for Perfecular and is now our primary business.
We hired an independent third party
contractor who performed web development beginning in the first quarter of 2015. This service was terminated on April 30, 2016
as we discontinued offering digital marketing services to third parties.
Operating Expenses
The major components of our operating expenses for the year
ended December 31, 2017 and 2016 are outlined in the table below:
|
|
December 31,
2017
|
|
|
December 31,
2016
|
|
|
|
|
|
|
|
|
Compensation - officers
|
|
$
|
120,000
|
|
|
$
|
121,385
|
|
Research and development
|
|
|
208,238
|
|
|
|
201,899
|
|
Professional fees
|
|
|
107,899
|
|
|
|
142,955
|
|
General and administrative
|
|
|
255,531
|
|
|
|
256,210
|
|
|
|
$
|
691,668
|
|
|
$
|
722,449
|
|
The decrease in our operating costs
for year ended December 31, 2017, compared to year ended December 31, 2016, was mainly due to decrease in professional fees. For
the year ended December 2017, operating expenses consists of general and administrative expenses of $255,531, including office
rent $51,167, employees’ salary expenses of $108,191, and payroll tax expenses of $38,991; officer’s compensation
expenses of $120,000; professional fees including audit and accounting fees of $75,551 and legal fees of $32,348; research and
development expenses of $208,238. Operating expenses decreased $30,781, 4% from $722,449 in 2016 to $691,668. The decrease was
mainly from professional fees. The Company incurred more professional fees in 2016 due to accounting and legal professional services
rendered for the merger.
Net Losses
During the year ended December 31,
2017 and 2016, we incurred net losses of $626,361 and $467,434, respectively, due to the factors discussed above.
Liquidity and Capital Resources
Working Capital
|
|
As of
December 31,
2017
|
|
|
As of
December 31,
2016
|
|
Current Assets
|
|
$
|
476,985
|
|
|
$
|
452,424
|
|
Current Liabilities
|
|
$
|
(481,790
|
)
|
|
$
|
(431,439
|
)
|
Working Capital (Deficit)
|
|
$
|
(4,805
|
)
|
|
$
|
20,985
|
|
Cash Flows
The table below, for the periods indicated, provides selected
cash flow information:
|
|
For the year ended
December 31, 2017
|
|
|
For the year ended
December 31, 2016
|
|
|
|
|
|
|
|
|
Cash used in operating activities
|
|
$
|
(445,673
|
)
|
|
$
|
(400,803
|
)
|
Cash used in investing activities
|
|
|
–
|
|
|
|
(8,239
|
)
|
Cash provided by (used in) financing activities
|
|
|
500,000
|
|
|
|
(82,902
|
)
|
Net increase (decrease) in cash
|
|
|
54,327
|
|
|
|
(491,944
|
)
|
Due to the merger with Perfecular Inc. we anticipate that for
the next year we will be generating cash from more diversified revenue stream as mentioned under Item 1, Company Background.
We believe that our cash generated from operations and cash on hand will provide sufficient capital to fund our operations and
meet our cash needs on a short term and long-term basis for the next twelve months. We intend to finance our internal growth with
cash on hand, cash provided from operations, borrowings, debt or equity offerings, or some combination thereof to expand our business
so that we can meet our cash needs.
Cash Flows from Operating Activities
Our cash flows from operating activities
represent the most significant source of funding for our operations. The primary use of our operating cash include funding general
operating expenses (marketing, travel, legal and professional expenses, and office rent) and cost of revenues. Our cash provided
by operating activities generally follows the trend in our net revenues and operating results.
Our net cash used in operating activities
of $445,673 for the year ended December 31, 2017 was primarily the result of our net loss of $626,361 largely offset for cash
flow purposes by changes in our operating assets and liabilities. These changes include increase in accounts receivable of $747,
decrease in accounts receivable – related party of $9,768, decrease in inventories of $30,333, increase in prepaid expense
of $318, decrease in deposit of $17,516, increase in accounts payable and accrued liabilities of $72,807, increase in accounts
payable – related party of $7,936, decrease in customer deposit of $30,392, and decrease in deferred rent of $468. Adjustment
to reconcile net loss to net cash used in operating activities includes decrease in inventory reserve of $9,270, depreciation
expense of $2,181, and amortization of debt discount of $81,342. The variances of the operating activities are mainly due to collection
of accounts receivable balances from 2016 and sales of inventories.
Our net cash used in operating activities
of $400,803 for the year ended December 31, 2016 was primarily the result of our net loss of $467,434 largely offset for cash
flow purposes by changes in our operating assets and liabilities. These changes include decrease in accounts receivable of $81,325,
increase in accounts receivable – related party of $10,332, increase in inventories of $53,258, decrease in prepaid expense
of $6,999, increase in accounts payable and accrued liabilities of $85,021, increase in accounts payable – related party
of $7,564, decrease in customer deposit of $77,903, and decrease in deferred rent of $443. Adjustment to reconcile net loss to
net cash used in operating activities includes increase in inventory reserve of $26,528, and depreciation expense of $1,130. The
variances of the operating activities are mainly due to collection of accounts receivable balances from 2015 and sales of inventories.
We expect that cash changes in
operating activities may fluctuate in future periods as a result of a number of factors including fluctuations in our net revenues
and operating results, utilization of new revenue streams, collection of accounts receivable, and timing of billings and payments.
Cash Flows from Investing Activities
The net cash used in investing activities
of $0 and $8,239 for the years ended December 31, 2017 and 2016, respectively, represents funds used to purchase property and
equipment for the Company.
Cash Flows from Financing Activities
During the year ended December 31,
2017, the Company issued convertible note to third party of $500,000. The fund was used in the Company’s operation.
The Company paid off a loan of $63,369
during the year ended December 31, 2016 to a related party entity, Vitashower, Corp., which is under common ownership and management
and repaid $19,534 of loans from shareholders.
Management expects to keep operating costs
to a minimum until cash is available through financing or operating activities. Management plans to continue to seek, in addition
to equity financing, other sources of financing (e.g. bank loan, line of credit, shareholder loan) on favorable terms; however,
there are no assurances that any such financing can be obtained on favorable terms, if at all. If we are unable to generate profits
sufficient to cover our operating costs or unable to obtain additional funds for our working capital needs, we may need to cease
or curtail operations. Furthermore, there is no assurance the net proceeds from any successful financing arrangement will be sufficient
to cover cash requirements during the initial stages of the Company’s operations.
Operating lease
Total rent expense was $51,167 and
$66,585 for the twelve months ended December 31, 2017 and 2016, respectively.
Future minimum lease commitments are as follows:
December 31,
|
|
Rent Expense
|
|
2018
|
|
$
|
42,840
|
|
2019
|
|
|
14,420
|
|
Thereafter
|
|
|
–
|
|
Convertible promissory note
On June 30, 2017 and again on July
28, 2017, the Company received $420,000 and $80,000, respectively through a series of two unsecured convertible promissory notes
from the same unrelated third party (the “2017 Notes”). The 2017 Notes bear interest at 10% per annum, are due on
June 30, 2020 and July 28, 2020 respectively and are unsecured. The 2017 Notes contain a provision that allows the note holder
to convert the outstanding balance into shares of the Company's common stock at $1.75 per share. The Company determined that the
convertible promissory notes contain beneficial conversion features that are valued at $420,000 and $80,000 respectively; however,
the amount recorded as the beneficial conversion feature is limited to the face amount of the convertible promissory note. This
beneficial conversion feature of $420,000 and $80,000 has been recorded in the financial statements to additional paid-in capital
and as a discount to the convertible promissory payable. The debt discounts are being amortized over the terms of the 2017 Notes.
The Company recognized interest expense of $81,342 during the year ended December 31, 2017 related to the amortization of the
debt discounts.
Going concern
These financial statements have been
prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities
in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial
support from its shareholders, the ability of the Company to repay its debt obligations, to obtain necessary equity financing
to continue operations, and the attainment of profitable operations. Recently, the Company has devoted a substantial amount of
resources to research and development to bring the Ubiquitor and its mobile application to full production and distribution. As
of December 31, 2017, the Company had a net loss and had negative cash flow from operating activities of $626,361 and $445,673,
respectively. The Company also had an accumulated deficit of $1,978,794. These factors raise certain doubts regarding the Company’s
ability to continue as a going concern. There are no assurances, however, that the Company will be successful in obtaining an
adequate level of financing for the long-term development and commercialization of its Ubiquitor product.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
MANAGEMENT
The following table presents information with respect to our
officers, directors and significant employees as of the date of this Prospectus:
Name
|
|
Age
|
|
|
Position
|
|
|
|
|
|
|
Dr. Edward Lee*
|
|
|
54
|
|
|
President and Director
|
Dr. Desheng Wang**
|
|
|
53
|
|
|
Chief Executive Officer, Secretary, and Director
|
Duncan Lee
|
|
|
34
|
|
|
Chief Financial Officer
|
Jennifer Gu*
|
|
|
50
|
|
|
Director
|
*Appointed director on October 21, 2015
**Appointed director on December 29, 2014.
Each director serves until our next annual meeting of the stockholders
or unless they resign earlier. The Board of Directors elects officers and their terms of office are at the discretion of the Board
of Directors.
Each of our directors serves until his
or her successor is elected and qualified. Each of our officers is elected by the board of directors to a term of one (1) year
and serves until his or her successor is duly elected and qualified, or until he or she is removed from office. At the present
time, members of the board of directors are not compensated for their services to the board.
Biographical Information Regarding Officers and Directors
Desheng Wang
Dr. Desheng Wang was appointed as Chief
Executive Officer, Secretary, and is a director nominee effective as of December 29, 2014. Dr. Wang has over 20 years of professional
experience in mobile technology. Dr. Wang earned his bachelor’s degree from Hebei Normal University, Physics Department in
1985. In 1988, Dr. Wang earned his master’s degree from Dalian Institute of Chemical Physics at the Chinese Academy of Science
in 1988. Dr. Wang earned his Ph.D. in Chemistry at Emory University in 1994. Dr. Wang served as a senior research fellow at California
Institute of Technology from 1994-2011. Over the last five years, Dr. Wang has served as president of Vitashower Corporation and
as President of Perfecular Inc.
Edward Lee
President and Director. Dr. Edward Lee
was born in 1963 in Henan, China. Received his bachelor’s degree in Mathematics at Lanzhou University in 1983, received his
master’s degree at University of Science and Technology of China in 1985 and earned his Ph.D. in Mathematics at University
of Florida in 1991. Dr. Lee worked as an assistant professor at Tsinghua University in 1986 and National University of Singapore
in 1992. Dr. Lee currently serves as CEO of AIDP. AIDP is a leading supplier of dietary supplement ingredients, focusing on research
& development and marketing and sales of proprietary ingredients like Magtein, KoACT, Predtic X, Long Jax etc. Dr. Lee is also
serving as the Vice President of the American Chinese Medicine Association.
Duncan Lee
Duncan Lee, age 34, is presently a licensed
Certified Public Accountant. Mr. Lee graduated in 2006 with a bachelor’s degree in Accounting from the University of Southern
California and has more than 11 years of experience with public company accounting and financial reporting with the SEC. Mr. Lee
worked on the audit staff of the PCAOB accounting firm of Moore Stephens Wurth Frazer and Torbet LLP and then worked as a senior
associate at the PCAOB accounting firm of Simon & Edward, LLP in Diamond Bar, CA. Since 2011, Mr. Lee worked in-house as a
staff accountant at a public company called Merion, Inc. preparing their S-1 filing (which was approved), and their routine securities
filings, including their 10-K and 10-Q filings.
Jennifer Gu
Director. Dr. Jennifer Gu was born in 1967
in Anhui, China. Dr. Gu earned her bachelor’s degree in Biology from University of Florida in 1990 and earned her Ph.D. in
Experimental Pathology at University of California, Los Angeles in 1997. She also completed post-doctoral research at the California
Institute of Technology in 2004. Dr. Gu is currently serving as the Vice President of Research & Development at AIDP.
EXECUTIVE COMPENSATION
Compensation of Officers
The following summary compensation table
sets forth information concerning compensation for services rendered in all capacities during years ended 2017, 2016, and 2015
awarded to, earned by or paid to our executive officers.
Summary Compensation Table
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
Name and Principal
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock Awards
|
|
|
Option Awards
|
|
|
Non-Equity Incentive Plan Compensation
|
|
|
Change in Pension Value & Non-qualified Deferred
Compensation Earnings
|
|
|
All Other
Compensation
|
|
|
Totals
|
|
Position [1]
|
|
Year
|
|
|
($)*
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(S)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Edward Lee
President
and Director
|
|
|
2017
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
2016
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
2015
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Jennifer Gu
Director
|
|
|
2017
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
2016
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
2015
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Desheng Wang
CEO,
Secretary
|
|
|
2017
|
|
|
|
120,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
120,000
|
|
|
|
|
2016
|
|
|
|
121,385
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
121,385
|
|
|
|
|
2015
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Duncan Lee
Chief Financial
Officer
|
|
|
2017
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Xu Tang,
President and Director
|
|
|
2015
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Yan Chen
Senior Vice
President
|
|
|
2015
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Tatyana Popova, Former
President, CEO
|
|
|
2015
|
|
|
|
4,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,500
|
|
|
|
4,500
|
|
Elena Ignatenko Former
CFO, Treasurer, Secretary
|
|
|
2015
|
|
|
|
4,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
4,500
|
|
|
|
4,500
|
|
Narrative Disclosure Requirement for Summary Compensation
Table
Compensation
We have not provided our named
executive officers with perquisites or other personal benefits. As of year-end December 31, 2017, and 2016, only Dr. Wang has
informally entered into compensation arrangements pursuant to services provided. As of December 31, 2017, no other officer or
director has formally entered into any compensation arrangement for services provided under consulting agreements or employment
agreements.
Retirement, Resignation or Termination Plans
We sponsor no plan, whether written or
verbal, that would provide compensation or benefits of any type to an executive upon retirement, or any plan that would provide
payment for retirement, resignation, or termination as a result of a change in control of our company or as a result of a change
in the responsibilities of an executive following a change in control of our company.
Directors’ Compensation
The persons who served as members of our
board of directors, including executive officers, did not receive any compensation for services as directors for 2017, 2016
and 2015.
Option Exercises and Stock Vested
We do not have a stock option plan
in place; therefore, there were no options issued, outstanding, exercised, or stock issued or vested as compensation during
the years ended December 31, 2017, 2016, and 2015.
Pension Benefits and Nonqualified Deferred Compensation
The Company does not maintain any qualified
retirement plans or non-nonqualified deferred compensation plans for its employees or directors.
Executive Officer Outstanding Equity Awards at Fiscal
Year-End
The following table provides certain information
concerning any common share purchase options, stock awards or equity incentive plan awards held by each of our named executive
officers that were outstanding as of December 31, 2017.
Option Awards
|
|
|
|
Stock Awards
|
|
Name
|
|
|
Number of
Securities
Underlying
Unexercised
Options(#)
Exercisable
|
|
|
|
Number of
Securities
Underlying
Unexercised
Options(#)
Unexercisable
|
|
|
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
|
Option
Exercise
Price ($)
|
|
|
|
Option
Expiration
Date
|
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested (#)
|
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
|
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
|
|
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
|
|
Edward Lee
President
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Desheng Wang
CEO, Secretary
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Duncan Lee,
CFO
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain
information regarding beneficial ownership of our common stock as of December 31, 2017: (i) by each of our directors, (ii)
by each of the Named Executive Officers, (iii) by all of our executive officers and directors as a group, and (iv) by each person
or entity known by us to beneficially own more than five percent (5%) of any class of our outstanding shares. As of December
31, 2017 there were 34,574,706 shares of our common stock outstanding:
Title of Class
|
|
Name of Beneficial Owner
|
|
Shares
and Nature
of Beneficial
Ownership
(1)
|
|
|
Number of
Shares to
be
Offered in
this
Registration
|
|
|
Percentage
of
Beneficial
Ownership
After
Offering
|
|
Common
|
|
Desheng Wang, CEO, and Director
|
|
|
17,000,000
|
|
|
|
-0-
|
|
|
|
49.169
|
|
Common
|
|
Edward Lee, President and Director
|
|
|
8,400,000
|
|
|
|
-0-
|
|
|
|
24.295
|
|
Common
|
|
Yan Chen
|
|
|
2,400,000
|
|
|
|
1,000,000
|
|
|
|
6.941
|
|
(1) Applicable percentage of ownership
is based on 34,574,706 shares of common stock outstanding on March 31, 2018.
Percentage ownership is determined based
on shares owned together with securities exercisable or convertible into shares of common stock within 60 days of December 31,
2017, for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes
voting or investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible
into shares of common stock that are currently exercisable or exercisable within 60 days of December 31, 2017, are deemed
to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such
person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Our common
stock is our only issued and outstanding class of securities eligible to vote.
As of December 31, 2017, there were 25,400,000
shares of common stock outstanding owned by our officers and directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Consulting services provided by the President, Chief Executive
Officer, Secretary and Treasurer and Chief Financial Officer for the years ended December 31, 2017 and 2016 were as follows:
|
|
For
the year
Ended
December
31,
2017
|
|
|
For
the year
Ended
December
31,
2016
|
|
|
|
|
|
|
|
|
President
|
|
$
|
–
|
|
|
$
|
–
|
|
Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer
|
|
|
120,000
|
|
|
|
121,385
|
|
|
|
$
|
120,000
|
|
|
$
|
121,385
|
|
Advances to (from) related party
Prior to the merger, the Company granted
advances to or from Perfecular Inc. from time to time, and the advances are non-interest bearing. Total advances from Perfecular
amounted to $12,448 as of March 31, 2015. The entire balance was paid off in January, 2016.
Loan from stockholders
On February 25, 2015, the Company borrowed
$100,000 from a stockholder for working capital. The loan bears an interest rate of 5% annually. The loan is unsecured and is
due on demand. The outstanding balance was $100,000 at March 31, 2015, with accrued interest payable of $479 as of March 31, 2015.
The entire balance plus accrued interest was paid off in October, 2015.
From time to time, Perfecular has borrowed
short-term loans from shareholders. At December 31, 2015, Perfecular has short-term loans payable totaled approximately $19,533.
These loans are due upon the demand of the lender and were unsecured with annual interest rate of 0.55%. The entire balance
plus accrued interest was paid off in February, 2016.
Loan from related party
On February 1, 2015, the Company borrowed
$20,000 from Perfecular. This loan is a demand loan payable upon the demand of the lender. The interest rate will accrue at 0.48%
per annum and is unsecured. The outstanding balance for this loan was $20,000 and $0 at March 31,2015 and December 31, 2015, respectively.
The entire balance plus accrued interest was paid off in June, 2016.
From time to time, Perfecular borrows
from a related party entity, Vitashower Corp., which is under common ownership and management. At December 31, 2015, the outstanding
loan and accrued interest payable to Vitashower totaled $63,369. This loan also bears an annual interest rate of 5 percent. The
entire balance plus accrued interest was paid off in March, 2016.
Our management is involved in other business
activities and may, in the future become involved in other business opportunities. If a specific business opportunity becomes
available, such persons may face a conflict in selecting between our business and their other business interests. In the event
that a conflict of interest arises at a meeting of our directors, a director who has such a conflict will disclose her interest
in a proposed transaction and will abstain from voting for or against the approval of such transaction.
Director Independence
A director is not considered to be independent
if he or she is also an executive officer or employee of the corporation.
Our director, Edward Lee, is also our President;
our director Desheng Wang is also our Chief Executive Officer. As a result, we have no independent
directors on our Board of Directors.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 75,000,000 common shares,
par value $0.001 per share.
Authorized and Issued Stock
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares at December 31, 2017
|
|
Title of Class
|
|
Authorized
|
|
|
Issued and
Outstanding
|
|
|
Reserved
|
|
Common stock, par value $.001 per share
|
|
|
75,000,000
|
|
|
|
34,574,706
|
|
|
|
-0-
|
|
Common Stock
Dividends
.
Each share of our common stock is entitled to receive an equal dividend, if one is declared. We cannot provide any assurance that
we will declare or pay cash dividends on our common stock in the future. Any future determination to declare cash dividends will
be made at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results
of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.
Our board of directors may determine it to be necessary to retain future earnings (if any) to finance our growth. See “Risk
Factors” and “Dividend Policy.”
Liquidation
. If our company is liquidated, then assets that remain (if any) after the creditors are paid and the owners of
preferred stock receive liquidation preferences (as applicable) will be distributed to the owners of our common stock
pro rata
.
Voting Rights
.
Each share of our common stock entitles the owner to one vote. There is no cumulative voting. A simple majority can elect all
of the directors at a given meeting, and the minority would not be able to elect any director at that meeting.
Preemptive Rights
. Owners of our
common stock have no preemptive rights. We may sell shares of our common stock to third parties without first offering such shares
to current stockholders.
Redemption Rights.
We do not have
the right to buy back shares of our common stock except in extraordinary transactions, such as mergers and court approved bankruptcy
reorganizations. Owners of our common stock do not ordinarily have the right to require us to buy their common stock. We do not
have a sinking fund to provide assets for any buy back.
Conversion Rights
. Shares of our
common stock cannot be converted into any other kind of stock except in extraordinary transactions, such as mergers and court
approved bankruptcy reorganizations.
Nonassessability
. All outstanding
shares of our common stock are fully paid and nonassessable.
N
evada Anti-Takeover Statutes
Nevada law provides that an acquiring person
who acquires a controlling interest in a corporation may only exercise the voting rights of control shares if those voting rights
are conferred by a majority vote of the corporation’s disinterested stockholders at a special meeting held upon the request
of the acquiring person. If the acquiring person is accorded full voting rights and acquires control shares with at least a majority
of all the voting power, then stockholders who did not vote in favor of authorizing voting rights for those control shares are
entitled to payment for the fair value of such stockholders’ shares. A “controlling interest” is an interest
that is sufficient to enable the acquiring person to exercise at least one-fifth of the voting power of the corporation in the
election of directors. “Control shares” are outstanding voting shares that an acquiring person or associated persons
acquire or offer to acquire in an acquisition and those shares acquired during the 90-day period before the person involved became
an acquiring person.
These provisions of Nevada law apply only
to “issuing corporations” as defined therein. An “issuing corporation” is a Nevada corporation that (a)
has 200 or more stockholders, with at least 100 of such stockholders being both stockholders of record and residents of Nevada,
and (b) does business in Nevada directly or through an affiliated corporation. As of the date of this prospectus, we do not have
100 stockholders of record that are residents of Nevada. Therefore, these provisions of Nevada law do not apply to acquisitions
of our shares and will not so apply until such time as both of the foregoing conditions are satisfied. At such time as these provisions
of Nevada law may apply to us, they may discourage companies or persons interested in acquiring a significant interest in or control
of our company, regardless of whether such acquisition may be in the interest of our stockholders.
Nevada law also restricts the ability
of a corporation to engage in any combination with an interested stockholder for three years from when the interested stockholder
acquires shares that cause the stockholder to become an interested stockholder, unless the combination or purchase of shares by
the interested stockholder is approved by the board of directors before the stockholder became an interested stockholder. If the
combination was not previously approved, then the interested stockholder may only effect a combination after the three-year period
if the stockholder receives approval from a majority of the disinterested shares or the offer satisfies certain fair price criteria.
An “interested stockholder”
is a person who is:
|
·
|
the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the outstanding voting shares of the corporation; or
|
|
·
|
an affiliate or associate of the corporation
and, at any time within three years immediately before the date in question, was the beneficial owner, directly or indirectly of
10% or more of the voting power of the then outstanding shares of the corporation.
|
Our articles of incorporation and bylaws do not exclude us from
these restrictions.
These provisions are intended to enhance
the likelihood of continuity and stability in the composition of the board of directors and in the policies formulated by the board
of directors and to discourage some types of transactions that may involve the actual or threatened change of control of our company.
These provisions are designed to reduce our vulnerability to an unsolicited proposal for the potential restructuring or sale of
all or a part of our company. However, these provisions could discourage potential acquisition proposals and could delay or prevent
a change in control of our company. They also may have the effect of preventing changes in our management.
SELLING STOCKHOLDERS
The following table presents information
regarding the selling stockholders and the shares of our common stock that may be sold by them pursuant to this prospectus. Except
for Desheng Wang and Edward Lee, who are directors and officers of our company, and Yan Chen, who was formerly an officer of our
company, none of the selling stockholders have had within the past three years any position, office or other material relationship
with our company or any of its predecessors or affiliates. No selling stockholder that is not a natural person is a broker-dealer
or an affiliate of a broker-dealer.
Our company issued the shares being offered
for resale pursuant to this prospectus to the selling stockholders in an acquisition of Perfecular Inc. where we issued shares
of our company on December 30, 2015 in exchange for 100% of the outstanding shares of Perfecular Inc. (the “Acquisition”).
Our company did not issue shares pursuant to the Acquisition to persons other than to the selling stockholders.
Name
|
|
Number of
Shares of
Common Stock
Beneficially
Owned Prior
to the
Offering (1)
|
|
|
Percentage of
Overall
Beneficial
Ownership
|
|
|
Number of
Shares of
Common Stock
Being Registered
in the Offering
|
|
|
Percentage of
Registered
Shares Owned
In the Offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yan Chen
|
|
|
3,000,000
|
|
|
|
8.68%
|
|
|
|
1,000,000
|
|
|
|
43.39%
|
|
Nice Zenith Ltd. (2)
|
|
|
1,600,000
|
|
|
|
4.62%
|
|
|
|
1,600,000
|
|
|
|
69.42%
|
|
HwaKay Mao
|
|
|
679,215
|
|
|
|
1.96%
|
|
|
|
679,215
|
|
|
|
29.47%
|
|
Wenshuang Zou
|
|
|
500,000
|
|
|
|
1.45%
|
|
|
|
240,000
|
|
|
|
10.41%
|
|
Wenjin Qian
|
|
|
200,000
|
|
|
|
*
|
|
|
|
200,000
|
|
|
|
8.67%
|
|
Ping Wang
|
|
|
100,000
|
|
|
|
*
|
|
|
|
100,000
|
|
|
|
4.33%
|
|
Lee-An Mao
|
|
|
58,824
|
|
|
|
*
|
|
|
|
58,824
|
|
|
|
2.55%
|
|
CC&C Investment LLC
|
|
|
26,667
|
|
|
|
*
|
|
|
|
26,667
|
|
|
|
1.16%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
6,164,706
|
|
|
|
17.83%
|
|
|
|
2,304,706
|
|
|
|
6.67%
|
|
_______________
(1)
|
|
The number of
shares listed in these columns includes all shares beneficially owned, whether or not deemed to be beneficially owned, by the selling
stockholder. The ownership percentages listed in these columns include only shares beneficially owned by the listed selling stockholder.
Beneficial ownership is determined in accordance with the rules of the SEC. In computing the percentage of shares beneficially
owned by a selling stockholder, shares of our common stock subject to options or warrants, or debt convertible into our common
stock, held by that selling stockholder that was exercisable or convertible on or within 60 days after the date of this prospectus
were deemed outstanding for the purpose of computing the percentage ownership of that selling stockholder. The ownership percentages
are calculated assuming that 34,574,706 shares of common stock were outstanding on the date of this prospectus.
|
|
|
|
(2)
|
|
The majority shareholder of Nice Zenith Ltd. is a non-beneficial affiliate of Dr. Edward Lee, our Director and President.
Dr. Lee sold 1,600,000 shares to Nice Zenith Ltd. for $120,000 on November 1, 2016.
|
PLAN OF DISTRIBUTION
The selling stockholders and any of its pledgees, donees, transferees,
assignees and successors-in-interest may, from time to time, sell any or all of its shares of common stock on any stock exchange,
market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated
prices. The selling stockholder may use any one or more of the following methods when selling shares:
·
|
|
ordinary
brokerage transactions and transactions in which the broker-dealer solicits investors;
|
|
|
|
·
|
|
block
trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
|
|
|
|
·
|
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
|
|
|
|
·
|
|
an
exchange distribution in accordance with the rules of the applicable exchange;
|
|
|
|
·
|
|
privately
negotiated transactions;
|
|
|
|
·
|
|
to
cover short sales made after the date that the registration statement of which this prospectus is a part is declared effective
by the Securities and Exchange Commission;
|
|
|
|
·
|
|
broker-dealers
may agree with the selling stockholder to sell a specified number of shares at a stipulated price per share;
|
|
|
|
·
|
|
a
combination of any of such methods of sale; and
|
|
|
|
·
|
|
any
other method permitted under applicable law.
|
|
|
|
The selling stockholders also may sell their
shares of our common stock under Rule 144 under the Securities Act or under another exemption from the registration requirements
of the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders
may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated.
The selling stockholders from time to time
may pledge or grant a security interest in some or all of the shares of our common stock owned by them, and, if a selling stockholder
defaults in the performance of its secured obligations, then the pledgees or secured parties may offer and sell shares of our common
stock from time to time under this prospectus or under an amendment to this prospectus under Rule 424(b)(3) under the Securities
Act or other applicable provisions of the Securities Act amending the list of selling stockholders to include the pledgees, the
transferees or other successors in interest as selling stockholders under this prospectus.
Upon our company being notified in writing
by a selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of our common stock
through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a
supplement to this prospectus will be filed with the Securities and Exchange Commission, if required, pursuant to Rule 424(b) under
the Securities Act, disclosing (i) the name of each such selling stockholder and of the participating broker-dealers, (ii) the
number of shares of our common stock involved, (iii) the price at which such shares of our common stock were sold, (iv) the commissions
paid or discounts or concessions allowed to such broker dealers, where applicable, (v) that such broker-dealers did not conduct
any investigation to verify the information set out or incorporated by reference in this prospectus and (vi) other facts material
to the transaction. In addition, upon our company being notified in writing by a selling stockholder that a donee or pledgee intends
to sell more than 500 shares of our common stock, a supplement to this prospectus will be filed if then required in accordance
with applicable securities law.
The selling stockholder also may transfer
the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will
be the selling beneficial owners for purposes of this prospectus.
The selling stockholders and any broker-dealers
or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities
Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Because
the selling stockholder may be deemed to be an underwriter within the meaning of the Securities Act, they will be subject to the
prospectus delivery requirements of the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any,
that can be attributed to the sale of Securities will be paid by the selling stockholder and/or the purchasers. The selling stockholder
has represented and warranted to the company that it acquired the securities subject to this registration statement in the ordinary
course of the selling stockholder’s business and, at the time of its purchase of such securities the selling stockholder
had no agreements or understandings, directly or indirectly, with any person to distribute any such securities.
The company has advised the selling stockholders
that it may not use shares registered on this Registration Statement to cover short sales of common stock made prior to the date
on which this Registration Statement shall have been declared effective by the Commission. If the selling stockholder uses this
prospectus for any sale of the common stock, it will be subject to the prospectus delivery requirements of the Securities Act.
The selling stockholder will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and
the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such selling stockholder
in connection with resales of their respective shares under this Registration Statement.
The company is required to pay all fees
and expenses incident to the registration of the shares, but the company will not receive any proceeds from the sale of the common
stock by selling stockholders. The company has agreed to indemnify the selling stockholder against certain losses, claims, damages
and liabilities, including liabilities under the Securities Act.
By Our Company
We are offering up to 10,000,000 shares
of Common Stock at a price of $2.50 per share. The Company may sell the securities covered by this prospectus in any of
three ways (or in any combination thereof): (i) to or through underwriters or dealers; (ii) directly to one or more purchasers;
or (iii) through agents.
We may distribute the securities covered
by this prospectus from time to time in one or more transactions at a fixed price of $2.50 per share unless modified by a post-effective
amendment to this registration statement.
Each time we offer and sell securities
covered by this prospectus, we will make available a prospectus supplement or supplements that will describe the method of distribution
and set forth the terms of the offering, including: (i) the name or names of any underwriters, dealers, or agents and the number
of shares of securities underwritten or purchased by each of them; (ii) if a fixed price offering, the public offering price
of the securities and the proceeds to us; (iii) any options under which underwriters may purchase additional securities from us;
(iv) any underwriting discounts or commissions or agency fees and other items constituting underwriters’ or agents’
compensation; (v) terms and conditions of the offering; (vi) any discounts, commissions or concessions allowed or reallowed or
paid to dealers; and (vii) any securities exchange or market on which the securities may be listed.
We may terminate the offering prior to the date that all shares
are sold. There is no minimum number of shares that must be sold before we use the proceeds. Proceeds will
not be returned to investors if we sell less than all of the 10,000,000 shares being offered in this prospectus. The
proceeds from the sales of the shares will be paid directly to us promptly following each sale and will not be placed in an escrow
account.
The offering will be conducted by Desheng Wang, our Chief Executive
Officer. Under Rule 3a 4-1 of the Securities Exchange Act an issuer may conduct a direct offering of its securities
without registration as a broker/dealer. Such offering may be conducted by officers who perform substantial duties for
or on behalf of the issuer otherwise than in connection with securities transactions and who were not brokers or dealers or associated
persons of brokers or dealers within the preceding 12 months and who have not participated in selling an offering of securities
for any issuer more than once every 12 months, with certain exceptions.
Furthermore, such persons may not be subject to a
statutory disqualification under Section 3(a)(39) of the Securities Exchange Act and may not be compensated in connection
with securities offerings by payment of commission or other remuneration based either directly or indirectly on transactions
in securities and at the time of offering our shares may not be associated persons of a broker or dealer. Mr. Wang
will meet these requirements.
DISCLOSURE OF SEC POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 78.7502 of the Nevada Revised Statutes
provides that directors and officers of Nevada corporations may, under certain circumstances, be indemnified against expenses (including
attorneys’ fees) and other liabilities actually and reasonably incurred by them as a result of any suit brought against them
in their capacity as a director or officer, if they acted in good faith and in a manner that they reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, if they had no
reasonable cause to believe their conduct was unlawful. Section 78.7502 of the Nevada Revised Statutes also provides that directors
and officers of Nevada corporation also may be indemnified against expenses (including attorneys’ fees) actually and reasonably
incurred by them in connection with a derivative suit if they acted in good faith and in a manner that they reasonably believed
to be in or not opposed to the best interests of the corporation, except that no indemnification may be made without court approval
if such person was adjudged liable to the corporation.
Article VIII of our articles of incorporation
provides that we shall, to the fullest extent permitted by the laws of the State of Nevada, indemnify our directors, officers and
certain other persons. Article V, Section 1 of our bylaws provides that our directors, officers and certain other persons shall
be indemnified and held harmless by us to the fullest extent permitted by the laws of the State of Nevada.
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to the directors, officers or persons controlling the registrant pursuant to
the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is therefore unenforceable.
In the event that a claim for indemnification
against such liabilities (other than the payment by our company of expenses incurred or paid by such director, officer or controlling
person of our company in the successful defense of any action, suit or proceeding) is asserted by any director, officer or controlling
person of our company in connection with the securities being registered in the registration statement of which this prospectus
is a part, the registrant will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification by our company is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of such issue.
LEGAL OPINION
The
validity of the shares covered by the registration statement of which this prospectus is a part has been passed upon for us by
Wilson & Oskam, LLP.
EXPERTS
The financial statements included in
this prospectus as of years ended December 31, 2017 and 2016 have been audited by BF Borgers CPA PC, an independent registered
public accounting firm, to the extent and for the periods set forth in their report appearing elsewhere herein and are included
in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Neither the named experts nor counsel own any of shares of our
common stock.
ADDITIONAL INFORMATION
We are subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended, and file reports, proxy statements and other information with the SEC. These
reports, proxy statements and other information may be inspected and copied at the public reference facilities maintained by the
SEC at 100 F Street, N.E., Washington, D.C. 20549 and at the SEC’s regional offices located at the Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 233 Broadway, New York, New York 10279. You can obtain copies
of these materials from the Public Reference Section of the SEC upon payment of fees prescribed by the SEC. You may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC’s website contains reports, proxy
and information statements and other information regarding registrants that file electronically with the SEC. The address of that
site is http://www.sec.gov.
We have filed a registration statement on
Form S-1 with the SEC under the Securities Act of 1933, as amended, with respect to the securities offered in this prospectus.
This prospectus, which is filed as part of a registration statement, does not contain all of the information set forth in the registration
statement, some portions of which have been omitted in accordance with the SEC’s rules and regulations. Statements made in
this prospectus as to the contents of any contract, agreement or other document referred to in this prospectus are not necessarily
complete and are qualified in their entirety by reference to each such contract, agreement or other document that is filed as an
exhibit to the registration statement. The registration statement may be inspected without charge at the public reference facilities
maintained by the SEC, and copies of such materials can be obtained from the Public Reference Section of the SEC at prescribed
rates. You may obtain additional information regarding our company on our website, located at
www.focusuniversal.com
.
FOCUS UNIVERSAL INC. AND SUBSIDIARY
FOR THE TWELVE MONTHS ENDED DECEMBER
31, 2017, AND 2016
Index to the Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the shareholders and the board of directors
of Focus Universal, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Focus Universal, Inc. (the "Company") as of December 31, 2017 and 2016, the related statement of operations,
stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the
"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable
basis for our opinion.
Substantial Doubt about the Company’s
Ability to Continue as a Going Concern
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 9 to the financial statements, the
Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
/s BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company’s
auditor since 2017
Lakewood, CO
April 10, 2018
FOCUS UNIVERSAL INC. AND SUBSIDIARY
CONSOLIDATED BALANCE
SHEETS
|
|
As of December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
(Restated)
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
394,398
|
|
|
$
|
340,071
|
|
Accounts receivable
|
|
|
26,311
|
|
|
|
25,564
|
|
Account receivable- related party
|
|
|
564
|
|
|
|
10,332
|
|
Inventories
|
|
|
47,432
|
|
|
|
68,495
|
|
Prepaid expenses
|
|
|
8,280
|
|
|
|
7,962
|
|
Total Current Assets
|
|
|
476,985
|
|
|
|
452,424
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
6,336
|
|
|
|
8,517
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
7,210
|
|
|
|
24,726
|
|
|
|
|
|
|
|
|
|
|
Total assets:
|
|
$
|
490,531
|
|
|
$
|
485,667
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
449,256
|
|
|
$
|
368,513
|
|
Customer deposit
|
|
|
31,734
|
|
|
|
62,126
|
|
Income taxes payable
|
|
|
800
|
|
|
|
800
|
|
Total Current Liabilities
|
|
|
481,790
|
|
|
|
431,439
|
|
Non-current Liabilities
|
|
|
|
|
|
|
|
|
Convertible promissory note, net
|
|
|
81,342
|
|
|
|
–
|
|
Deferred rent
|
|
|
–
|
|
|
|
468
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
563,132
|
|
|
|
431,907
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
|
|
Common stock, par value $0.001 per share, 75,000,000 shares authorized, 34,574,706 shares issued and outstanding as of December 31, 2017 and 2016, respectively
|
|
|
34,575
|
|
|
|
34,575
|
|
Additional paid-in capital
|
|
|
1,871,618
|
|
|
|
1,371,618
|
|
Accumulated deficit
|
|
|
(1,978,794
|
)
|
|
|
(1,352,433
|
)
|
Total stockholders' equity
|
|
|
(72,601
|
)
|
|
|
53,760
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
490,531
|
|
|
$
|
485,667
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
FOCUS UNIVERSAL INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT
OF OPERATION
|
|
Years Ended December 31
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
(Restated)
|
|
Revenue
|
|
$
|
891,513
|
|
|
$
|
1,116,219
|
|
Revenue – related party
|
|
|
6,571
|
|
|
|
5,759
|
|
Total revenue
|
|
|
898,084
|
|
|
|
1,121,978
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenue
|
|
|
726,252
|
|
|
|
866,559
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
171,832
|
|
|
|
255,419
|
|
|
|
|
|
|
|
|
|
|
Operation Expenses:
|
|
|
|
|
|
|
|
|
Compensation - officers
|
|
|
120,000
|
|
|
|
121,385
|
|
Research and development
|
|
|
208,238
|
|
|
|
201,899
|
|
Professional fees
|
|
|
107,899
|
|
|
|
142,955
|
|
General and administrative
|
|
|
255,531
|
|
|
|
256,210
|
|
Total Operating Expenses
|
|
|
691,668
|
|
|
|
722,449
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(519,836
|
)
|
|
|
(467,030
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(105,830
|
)
|
|
|
91
|
|
Other income
|
|
|
(1
|
)
|
|
|
588
|
|
Other expense
|
|
|
–
|
|
|
|
(588
|
)
|
Total other expense
|
|
|
(105,831
|
)
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(625,667
|
)
|
|
|
(466,939
|
)
|
|
|
|
|
|
|
|
|
|
Tax expense
|
|
|
694
|
|
|
|
495
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(626,361
|
)
|
|
$
|
(467,434
|
)
|
|
|
|
|
|
|
|
|
|
Weight Average Number of Common Shares Outstanding - Basic and Diluted
|
|
|
34,574,706
|
|
|
|
34,574,706
|
|
|
|
|
|
|
|
|
|
|
Net Loss per common share
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
* Denotes a loss of less than $(0.01) per share
The accompanying notes are an integral part of these consolidated
financial statements.
FOCUS UNIVERSAL INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS
OF CASH FLOWS
|
|
For the years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
(Restated)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(626,361
|
)
|
|
$
|
(467,434
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Inventory reserve
|
|
|
(9,270
|
)
|
|
|
26,528
|
|
Depreciation expense
|
|
|
2,181
|
|
|
|
1,130
|
|
Amortization of debt discount
|
|
|
81,342
|
|
|
|
–
|
|
Changes in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(747
|
)
|
|
|
81,325
|
|
Accounts receivable- related party
|
|
|
9,768
|
|
|
|
(10,332
|
)
|
Inventories
|
|
|
30,333
|
|
|
|
(53,258
|
)
|
Prepaid expenses
|
|
|
(318
|
)
|
|
|
6,999
|
|
Deposits
|
|
|
17,516
|
|
|
|
–
|
|
Accounts payable and accrued liabilities
|
|
|
80,743
|
|
|
|
92,585
|
|
Customer deposit
|
|
|
(30,392
|
)
|
|
|
(77,903
|
)
|
Deferred rent
|
|
|
(468
|
)
|
|
|
(443
|
)
|
Net cash flows used in operating activities
|
|
|
(445,673
|
)
|
|
|
(400,803
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
–
|
|
|
|
(8,239
|
)
|
Net cash flows used in investing activities
|
|
|
–
|
|
|
|
(8,239
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from convertible note payable
|
|
|
500,000
|
|
|
|
–
|
|
Repayment to related parties
|
|
|
–
|
|
|
|
(63,368
|
)
|
Repayment to shareholders
|
|
|
–
|
|
|
|
(19,534
|
)
|
Net cash flows provided by (used in) financing activities
|
|
|
500,000
|
|
|
|
(82,902
|
)
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents
|
|
|
54,327
|
|
|
|
(491,944
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - Beginning of Period
|
|
|
340,071
|
|
|
|
832,015
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - End of Period
|
|
$
|
394,398
|
|
|
$
|
340,071
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures for Statement of Cash Flows:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
105,831
|
|
|
$
|
501
|
|
Income tax paid
|
|
$
|
694
|
|
|
$
|
495
|
|
The accompanying notes are an integral
part of these consolidated financial statements.
FOCUS UNIVERSAL INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31,
2017 AND 2016
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
Description
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance - December 31, 2015 (Restated)
|
|
|
34,574,706
|
|
|
$
|
34,575
|
|
|
$
|
1,371,618
|
|
|
$
|
(884,999
|
)
|
|
$
|
521,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(467,434
|
)
|
|
|
(467,434
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2016 (Restated)
|
|
|
34,574,706
|
|
|
$
|
34,575
|
|
|
$
|
1,371,618
|
|
|
$
|
(1,352,433
|
)
|
|
$
|
53,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of promissory note
|
|
|
–
|
|
|
|
–
|
|
|
|
500,000
|
|
|
|
–
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(626,361
|
)
|
|
|
(626,361
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2017
|
|
|
34,574,706
|
|
|
$
|
34,575
|
|
|
$
|
1,871,618
|
|
|
$
|
(1,978,794
|
)
|
|
$
|
(72,601
|
)
|
The accompanying notes are an integral
part of these consolidated financial statements.
FOCUS UNIVERSAL INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
Note 1 – Organization and Operations
Focus Universal Inc. (the “Company”)
was incorporated under the laws of the State of Nevada on December 4, 2012 (“Inception”). We are a
universal
smart instrument developer and manufacturer, headquartered in the Los Angeles, California metropolitan area, specializing in the
development and commercialization of the novel and proprietary universal smart technologies and instruments. Universal smart technology
is an innovative, commercial, off-the-shelf technology with an innovative soft hardware integrated platform. Our platform provides
a unique and universal wireless solution for embedded design, industrial control, test and measurement. Our smart technology software
utilizes a smartphone, computer, or a mobile device as a platform and display that communicates and works in tandem with a group
of external sensors and probes manufactured by different vendors in a manner that requires the user to have little or no knowledge
of their unique characteristics. Our universal smart instrument (the “Ubiquitor”) consists of a reusable foundation
component which includes a wireless gateway (which allows the instrument to connect to the smartphone via Bluetooth and wifi technology),
a universal smart application software (our “Application”) which is installed on the user’s smartphone allowing
the sensor readouts to be monitored on the smartphone screen. The Ubiquitor also connects to a variety of individual scientific
sensors that collect unique data points, from moisture, light, and airflow to other things like electricity voltage meters and
a wide variety of applications. These data points are then sent wirelessly to the smartphone and the data is organized on the smartphone
screen. The smartphone, foundation, and sensor readouts together perform the functions of many traditional scientific and engineering
instruments and are intended to replace the traditional, wired stand-alone instruments at a fraction of their cost.
The Company and Perfecular were entities
under common control; therefore, in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification
(“ASC”) 805-50-45, the acquisition of Perfecular was accounted for as a business combination between entities under
common control and treated similar to a pooling of interest transaction.
Perfecular Inc. was founded in September
2009 and is headquartered in Walnut, 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.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial
statements include the accounts of Focus Universal Inc. and its wholly-owned subsidiary, Perfecular Inc. All intercompany balances
and transactions have been eliminated upon consolidation. The Company’s consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain
reclassifications have been made to the consolidated financial statements for prior years to the current year’s presentation.
Such reclassifications have no effect on net income as previously reported. Please see Note 11, Reclassifications.
Segment Reporting
The Company currently has one operating
segment. 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 that evaluated
regularly by the Management in deciding how to allocate resources and in assessing performance. The Management reviews financial
information presented on a consolidated basis for purposes of allocation resources and evaluating financial performance. Accordingly,
the Company has determined that it has a single operating and reportable segment.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with a maturity of three months or less to be cash and cash equivalents. At times, such investments may be in excess
of Federal Deposit Insurance Corporation (FDIC) insurance limit. There were no cash equivalents held by the Company at December
31, 2017 and December 31, 2016.
Concentrations of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company limits its exposure
to credit loss by investing its cash with high credit quality financial institutions.
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 observable inputs and not corroborated by market data.
|
Financial assets are considered Level
3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least
one significant model assumption or input is unobservable.
The fair value hierarchy gives the
highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to
unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the
categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s
financial assets and liabilities, such as cash and cash equivalent, prepaid expenses, accounts payable and accrued expenses, approximate
their fair value because of the short maturity of those instruments.
Transactions involving related parties
cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings
may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions
were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
It is not however practical to determine
the fair value of advances from stockholders, if any, due to their related party nature.
Inventory
Inventory is valued at the lower of the
inventory’s cost (first in, first out basis) or the current market price of the inventory. Management compares the cost of
inventory with its market value and an allowance is made to write down inventory to market value, if lower. Inventory allowances
are recorded for obsolete or slow-moving inventory based on assumptions about future demand and marketability of products, the
impact of new product introductions and specific identification of items, such as discontinued products. These estimates could
vary significantly from actual requirements if future economic conditions, customer inventory levels or competitive conditions
differ from expectations. The Company regularly reviews the value of inventory based on historical usage and estimated futu
re
usage.
As of December 31, 2017 and 2016, inventory reserve amounted to $27,067 and $36,337, respectively.
Property and Equipment
Property and equipment are stated at cost.
Depreciation is computed using the straight-line method. Estimated useful lives range from three to seven years on all categories
of depreciable assets. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts
and any gain or loss is included in earnings. Maintenance and repairs are expensed currently. Major renewals and betterments are
capitalized.
Long-term assets of the Company are reviewed
when circumstances warrant as to whether their carrying value has become impaired. The Company considers assets to be impaired
if the carrying value exceeds the future projected cash flows from related operations. The Company also re-evaluates the periods
of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
Revenue Recognition
The Company applies ASC 605-10-S99-1 for
revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue
realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists,
(ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable,
and (iv) collectability is reasonably assured.
The Company derives its revenues from sales
contracts with its customer with revenues being generated upon rendering of services. Persuasive evidence of an arrangement is
demonstrated via invoice; service is considered provided when the service is delivered to the customers; and the sales price to
the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.
Perfecular’s primary business functions
are designing and marketing products. Tianjin Guanglee serves as an original equipment manufacturer (“OEM”). Perfecular
determines the product specifications and the sales prices, and bears physical loss risks during shipping. Perfecular collects
full amount of accounts receivable from customers through direct wire transfers or letters of credit. Tianjin Guanglee invoices
Perfecular for the manufacturing costs and Perfecular pays these invoices.
Allowance for doubtful accounts
The Company provides an allowance for doubtful
accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience and
a 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. Management evaluated that there was no allowance for doubtful accounts at December 31, 2017
and December 31, 2016 based on collection history.
Research and development
Research and development costs are expensed
as incurred. Research and development costs primarily consist of efforts to refine existing product models and develop new product
models.
Related Parties
The Company follows ASC 850-10 for the
identification of related parties and disclosure of related party transactions. Pursuant to ASC 850-10-20 the related parties include:
a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election
of the fair value option under the Fair Value Option Subsection of ASC 825–10–15, to be accounted for by the equity
method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed
by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with
which the Company may deal if one party controls or can significantly influence the management or operating policies of the other
to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other
parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership
interest in one of the transacting parties and can significantly Influence the other to an extent that one or more of the transacting
parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements shall
include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other
similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of
consolidated financial statements is not required in those statements. The disclosures shall include: (a) the nature of the relationship(s)
involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for
each of the periods for which income statements are presented, and such other information deemed necessary to an understanding
of the effects of the transactions on the consolidated financial statements; (c) the dollar amounts of transactions for each of
the periods for which income statements are presented and the effects of any change in the method of establishing the terms from
that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented
and, if not otherwise apparent, the terms and manner of settlement.
Commitments and Contingencies
The Company follows ASC 450-20 to report
accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which
may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The
Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss
contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings,
the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the
amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of
the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are
generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe,
based upon information available at this time that these matters will have a material adverse effect on the Company’s financial
position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely
affect the Company’s business, financial position, and results of operations or cash flows.
Stock Based Compensation
The Company accounts for employee and non-employee
stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of
the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the
fair value of the equity instrument, whichever is more reliably measurable.
There were no outstanding stock options
for the years ended December 31, 2017 and 2016.
Income Tax Provision
Income taxes are accounted for using the
asset and liability method. Deferred income taxes are provided for temporary differences in recognizing certain income, expense
and credit items for financial reporting purposes and tax reporting purposes. Such deferred income taxes primarily relate to the
difference between the tax basis of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities
are measured by applying enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities
are expected to be settled or realized. There was no material deferred tax assets or liabilities as of December 31, 2017 and December
31, 2016.
As of December 31, 2017, and December 31,
2016, the Company did not identify any material uncertain tax positions.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed
pursuant to ASC 260-10-45. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average
number of common shares outstanding during the period.
Diluted net income (loss) per common share
is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding
shares of common 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.
There were no potentially dilutive debt
or equity instruments issued and outstanding at any time during the years ended December 31, 2017 and 2016.
Cash Flows Reporting
The Company adopted ASC 230-10-45-24 for
cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing
activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”)
as defined by ASC 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities
by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals
of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all
items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting
currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect
of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and
ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting
in cash receipts or payments in the period pursuant to ASC 830-230-45-1.
Subsequent Events
The Company follows the guidance in ASC
855-10-50 for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial
statements were issued. Pursuant to ASU 2010-09, the Company as an SEC filer considers its financial statements issued when they
are widely distributed to users, such as through filing them on EDGAR.
Note 3 – Property and Equipment
At December 31, 2017 and 2016, property
and equipment consisted of the following:
|
|
December 31,
2017
|
|
|
December 31,
2016
|
|
Computers
|
|
$
|
1,029
|
|
|
$
|
1,029
|
|
Furniture and fixture
|
|
|
8,850
|
|
|
|
8,850
|
|
Total cost
|
|
|
9,879
|
|
|
|
9,879
|
|
Less accumulated depreciation
|
|
|
(3,543
|
)
|
|
|
(1,362
|
)
|
Property and equipment, net
|
|
$
|
6,336
|
|
|
$
|
8,517
|
|
Depreciation expense for the twelve months
period ended December 31, 2017 and 2016 amounted to $2,181 and $1,130, respectively.
Note 4 – Convertible Promissory
Note
On June 30, 2017 and again on July 28,
2017, the Company received $420,000 and $80,000, respectively through a series of two unsecured convertible promissory notes from
the same unrelated third party (the “2017 Notes”). The 2017 Notes bear interest at 10% per annum, are due on June 30,
2020 and July 28, 2020 respectively and are unsecured. The 2017 Notes contain a provision that allows the note holder to convert
the outstanding balance into shares of the Company's common stock at $1.75 per share. The Company determined that the convertible
promissory notes contain beneficial conversion features that are valued at $420,000 and $80,000 respectively; however, the amount
recorded as the beneficial conversion feature is limited to the face amount of the convertible promissory note. This beneficial
conversion feature of $420,000 and $80,000 has been recorded in the financial statements to additional paid-in capital and as a
discount to the convertible promissory payable. The debt discounts are being amortized over the terms of the 2017 Notes. The Company
recognized interest expense of $81,342 during the year ended December 31, 2017 related to the amortization of the debt discounts.
Note 5 – Related Party Transactions
Revenue generated from Vitashower Corp.,
a company owned by the CEO, amounted to $6,571 and $5,759 for the years ended December 31, 2017 and 2016.
Compensation for services provided by
the President and Chief Executive Officer for the years ended December 31, 2017 and 2016 amounted to $120,000 and $121,385, respectively.
Note 6 – Business Concentration
and Risks
Major customers
One customer accounted for 100% and 100% of
the total accounts receivable at December 31, 2017 and December 31, 2016, respectively.
Major vendors
One vendor accounted for 93% and 97% of
total accounts payable at December 31, 2017 and December 31, 2016, respectively.
Note 7 – Commitments and Contingencies
On April 24, 2017, we entered into
a two-year industrial/commercial lease within a larger multi-tenant industrial complex with Walnut Park Business Center, LLC. We
leased a 2,800-square foot warehouse with a 1,400-square foot office space inside which will allow us to assemble our
products as well as efficiently run our administrative operations in the same building. The lease commenced on May 1, 2017 and
will end on April 30, 2019. We will pay $3,500 per month until May 1, 2018 when the rent will increase to $3,605 per month. The
warehouse is located at 820511 East Walnut Drive North, Walnut, California. Rent expense under this lease will be recognized over
the life of the lease term on a straight-line basis. Straight-line monthly rent expense over the life of the lease will be $3,553.
In July 2016, we sub-leased a portion of
the property to a third party. The lease is non-cancelable operating lease with monthly rent of $4,400. During the three months
ended September 30, 2017, the Company recognized $8,800 in sub-lease income. The lease commenced on July 7, 2016 and expired on
May 31, 2017. $3,300 of the rent deposit has been returned to the subtenant.
Total rent expense was $51,167 and $66,585
for the twelve months ended December 31, 2017 and 2016, respectively.
Future minimum lease commitments are as follows:
December 31,
|
|
Rent Expense
|
|
2018
|
|
$
|
42,840
|
|
2019
|
|
|
14,420
|
|
Thereafter
|
|
|
–
|
|
Note 8 – Stockholders’ Equity
Shares authorized
Upon formation the total number of shares
of all classes of stock which the Company is authorized to issue is seventy-five million (75,000,000) shares of common stock, par
value $0.001 per share.
Common stock
As of December 31, 2017 the Company had
34,574,706 shares of common stock issued and outstanding.
Note 9 – Going Concern
In August 2014, the FASB issued ACU 2014-15,
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new standard requires management
to assess the company’s ability to continue as a going concern. Disclosures are required if there is substantial doubt as
to the company’s continuation as a going concern within one year after the issue date of financial statements. The standard
provides guidance for making the assessment, including consideration of management’s plans which may alleviate doubt regarding
the Company’s ability to continue as a going concern. ASU 2014-15 is effective for years ending after December 15, 2016.
The Company has adopted this standard for the year ending December 31, 2017.
These financial statements have been prepared
on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal
course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its
shareholders, the ability of the Company to repay its debt obligations, to obtain necessary equity financing to continue operations,
and the attainment of profitable operations. Recently, the Company has devoted a substantial amount of resources to research and
development to bring the Ubiquitor and its mobile application to full production and distribution. As of December 31, 2017, the
Company had a net loss and had negative cash flow from operating activities of $626,361 and $445,673, respectively. The Company
also had an accumulated deficit of $1,978,794. These factors raise certain doubts regarding the Company’s ability to continue
as a going concern. There are no assurances, however, that the Company will be successful in obtaining an adequate level of financing
for the long-term development and commercialization of its Ubiquitor product.
Note 10 – Restatement
The Company reevaluated inventory for slow
moving and reserved a portion of slow moving inventory for obsolescence.
In 2015 the Company entered into a business
combination with an entity under common control. The accounting treatment for such business combination should have been recorded
at carry value, similar to pooling of interest. The Company corrected the error in the accounting treatment of the transaction.
In 2016, the Company recorded sales transactions net of cost of goods sold in error. The restatement corrected the error.
Also, certain account classifications have
been modified. Related party accounts receivable and accounts payable have been reclassified to their own line for disclosure purpose.
See below for result of 2016 restatement and reclassification.
|
|
Previous reported
|
|
|
|
|
|
|
|
Restated
|
|
|
|
12/31/2016
|
|
|
Adjustment
|
|
|
|
|
12/31/2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
340,073
|
|
|
|
(2
|
)
|
|
|
|
$
|
340,071
|
|
Accounts receivable
|
|
|
35,896
|
|
|
|
(10,332
|
)
|
|
{a}
|
|
|
25,564
|
|
Accounts receivable - related party
|
|
|
–
|
|
|
|
10,332
|
|
|
{a}
|
|
|
10,332
|
|
Inventories, net
|
|
|
104,832
|
|
|
|
(36,337
|
)
|
|
{b}
|
|
|
68,495
|
|
Prepaid expenses
|
|
|
7,962
|
|
|
|
|
|
|
|
|
|
7,962
|
|
Total Current Assets
|
|
|
488,763
|
|
|
|
–
|
|
|
|
|
|
452,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
8,517
|
|
|
|
–
|
|
|
|
|
|
8,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
24,726
|
|
|
|
–
|
|
|
|
|
|
24,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets:
|
|
$
|
522,006
|
|
|
|
–
|
|
|
|
|
$
|
485,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
372,912
|
|
|
|
(4,399
|
)
|
|
{c}
|
|
$
|
368,513
|
|
Customer deposit
|
|
|
57,726
|
|
|
|
4,400
|
|
|
{c}
|
|
|
62,126
|
|
Income taxes payable
|
|
|
800
|
|
|
|
–
|
|
|
|
|
|
800
|
|
Total Current Liabilities
|
|
|
431,438
|
|
|
|
|
|
|
|
|
|
431,439
|
|
Non-current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred rent
|
|
|
468
|
|
|
|
–
|
|
|
|
|
|
468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
431,906
|
|
|
|
|
|
|
|
|
|
431,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, par value $0.001 per share, 75,000,000 shares authorized; 34,574,706 shares issued and outstanding as of December 31, 2017 and 2016, respectively
|
|
|
34,575
|
|
|
|
–
|
|
|
|
|
|
34,575
|
|
Additional paid-in capital
|
|
|
713,239
|
|
|
|
658,379
|
|
|
{d}
|
|
|
1,371,618
|
|
Accumulated deficit
|
|
|
(657,714
|
)
|
|
|
(694,719
|
)
|
|
{e}
|
|
|
(1,352,433
|
)
|
Total stockholders' equity
|
|
|
90,100
|
|
|
|
|
|
|
|
|
|
53,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
522,006
|
|
|
|
|
|
|
|
|
$
|
485,667
|
|
{a} The Company reclassified related party
accounts receivable and payable balance into its own line item.
{b}The Company reserved $36,337 for slow
moving inventory items.
{c} Customer deposit of $4,400 was reclassified
out from accounts payable to correctly record in customer deposit.
{d} The Company and Perfecular Inc. entered
into merger agreement on December 30, 2015. The two entities are merger under common control. Per ASC 805-50-45, entities merger
under common control should be recorded using book value and retained earnings is carried into the consolidated financial statements.
The Company erroneously eliminated Perfecular Inc.’s retained earnings through consolidation. An adjustment is made to properly
record investment made to the merger and record retained earnings of Perfecular Inc.
{e} Accumulated adjustment effect in result
of inventory reserve and adjustment to properly recorded investment made to the merger.
|
|
Previously reported
|
|
|
|
|
|
|
|
Restated
|
|
|
|
12/31/2016
|
|
|
Adjustment
|
|
|
|
|
12/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
337,496
|
|
|
|
778,723
|
|
|
{f}
|
|
$
|
1,116,219
|
|
Revenue - related party
|
|
|
–
|
|
|
|
5,759
|
|
|
{g}
|
|
|
5,759
|
|
Total revenue
|
|
|
337,496
|
|
|
|
|
|
|
|
|
|
1,121,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenue
|
|
|
57,128
|
|
|
|
809,431
|
|
|
{f}{h}
|
|
|
866,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
280,368
|
|
|
|
|
|
|
|
|
|
255,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operation Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation - officers
|
|
|
121,385
|
|
|
|
|
|
|
|
|
|
121,385
|
|
Research and development
|
|
|
201,899
|
|
|
|
|
|
|
|
|
|
201,899
|
|
Professional fees
|
|
|
142,956
|
|
|
|
|
|
|
|
|
|
142,955
|
|
General and administrative
|
|
|
257,365
|
|
|
|
(1,155
|
)
|
|
{g}
|
|
|
256,210
|
|
Total Operating Expenses
|
|
|
723,605
|
|
|
|
|
|
|
|
|
|
722,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(443,237
|
)
|
|
|
|
|
|
|
|
|
(467,030
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(203
|
)
|
|
|
300
|
|
|
{g}
|
|
|
97
|
|
Other income
|
|
|
5,736
|
|
|
|
(5,148
|
)
|
|
{g}
|
|
|
588
|
|
Other expense
|
|
|
(1,600
|
)
|
|
|
1,012
|
|
|
{g}
|
|
|
(588
|
)
|
Total other expense
|
|
|
3,933
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(439,304
|
)
|
|
|
|
|
|
|
|
|
(466,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
1,600
|
|
|
|
(1,105
|
)
|
|
{j}
|
|
|
495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(440,904
|
)
|
|
|
|
|
|
|
|
$
|
(467,434
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weight Average Number of Common Shares Outstanding - Basic and Diluted
|
|
|
34,574,706
|
|
|
|
|
|
|
|
|
|
34,574,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
$
|
(0.01
|
)
|
{f} The Company previously recorded shipment
of sales shipped directly from vendor to customer as net of cost of goods sold. The Company corrected the error by recording sales
at gross amount and separately record cost of goods sold amount.
{g} Other income and other expenses items
were reclassified to other income statement accounts. Refund of rent expense of $1,155 was reclassified from other income to general
and administrative expenses. Other expenses items including interest expense and cost of sales were reclassified to their respective
accounts. Interest expense was reclassified from other income.
{h} The Company reserved $36,337 for slow
moving inventory items into cost of goods sold.
{i}Income tax refund was reclassified from
other income to income tax expense.
|
|
Previously
reported
|
|
|
|
|
|
|
|
Restated
|
|
|
|
12/31/2016
|
|
|
Adjustment
|
|
|
|
|
12/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(440,904
|
)
|
|
|
(26,530
|
)
|
|
|
|
$
|
(467,434
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory reserve
|
|
|
–
|
|
|
|
26,528
|
|
|
{j}
|
|
|
26,528
|
|
Depreciation expense
|
|
|
1,130
|
|
|
|
|
|
|
|
|
|
1,130
|
|
Changes in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
70,993
|
|
|
|
10,332
|
|
|
{k}
|
|
|
81,325
|
|
Accounts receivable - related party
|
|
|
–
|
|
|
|
(10,332
|
)
|
|
{k}
|
|
|
(10,332
|
)
|
Inventories
|
|
|
(53,258
|
)
|
|
|
|
|
|
|
|
|
(53,258
|
)
|
Prepaid expenses
|
|
|
6,999
|
|
|
|
|
|
|
|
|
|
6,999
|
|
Accounts payable and accrued liabilities
|
|
|
96,987
|
|
|
|
(4,402
|
)
|
|
{l}
|
|
|
92,585
|
|
Customer deposit
|
|
|
(82,303
|
)
|
|
|
4,400
|
|
|
{l}
|
|
|
(77,903
|
)
|
Deferred rent
|
|
|
(443
|
)
|
|
|
|
|
|
|
|
|
(443
|
)
|
Net cash flows used in operating activities
|
|
|
(400,799
|
)
|
|
|
|
|
|
|
|
|
(400,803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(8,239
|
)
|
|
|
|
|
|
|
|
|
(8,239
|
)
|
Net cash flows used in investing activities
|
|
|
(8,239
|
)
|
|
|
|
|
|
|
|
|
(8,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment to related parties
|
|
|
(63,369
|
)
|
|
|
|
|
|
|
|
|
(63,368
|
)
|
Repayment to shareholders
|
|
|
(19,533
|
)
|
|
|
|
|
|
|
|
|
(19,534
|
)
|
Net cash flows provided by (used in) financing activities
|
|
|
(82,902
|
)
|
|
|
|
|
|
|
|
|
(82,902
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents
|
|
|
(491,940
|
)
|
|
|
|
|
|
|
|
|
(491,944
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - Beginning of Period
|
|
|
832,015
|
|
|
|
|
|
|
|
|
|
832,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - End of Period
|
|
$
|
340,071
|
|
|
|
|
|
|
|
|
$
|
340,071
|
|
{j} The Company reserved $36,337 for slow
moving inventory items into cost of goods sold.
{k} The Company reclassified related party
accounts receivable and payable balance into its own line item.
{l} Customer deposit of $4,400 was reclassified
out from accounts payable to correctly record in customer deposit.
Note 11 – Subsequent Events
The Company has evaluated all events that
occurred after the consolidated balance sheet date through the date when the consolidated financial statements were issued to determine
if they must be reported.
On March 2, 2018, Focus Universal Inc.
(the “Company”) executed a letter of intent with Aloha Island Cable, Inc. (the “Letter of Intent”) whereby
the Company will purchase one hundred percent of Aloha Island Cable, Inc. through a mixture of stock, cash, and a promissory note.
The Letter of Intent is non-binding, but the parties expect to consummate the transaction as soon as reasonably practical. The
Letter of Intent is only an expression of interest and is not binding on the parties. The parties contemplate the closing date
to take place on April 28, 2018.
On March 5, 2018, Focus Universal Inc.
(the "Company") issued a press release announcing that the U.S. Patent and Trademark Office has issued an Issue Notification
for U.S. Patent Application No. 9924295 entitled “Universal Smart Device,” which covers a patent application regarding
the Company’s Universal Smart Device. The USPTO had previously issued a Notice of Allowance for the same patent. Barring
any unforeseen circumstances, this patent, when issued, will be valid until 2036.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
Our Chief Executive Officer and Principal
Financial Officer, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Registration Statement
on Form S-1 (the "Evaluation Date"), concluded that as of the Evaluation Date, our disclosure controls and procedures
were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms.
Changes in internal control over financial
reporting.
There were no changes in our internal control
over financial reporting during our most recent fiscal quarter that materially affected, or were reasonably likely to materially
affect, our internal control over financial reporting.
Limitations on the Effectiveness of
Internal Controls
Disclosure controls and procedures, no
matter how well designed and implemented, can provide only reasonable assurance of achieving an entity's disclosure objectives.
The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include
the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human
failures such as simple errors or mistakes or intentional circumvention of the established process.
Management's Report on Internal Control
over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting; as such term is defined in the Securities Exchange Act of 1934
Rule 13a-15(f). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based
on the framework in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("1992 COSO Framework").
A material weakness is a deficiency or
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
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 deficiency constitutes a material weakness.
This Registration Statement does not include
an attestation report of the Company's independent registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant
to rules of the SEC that permit the company to provide only management's report on internal control in this Registration Statement.
Background and Remediation Plan
Management has
determined that its processes and procedures over accounting and financial reporting are not adequate. As a result, the Company
plans to implement a number of steps to remediate the material weakness discussed above and improve its internal control over financial
reporting. Specifically, the following are planned: hiring additional qualified accounting personnel; reviewing all areas of the
accounting process; strengthening controls and improving the reporting tools and quality of data used in the analysis of disclosures
to review activities relevant to the financial reporting process.
Management believes
that the measures described above should remediate the material weakness identified and strengthen the Company’s internal
control over financial reporting. As the Company continues to evaluate and improve its internal control over financial reporting,
additional measures to remediate the material weakness or modifications to certain of the remediation procedures described above
may be necessary. The Company expects to complete the required remedial actions during 2015.
PART II — INFORMATION NOT REQUIRED
IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the
expenses expected to be incurred by us in connection with the issuance and distribution of the securities being registered. No
portion of any of such expenses will be borne by any of the selling stockholders.
SEC Registration
|
|
$
|
1,000
|
|
Legal Fees and Expenses*
|
|
$
|
25,000
|
|
Accounting Fees*
|
|
$
|
15,000
|
|
Miscellaneous*
|
|
$
|
10,000
|
|
Total
|
|
$
|
51,000
|
|
Item 14. Indemnification of Directors and Officers.
Section 78.7502 of the Nevada Revised Statutes provides that
directors and officers of Nevada corporations may, under certain circumstances, be indemnified against expenses (including attorneys’
fees) and other liabilities actually and reasonably incurred by them as a result of any suit brought against them in their capacity
as a director or officer, if they acted in good faith and in a manner that they reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action or proceeding, if they had no reasonable cause
to believe their conduct was unlawful. Section 78.7502 of the Nevada Revised Statutes also provides that directors and officers
of Nevada corporations also may be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred
by them in connection with a derivative suit if they acted in good faith and in a manner that they reasonably believed to be in
or not opposed to the best interests of the corporation, except that no indemnification may be made without court approval if such
person was adjudged liable to the corporation.
Article VIII of our articles of incorporation provides that
we shall, to the fullest extent permitted by the laws of the State of Nevada, indemnify our directors, officers and certain other
persons. Article V, Section 1 of our bylaws provides that our directors, officers and certain other persons shall be indemnified
and held harmless by us to the fullest extent permitted by the laws of the State of Nevada.
Item 15. Recent sales of unregistered securities.
None.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity
securities during the quarter ended March 31, 2018, the year ended December 31, 2017, or 2016.
Item 16. EXHIBITS
EXHIBIT NUMBER
|
|
DESCRIPTION
|
|
|
|
2.1
|
|
Agreement and Plan of Merger by and among FCUV Acquisition Corp. and Perfecular Inc. dated December 30, 2015
filed with the SEC on January 5, 2016 and
amended
on January 7, 2016.
|
3.1
|
|
Articles
of Incorporation
. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC
on December 26, 2013.
|
3.2
|
|
Bylaws
. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on December 26, 2013.
|
4.2
|
|
Subscription Agreement
. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on December 26, 2013.
|
5.1 *
|
|
Opinion of
Wilson & Oskam, LLP
|
10.1
|
|
Consulting Agreement with MorePro Marketing, Inc.
Incorporated by reference to the Company’s 8-K filed with the SEC on January 5, 2015.
|
10.2
|
|
Stock Purchase Agreement dated December 29, 2015
. Incorporated by reference to the Company’s 8-K filed with the SEC on January 5, 2015.
|
10.3
|
|
Unsecured Demand Promissory Note dated February 1, 2015 in the amount of $20,000 filed with the SEC on July 28, 2015
|
10.4
|
|
Unsecured Demand Promissory Note dated February 25, 2015
in the amount of $100,000 filed with the SEC on July 28, 2015
|
10.5
|
|
Master Revolving Note dated May 21, 2015 in the amount of $1,000,000
filed with the SEC on July 28, 2015
|
2.1
|
|
Agreement and Plan of Merger by and among Focus Universal Inc., FCUV Acquisition Corp. and Perfecular Inc
. filed with the SEC on January 5, 2016.
|
99.1
|
|
Perfecular, Inc. audited financial statements for the years ended December 31, 2015 and 2014,
filed with the SEC on June 23, 2016.
|
23.1 *
|
|
Consent of BF Borgers CPA PC
|
23.2 *
|
|
Consent of Wilson & Oskam, LLP (included in Exhibit 5.1)
|
24.1*
|
|
Power of Attorney
(included on signature page)
|
101.INS
|
|
XBRL Instance 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 **
|
* Filed herewith.
** XBRL (Extensible Business Reporting
Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11
or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended, and otherwise is not subject to liability under these sections.
Item 17. Undertakings.
The undersigned hereby undertakes:
(1)
|
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
|
|
|
(i)
|
|
To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
|
|
|
|
|
|
(ii)
|
|
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
|
|
|
|
|
|
(iii)
|
|
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
|
|
|
|
|
(2)
|
That, for the purpose of determining liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
|
|
|
(3)
|
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
|
|
|
(4)
|
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness;
provided, however,
that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
|
|
|
(5)
|
|
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
|
|
|
|
(i)
|
|
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
|
|
|
|
|
|
(ii)
|
|
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
|
|
|
|
|
|
(iii)
|
|
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
|
|
|
|
|
|
(iv)
|
|
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
|
|
|
|
|
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1933, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: April 11, 2018
|
FOCUS UNIVERSAL INC.
|
|
|
|
|
By:
|
/s/ Duncan Lee
|
|
|
Duncan Lee
|
|
|
Chief Financial Officer
|
In accordance with the Exchange Act, this
report has been signed below by the following persons on behalf of Focus Universal Inc. and in the capacities and on the dates
indicated.
SIGNATURES
|
|
TITLE
|
|
DATE
|
|
|
|
|
|
/s/ Desheng Wang
|
|
Chief Executive Officer, Secretary and Director
|
|
April 11, 2018
|
Desheng Wang
|
|
|
|
|
|
|
|
|
|
POWER OF ATTORNEY AND SIGNATURES
The
undersigned officers and directors of the company hereby constitute and appoint Steve Miller and James Short, and each of them
singly, with full power of substitution, our true and lawful attorneys-in-fact and agents to take any actions to enable the company
to comply with the Securities Act, and any rules, regulations and requirements of the SEC, in connection with this registration
statement, including the power and authority to sign for us in our names in the capacities indicated below any and all amendments
to this registration statement and any other registration statement filed pursuant to the provisions of Rule 462 under the Securities
Act.
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/Desheng Wang
|
|
Chief Executive Officer,Director
|
|
April 11, 2018
|
Desheng Wang
|
|
|
|
|
|
|
|
|
|
/s/Edward Lee
|
|
President, Director
|
|
April 11,
2018
|
Edward Lee
|
|
|
|
|
|
|
|
|
|
/s/ Duncan Lee
|
|
Chief Financial Officer
|
|
April 11, 2018
|
Duncan Lee
|
|
|
|
|