FOCUS UNIVERSAL INC.

Focus Universal Inc. operates in the Internet of Things (IoT) industry, which is characterized by billions of internet-compatible devices and machines sharing data globally. Forecasts suggest that by 2030, approximately 50 billion IoT devices will be in use worldwide ⁷, creating a massive interconnected web. The company believes that the rapid growth of IoT will challenge existing human labor and natural resources.

The company's core business model revolves around developing and commercializing universal smart technology and financial reporting software. Revenue is generated through product development, technological upgrades, technical service, and customer data collection. The financial reporting software is intended to be commercialized under a Software as a Service (SaaS) model. The company operates through multiple subsidiaries, including Perfecular Inc., AVX Design and Integration, Inc. (also doing business as Smart AVX), Focus Universal (Shenzhen) Technology Company LTD, and Lusher, Inc.

Focus Universal has developed several key product and service lines. Its universal smart technology, including the Ubiquitor device, is designed for smart meters and automation systems, with applications in horticulture, agriculture, aquaculture, and home automation. The Ubiquitor is a handheld, fully modular system that uses a smartphone as an output display, capable of controlling numerous sensors and devices. The company has also developed an innovative "device on a chip" (DoC) technology, which integrates electronic circuits and software onto a single chip to simplify manufacturing and lower costs. Additionally, Focus Universal is developing 5G ultra-narrowband (UNB) wireless communication technology, aiming to achieve low-band 5G coverage with 1 Gbps high-band speed by employing an ultra-narrow spectrum channel (<1kHz). Its patented UNB Power Line Communication (PLC) technology enables data transfer over existing power cables, offering a cost-effective and scalable interconnectivity approach for IoT. The company also offers SEC financial reporting software, "One Touch Financial," an AI-enabled solution designed to automate the preparation of financial reports like Form 10-Q and 10-K.

For the fiscal year ended December 31, 2025, Focus Universal reported consolidated gross revenue of $255,023 ¹. The cost of revenue was $290,275 ², resulting in a gross loss of $(35,252) ³. Operating expenses totaled $4,858,013 ⁴, comprising selling expense of $60,289 ⁵, compensation for officers and directors of $499,852 ⁶, research and development costs of $919,965 ⁹, professional fees of $1,302,800 ¹⁰, and general and administrative expenses of $2,075,107 ¹¹. The company incurred a net loss of $4,787,769 ¹² for the year. Cash and cash equivalents at December 31, 2025, were $7,934,958 ¹³, with total current assets of $8,647,129 ¹⁴ and total current liabilities of $366,471 ¹⁵, leading to working capital of $8,280,658 ¹⁶. Net cash used in operating activities was $(5,102,771) ¹⁷.

Comparing fiscal year 2025 to 2024, total revenue decreased by $143,114 ¹⁸ from $398,137 ¹⁹ in 2024 to $255,023 ¹ in 2025, primarily due to a lower number of sales. Cost of revenue also decreased by $97,661 ²⁰ from $387,936 ²¹ in 2024 to $290,275 ² in 2025. This resulted in a shift from a gross profit of $10,201 ²² in 2024 to a gross loss of $(35,252) ³ in 2025. Total operating expenses decreased by $1,352,439 ²³ from $6,210,452 ²⁴ in 2024 to $4,858,013 ⁴ in 2025, driven by reductions in selling expense, officer and director compensation, and research and development costs. Net loss increased from $3,200,138 ²⁵ in 2024 to $4,787,769 ¹² in 2025. The company discontinued the operations of its subsidiary AT Tech Systems LLC in August 2024, which contributed a loss from discontinued operations of $278,263 ²⁶ in 2024, but $0 ²⁷ in 2025.

During the reported period, Focus Universal made significant operational developments. It completed the design of a "Total Dissolved Solids" (TDS) meter electrode, carbon dioxide sensor, new quantum PAR sensor, and total dissolved oxygen sensors, which are ready for marketing in agriculture, aquaculture, and the beverage industry. The SEC financial reporting software, One Touch Financial, has been completed in a Microsoft Word format and is undergoing extensive testing, with a cloud-based version under development. The company completed an initial production run of prototype Ubiquitor devices and showcased them at CES 2024 and 2025. It also finished designing smart devices for lighting, air conditioner, sprinkler, garden light, garage door, and heating control for residential customers, and is developing swimming pool control, smoke detector, and carbon monoxide monitor devices. In January 2026, the company entered into an agreement to acquire a 100,743 sq. ft. office and commercial building in Monterey Park, California, for $17,700,000 ²⁸.

Focus Universal Inc. plans to commercialize its financial reporting software under a Software as a Service (SaaS) model and its universal smart technology for smart meters and automation systems, actively seeking distribution partners for both products. The company intends to launch new technology products in phases, with increasing amounts of technology layered upon them, and will continue to increase efforts in protecting intellectual property rights.

A major growth area for the company is the industrial sector, particularly indoor agriculture, where it plans to market its Universal Smart Instrumentation Platform (USIP). Once established, the core technologies of universality and interoperability through mobile devices will be ported to consumer and residential markets. The company believes this two-phase approach will allow for continuous and increasing revenue growth, while the industrial phase will serve to test and refine products for broader market readiness. The Ubiquitor device, a simplified version of its universal smart IoT technology, was showcased at CES 2024 and 2025, attracting significant interest, and is central to its smart installation systems, offering expanded and customized connectivity. The company has also developed scientific sensors for agriculture, aquaculture, and the beverage industry, including quantum photosynthetic active radiation sensors, TDS sensors, pH sensors, total dissolved oxygen sensors, pressure sensors, ORP sensors, temperature sensors, humidity sensors, carbon dioxide sensors, water level sensors, chlorine sensors, and turbidity sensors, which are ready for marketing.

Another significant growth vector is the development and commercialization of its SEC financial reporting software, "One Touch Financial." The software, which has completed its public reporting automation and is undergoing extensive testing, aims to streamline and automate financial reporting for SEC attorneys, PCAOB accounting firms, and other financial professionals by automatically retrieving financial data and generating reports in various formats with a single click. The company expects to showcase this software to the public in 2026. A cloud-based version is currently under development.

Operationally, the company plans to phase out traditional, lower-margin products and focus on its newer technology products. It anticipates that its universal smart technology will lead to hardware cost reductions of up to 90% ²⁹. The company is building a U.S. sales team to market its Smart AVX-branded large format multimedia touch screens, surveillance camera systems, indoor and outdoor LED screens, and Focus Universal-branded VOIP phone service systems. Research and development efforts will continue on Power Line Communication (PLC) technology, with preliminary internal testing showing significant noise rejection and interference suppression, and increased bandwidth to 4 megabits per second ³⁰. A proprietary PLC microchip is being designed with an intended launch date for late 2025 or early 2026.

The company's capital allocation plans include raising capital to fund a full sales and marketing team for the Ubiquitor device and growing product lines. It intends to partner with manufacturers to promote the adoption of the Ubiquitor in a USIP, acquire stable market share in the sensor device market, and continue R&D on PLC technology. Furthermore, the company aims to build its smart home offerings to reduce implementation costs, expanding beyond luxury homes, and file additional patents to expand its intellectual property portfolio related to the Ubiquitor and PLC technology. The company is also in the process of acquiring a 100,743 sq. ft. office and commercial building in Monterey Park, California, for a purchase price of $17,700,000 ²⁸, with an escrow deposit of $525,000 ³¹.

The company explicitly flagged several structural headwinds and execution risks. It has a history of operating losses and negative cash flow from operating activities, with an accumulated deficit of $31,023,411 ³² as of December 31, 2025, raising substantial doubt about its ability to continue as a going concern. Significant funding, potentially up to $20 million ³³, is required for the development, manufacturing, assembly, and marketing of the Ubiquitor. The company also faces risks related to its international operations and currency exchange fluctuations, particularly with its Focus Shenzhen subsidiary in China, where intellectual property rights may not be afforded the same protection as in the United States. Regulatory actions, especially concerning the use of power lines for communication, could limit market opportunities. The company's reliance on outsourced manufacturing for fully manufactured parts increases quality and reliability risks and limits its ability to quickly adjust production rates.

Focus Universal Inc. faces material risks including a history of operating losses and negative cash flow from operating activities, with an accumulated deficit of $31,023,411 ³² as of December 31, 2025, raising substantial doubt about its ability to continue as a going concern. The company requires significant funding, potentially up to $20 million ³³, for the development, manufacturing, assembly, and marketing of its Ubiquitor wireless sensor. There is a dependence on key personnel, particularly the CEO and CFO, whose departure could pose significant difficulties. Regulatory actions, especially concerning the use of the power line grid for communication, could limit the market for its products. The company outsources product manufacturing, leading to a lack of direct control over processes, increased quality/reliability risks, and potential inability to quickly adjust production rates. Operating in China exposes the company to risks of inadequate intellectual property protection and increased international taxation. Estimates of market size and future growth for the Ubiquitor and PLC technology may be inaccurate, adversely affecting sales growth. Inability to properly forecast future demand could lead to inappropriate inventory levels, impacting net sales or working capital. The Ubiquitor product may face competition from new entrants copying products or infringing on intellectual property, and the company may incur substantial damages if found to infringe on others' IP. Internal system or service failures, including cybersecurity threats, could disrupt operations, result in loss of critical information, and damage reputation. Diversifying away from a single dominant customer in the sensor segment poses risks in building new relationships and maintaining business. Prices and availability of electronic parts and plastics for the Ubiquitor could fluctuate, with larger competitors potentially receiving purchasing priority. Changes in tariffs, import/export restrictions, or Chinese regulations could reduce gross margins, especially if the company becomes responsible for shipping and tariff costs. Failure to respond to rapid technological changes in the IoT market could lead to loss of revenue and harm competitive position. The business depends on maintaining low manufacturing costs, and the company may lack expertise to negotiate favorable terms with vendors. Wireless network limitations, such as expense, limited range, susceptibility to interference, and security risks, may reduce the competitive advantage of the Ubiquitor and USIP platform. Demand for products is uncertain and depends on the unproven ability to create and maintain superior performance. The Ubiquitor device could fail to gain market traction due to lack of market acceptance, issues with suppliers, manufacturing delays, competition, or intellectual property claims. The market may not adapt to using smartphones as a substitute platform for sensor devices, leading to product failure. Product liability risks, including costly fixes, litigation, and damages, are inherent, and the company currently lacks product liability insurance for its products. The growth strategy reliant on mergers and acquisitions may fail to identify suitable targets or successfully integrate acquired businesses. Licensing intellectual property carries the risk of licensees becoming competitors. Only two officers have public company experience, which could impact compliance with U.S. securities laws and internal control over financial reporting, which management has concluded was not effective as of December 31, 2025, due to material weaknesses such as limited segregation of duties and reliance on inexperienced staff for financial reporting. Executive officers and directors collectively own 39.7% ³⁴ of outstanding common stock, influencing corporate decisions. The common stock is subordinated to preferred stock, and Series B Preferred Stock holders have redemption rights, with $5,479,950 ³⁵ remaining subject to redemption as of March 16, 2026. Short selling practices may decrease stock price, and an increase in free trading shares could cause the stock price to fall. Future issuance of capital stock and derivative securities could dilute existing shareholders. The company does not intend to pay dividends. Maintaining NASDAQ listing standards, including a minimum $2.5 million ³⁶ stockholders' equity and a $1.00 ³⁷ minimum bid price, is a challenge, with a delisting risk. Increasing competition in the IoT market could impact profit margins. The success of the smart home installation business depends on the management efforts of AVX, and failure to integrate the Ubiquitor device into smart home installations could negatively affect competitiveness.

Management's message to shareholders emphasizes a strategic pivot towards commercializing universal smart technology and financial reporting software, while phasing out lower-margin traditional products. They highlight the development of five proprietary platform technologies, including "device on a chip," Universal Smart Instrumentation Platform (USIP), 5G ultra-narrowband technology, ultra-narrowband Power Line Communication (PLC) technology, and financial reporting software, as key to solving major industry problems and achieving long-term growth. The company is actively building a U.S. sales team and seeking distribution partners for its new products, such as the Ubiquitor device and One Touch Financial software, which is expected to be showcased to the public in 2026. Despite a net loss of $4,787,769 ¹² for the year ended December 31, 2025, and an accumulated deficit of $31,023,411 ³², management expresses confidence in the potential for these new technologies to generate significant revenue and achieve profitability, citing internal testing results for their UNB and PLC technologies. Strategic priorities for the period ahead include raising capital to fund sales and marketing for the Ubiquitor, partnering with manufacturers to promote USIP adoption, and continuing research and development on PLC technology, alongside expanding the intellectual property portfolio. Management also aims to reduce smart home implementation costs to broaden market reach and commercialize the financial reporting software under a SaaS model. They acknowledge the ongoing challenge of maintaining effective internal controls over financial reporting, which they have concluded were not effective as of December 31, 2025, and are actively working on remediation efforts.