Focus Universal (FCUV) risk factors, FY2025 10-K

Risks Related to our Business and Industry

1. 01We have a history of operating losses and going concern basis, and we may not be able to sustain profitability52% rewritten
2. 02We require significant funding to develop, manufacture and market our Ubiquitor wireless sensor
3. 03Our future success will depend in part on the continued service of key personnel, particularly, Desheng Wang, our Chief Executive Officer and Irving Kau, our Chief Financial Officer
4. 04Regulatory actions could limit our ability to market and sell our products
5. 05We outsource our product manufacturing and are susceptible to problems in connection with procurement, decreasing quality, reliability and protectability
6. 06Our potential inability to adequately protect our intellectual property during the outsource manufacturing of n products in China could negatively impact our performance
7. 07Our business operations in China may negatively affect our ability to protect our intellectual property and our financial position
8. 08The size and future growth in the market for our Ubiquitor device or our PLC technology has not been established with precision and may be smaller than we estimate, possibly materially. If our estimates and projections overestimate the size of this market, our sales growth may be adversely affected
9. 09If we are unable to properly forecast future demand of our products, our production levels may not meet demands, which could negatively impact our operating results
10. 10Demand for our Ubiquitor product may be affected by new entrants who copy our products and/or infringe on our intellectual property
11. 11Our sensor segment is subject to risks associated with operations as we diversify away from a single dominant customer
12. 12Prices and availability for the electronic parts and plastics we need to assemble the Ubiquitor could fluctuate
13. 13Changes in tariffs, import or export restrictions, Chinese regulations or other trade barriers may reduce gross margins
14. 14Our failure to respond to rapid change in the technology markets could cause us to lose revenue and harm our competitive position
15. 15Our 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
16. 16Demand for our products is uncertain and depends on our currently unproven ability to create and maintain superior performance
17. 17The Ubiquitor device could fail to gain traction in the marketplace for several reasons that would adversely impact our financial results and cause our investors to lose money
18. 18Our Ubiquitor device greatly depends on the growth and adoption of the IoT market, and other next-generation internet and smartphone-based applications
19. 19There is a risk that the market will not adapt to using the smartphone readout as a substitute platform for sensor devices, causing our products to fail in the marketplace
20. 20Using wireless transmission technologies such as Wi-Fi and Bluetooth may create security risks
21. 21Our business involves the use, transmission and storage of confidential information, and the failure to properly safeguard such information could result in significant reputational harm
22. 22Product liability associated with the production, marketing, and sale of our products, and/or the expense of defending against claims of product liability, could materially deplete our assets and generate negative publicity which could impair our reputation
23. 23We may not be able to identify suitable acquisition targets or otherwise successfully implement a growth strategy reliant on mergers and acquisitions
24. 24Our growth strategy includes licensing our intellectual property, and we run the risk that a licensee could become a competitor
25. 25Product defects could result in costly fixes, litigation, and damages
26. 26Only two officers have public company experience on our management team which could adversely impact our ability to comply with the reporting requirements of U.S. securities laws
27. 27We have concluded that we have not maintained effective internal control over financial reporting through the years ended December 31, 2025, and December 31, 2024. Significant deficiencies and material weaknesses in our internal control could have material adverse effects on us
28. 28A 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 manner
29. 29Our 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
30. 30If 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
31. 31The requirements of being a public company may strain our resources and distract our management
32. 32These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business and results of operations

Risks Related to the Ownership of our Common Stock

1. 33Our common stock is subordinated to our preferred stockNew
2. 34Starting on January 19, 2026, the outstanding shares of Series B Preferred Stock will be redeemable at the holder of such shares optionNew
3. 35Our shares may be affected by short selling practices which may decrease the stock price
4. 36An increase of free trading shares of our common stock could result in substantial sales of common stock on the open market which could cause our stock price to fall substantially
5. 37You could be diluted from our future issuance of capital stock and derivative securities37% rewritten
6. 38Sales 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
7. 39Future sales of our common stock by existing stockholders could cause our stock price to decline
8. 40We 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
9. 41Sales of a substantial number of shares of our common stock in the public market by certain of our shareholders could cause our stock price to fall
10. 42An active trading market for our common stock may not be maintained27% rewritten
11. 43We may not be able to maintain the continued NASDAQ listing standards69% rewritten
12. 44If we are unable to maintain compliance with NASDAQ continued listing standards, including maintenance of at least $2.5 million of stockholders’ equity and maintenance of a $1.00 minimum bid price, our common stock may be delisted from NASDAQ

Risks Related to AVX

1. 45Increasing competition within our industry could have an impact on our business prospects
2. 46The success of our smart home installation business will depend upon the efforts of management of our subsidiary AVX
3. 47If we are unable to integrate the Ubiquitor device into the smart home installation business, we may not be able to distinguish ourselves in the segment and that could negatively affect our ability to operate in the competitive smart home installation industry