Focus Universal(FCUV) - 2022 Q3 - Quarterly Report

Revenue and Business Performance - For the three and nine months ended September 30, 2022, the company generated significant revenue from agricultural sensors and measurement equipment, which is its primary business [138]. - Consolidated gross revenue for the three months ended September 30, 2022, was $60,654, a decrease of $574,123 compared to $634,777 for the same period in 2021 [190]. - Consolidated gross revenue for the nine months ended September 30, 2022, was $282,463, a decrease of $977,457 from $1,259,920 in 2021 [200]. - The company is shifting towards higher technology products and diversifying away from generalized hydroponic equipment due to competitive pressures in the Los Angeles area [190]. Product Development and Innovation - The company plans to phase out traditional lower-margin products and launch a new line of technology products that have been in development for several years [140]. - The honeycomb activated carbon filter product received a patent in October 2022, with production completed and ready for nationwide marketing in the USA [142]. - The Ubiquitor device is being developed to integrate multiple digital sensors and measurement tools into a single platform, enhancing functionality and reducing costs [151]. - The Ubiquitor is expected to connect up to thousands of sensor nodes, allowing real-time data collection at rates of up to 100 Hz per second [162]. - The company has completed 80% of the development for a complementary office automation software designed to streamline financial reporting processes [146]. - The patented Power Line Communication (PLC) technology enables data transmission over existing power cables, potentially reducing infrastructure costs for IoT connectivity [168]. - The Ubiquitor's initial production run of prototypes has been completed, with plans for full-scale production in 2023 [158]. - The company aims to enhance its intellectual property protection and continue developing technologies for long-term growth [140]. Financial Performance - Cost of revenue for the three months ended September 30, 2022, was $42,441, down from $521,334 in the same period in 2021 [192]. - Gross profit for the three months ended September 30, 2022, decreased to $18,213 from $113,443 in 2021 [192]. - Research and development costs increased to $133,109 for the three months ended September 30, 2022, compared to $55,525 in 2021, reflecting higher employee compensation and operational costs [194]. - Total operating expenses for the three months ended September 30, 2022, were $992,179, an increase of $121,182 from $870,997 in 2021 [193]. - Net losses for the three months ended September 30, 2022, were $942,020, compared to $1,337,754 in the same period in 2021 [198]. - Cost of revenue for the nine months ended September 30, 2022, was $243,004, down from $1,022,666 in 2021 [201]. - Gross profit for the nine months ended September 30, 2022, decreased to $39,459 from $237,254 in 2021 [201]. - Selling expenses for the nine months ended September 30, 2022, increased to $132,871 from $15,734 in the same period of 2021, reflecting a rise of $117,137 due to increased marketing fees [206]. - Research and development costs surged to $862,214 for the nine months ended September 30, 2022, compared to $165,897 in 2021, marking an increase of $696,317 attributed to higher employee compensation and costs from the Chinese subsidiary [203][206]. - General and administrative expenses rose to $2,317,359 in the nine months ended September 30, 2022, up from $1,286,943 in 2021, an increase of $1,030,416 primarily due to higher stock-based compensation for directors [205][206]. - The total operating expenses for the nine months ended September 30, 2022, were $4,142,634, an increase of $1,765,098 from $2,377,536 in the same period of 2021 [206]. - The company incurred net losses of $3,872,247 for the nine months ended September 30, 2022, compared to $2,500,415 in 2021, reflecting a loss increase of $1,371,832 [209]. Cash Flow and Assets - Cash outflows from operating activities were $2,435,157 for the nine months ended September 30, 2022, compared to $1,496,812 in 2021, indicating a rise in cash used of $938,345 [211][214]. - Cash outflow from investing activities was $177,738 for the nine months ended September 30, 2022, significantly higher than $6,875 in 2021, primarily due to marketable securities transactions [216]. - The company had no financing activities for the nine months ended September 30, 2022, while in 2021, it reported cash inflows of $10,455,528 from various loan proceeds and an underwritten public offering [217]. - Current assets decreased to $6,591,072 as of September 30, 2022, from $9,214,340 on December 31, 2021, while current liabilities increased to $2,278,440 from $571,442, resulting in a working capital decline to $4,312,632 [210]. - The company expects fluctuations in cash flows from operating activities in future periods due to various factors, including revenue streams and accounts receivable collection [215].