Focus Universal Inc. — Form 10-Q Summary
Reporting period: Three months ended June 30, 2014; comparative quarter ended June 30, 2013. The company identifies itself as a development-stage business providing online marketing, advertising, and website design services. Financial statements are unaudited.
Financial performance and position
| Metric | Q1 2014 | Q1 2013 |
|---|---|---|
| Revenue | $6,700 | $0 |
| Cost of revenue | $5,000 | $0 |
| Gross profit / gross margin | $1,700 / 25.4% | $0 |
| Operating expenses | $23,237 | $0 |
| Net loss | $21,537 | $0 |
| Operating cash flow | $(30,703) | $0 |
| Financing cash flow | $29,250 | $0 |
At June 30, 2014, cash was $5,955, accounts receivable $3,200, and total current assets $9,334. Current liabilities were $17,475, resulting in an $8,141 working-capital deficit and a current ratio of approximately 0.53. Accumulated development-stage losses were $44,391. The filing reports no debt balance; no senior securities were outstanding.
Common shares outstanding increased from 4,000,000 at March 31 to 6,580,000 at June 30. The company reported selling 2,580,000 shares at $0.0125 per share during the quarter.
Changes versus the prior comparable period
- Revenue began to be recognized: $6,700 versus none in the prior-year quarter, with $1,700 gross profit.
- Operating expenses rose to $23,237 from none, including $16,737 of general and administrative costs, $3,500 of professional fees, and $3,000 of officer compensation.
- Cash declined by $1,453 during the quarter, despite reported equity financing; operating cash outflow was $30,703.
Outlook, risks, and other matters
- Management plans to expand from one-off client services toward subscription-based packages and expects to rely on the same revenue stream over the next 12 months.
- Management said cash on hand and cash generated from operations should fund near-term needs, while also stating that available cash may be insufficient for daily operations. The going-concern note says the losses and cash position raise substantial doubt about the company’s ability to continue; management plans to seek additional public or private funding, with no assurance it can obtain financing.
- The company has no long-term client contracts and depends on winning new clients. It warns that inability to attract clients, generate sufficient profits, or obtain financing could require it to curtail or cease operations.
- The filing reports no pending litigation, significant off-balance-sheet arrangements, or reportable subsequent events. Management concluded disclosure controls were effective and reported no significant control changes or identified material weaknesses.
- The company’s common stock began quotation on OTC Bulletin Board and OTC Link under “FCUV” on July 31, 2014.
Important facts for investors to verify
- Reconcile the reported $29,250 of quarterly financing cash flow with the stated $32,250 share-sale proceeds and the $3,000 subscription received before the quarter.
- Review the cash-flow statement’s $30,703 operating outflow against the small reported quarterly loss and the listed working-capital movements.
- Assess whether the $5,955 cash balance, customer collections, and prospective financing can support operations given the going-concern warning.
- Confirm the timing and collectability of the $3,200 accounts receivable, which the filing says was collected after quarter-end.
- Consider the company’s limited revenue history, low gross margin, lack of long-term customer contracts, and reliance on new clients and external financing.