EXPLANATORY NOTE

ColorStars Group is filing this Amendment No. 1 (“Amendment No. 1”) to its Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission  (the “SEC”) on April 14, 2015 (the “Original Filing”) for the purpose of adding XBRL and correcting a typo on page on the Statement of Cash Flows. 

Pursuant to Rule 12b-15 of the Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company has included with this Amendment currently-dated certifications by the Company’s principal executive officer and principal financial officer, as required by Exchange Act Rules 13a-14(a) and (b) and 15d-14(a) and (b).

Except as stated in this Explanatory Note, no other information contained in any Item of the Original Filing is being amended, updated or otherwise revised.  This Amendment No. 1 speaks as of the filing date of the Original Filing and does not reflect any events that may have occurred subsequent to such date.

PART I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This 2015 Annual Report on Form 10-K, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains “forward-looking statements” that include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources.  These forward-looking statements include, without limitation, statements regarding: proposed new products or services; our statements concerning litigation or other matters; statements concerning projections, predictions, expectations, estimates or forecasts for our business, financial and operating results and future economic performance; statements of management’s goals and objectives; trends affecting our financial condition, results of operations or future prospects; our financing plans or growth strategies; and other similar expressions concerning matters that are not historical facts.  Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes” and “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause these differences include, but are not limited to:

Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.  If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

We were initially incorporated in the Province of Ontario, Canada on January 21, 2005.  On November 3, 2005, we converted to a Nevada corporation.

On July 24, 2005, we entered into an acquisition agreement with ColorStars, Inc., a Taiwanese corporation (“ColorStars Taiwan”), pursuant to which, on February 14, 2006, the shareholders of ColorStars Taiwan were issued shares of our Company in exchange for their shares of ColorStars Taiwan.  This resulted in ColorStars Taiwan becoming a wholly owned subsidiary of the Company. Specifically, for each share of common stock outstanding of ColorStars Taiwan (1,500,000 shares of ColorStars Taiwan were issued and outstanding at such time), 20 shares of our common stock were issued in exchange for each such share (the aggregate of 30,000,000 shares of our common stock).

On March 20, 2009, ColorStars Taiwan acquired 50.4% of the outstanding common shares of Fin-Core Corporation, a Taiwanese corporation (“Fin-Core”) for a cash consideration of US $468,262.  This resulted in Fin-Core becoming a subsidiary of ours. The purchase price for the common shares of Fin-Core was determined through private negotiations between the parties and was not based upon any specific criteria of value. Fin-Core is principally engaged in the design and manufacturing of thermal management devices, the design and manufacturing of electrical and lighting devices and trade, and the import and export of electrical and lighting devices.

On July 7, 2010, ColorStars Taiwan sold 30.4% of its common shares of Fin-Core to Meiloon Industrial Co., Ltd., a publicly traded company on the Taiwan Stock Exchange, for a cash offering of US $429,000.  As a result of this transaction, ColorStars Taiwan owned only 20% of the outstanding common shares of Fin-Core. 

On August 5, 2009, ColorStars Taiwan acquired a 51% equity interest in Jun Yee Industrial Co., Ltd., a Taiwanese corporation (“Jun Yee”) for a cash consideration of US $536,000.  The purchase price for the equity interest in Jun Yee was determined through private negotiations between the parties and was not based upon any specific criteria of value.   Upon acquiring the equity interest, Jun Yee became a subsidiary of ours.  The principal activity of Jun Yee is the manufacturing of LED light.

On November 26, 2010, ColorStars Taiwan entered into two related stock purchase agreements whereby ColorStars Taiwan sold all of its shares of Jun Yee common stock to Mr. Ming-Chun Tung and Ms. Ming-Fong Tung. Pursuant to the stock purchase agreement entered into with Mr. Ming-Chun Tung, ColorStars Taiwan sold 265,000 shares of its Jun Yee common stock to Mr. Ming-Chun Tung at a price per share of NTD $23 (USD $0.76) for a total purchase price of NTD $6,095,000 (USD $200,427). Furthermore, pursuant to the stock purchase agreement entered into with Ms. Ming-Fong Tung, ColorStars Taiwan sold 500,000 shares of its Jun Yee common stock to Ms. Ming-Fong Tung at a price per share of NTD $23 (USD $0.76) for a total purchase price of NTD $11,500,000 (USD $378,165).  As a result of the transactions consummated above, Jun Yee is no longer our subsidiary.

In October 2011, Fin-Core decided to increase its capital by issuing 3,000,000 new shares at par value of NTD10 per share.  The Company was entitled to subscribe for up to 600,000 shares for NTD 6,000,000.  However, the Company chose not to participate in the subscription of any newly issued shares of Fin-Core.  As a result, on November 4, 2011, the Company’s equity interest in Fin-Core decreased to 11.43% from 20% after issuance of 3,000,000 new shares. 

On Dec. 20, 2012, Fin-Core Corporation decreased its total shares from 7,000,000 to 500,000. The Company’s invested cost and percentage of shareholding were unchanged after the share consolidation. The Company held 57,143 shares in Fin-Core after the consolidation. 

In 2004, ColorStars, Inc. based in Taiwan acquired 20% of the outstanding common shares of Anteya Technology Corporation.  Anteya provides the OEM service to us for the TRISTAR, EZSTAR, R4, LUXMAN, and HB series of product lines.  On August 16, 2012, Anteya increased its share capital from 5,000,000 shares to 6,500,000 shares, and we subscribed for 300,000 additional shares at par value. The Company now holds a total of 1,300,000 shares in Anteya representing a total investment of NTD $27,304,000 (USD $910,492).  Our ownership percentage in Anteya of remains 20%.

On October 13, 2008 we acquired 2,800 shares in a German company, Phocos AG. On May 27, 2013, the Company sold its 2,800 shares of Phocos AG to MUUS Horizen Fund 1, LP for $30 EU per share ($84,000 EU in total). The Company has no remaining stake in Phocos AG.

Overview

We are a vertically integrated lighting company that develops light emitting diodes (“LED”) lighting products for general consumer applications as well as professional lighting installations.

We develop and retrofit LED lamps and bulbs for lighting fixtures designed for general and special lighting applications.

Our website can be found at www.colorstarsgroup.com and www.colorstars.com.

Products

Color Stars' current line of products is as follows:

Major Product Lines and Technologies:

Light Sources

1. The AMBY™-A19-WHT dimmable 12-watt A19  LED lamps with an E26/E27 or B22 base feature a new, patented aluminum housing and uniquely shaped patented optical lens that allows for a nearly 360° light distribution.  The lamps are ETL and CE certified, RoHS compliant and LM-79 reports are available. Lighting Facts are also available for the U.S. market. Lumen output is 923 lumens ±10% for daylight white (5000 ±200K) and 801 lumens ±10% for warm-white (2900K ±200K). Non-dimmable 11W AMBY-A19-WHT-U7 models (90~277Vac) are also available. The AMBY-A19-WHT-W-120 now has Energy Star approval.

R5 Series.   The R5 Series LED lamps are a new line of LED lighting products introduced in 2012. The series includes PAR 20, PAR 30 and PAR 38 lamps with a beautiful sleek design, MR16 lamps with a GU5.3 base and a narrow beam angle of 15°, along with beam angles of 30° and 60°, AR111 lamps for existing fixtures, and AR111X lamps with an external driver for new fixtures. Also available is the R5-AR111-GU10-WHT lamp with a GU10 base. The R5-AR111X, R5-AR111-GU10-WHT, and R5-PAR lamps are available in dimmable models that include LEDs with CREE, Nichia, or Taiwan chips. Non-dimmable models with Nichia and Taiwan LEDs are available for the R5-AR111-WHT and R5-PAR lamps.  The R5-MR16-WHT lamps are non-dimmable lamps are available with either CREE or Taiwan LEDs. The dimmable 120V R5-PAR-WHT lamps are ETL certified with LM-79 reports and Lighting Facts available.

The R5-PAR38-WHT lamp won the red dot award for product design for 2012.

<14W dimmable models with CREE LEDs are available in warm white (3000K ±200K; CRI 80+; 910 lumens) and daylight white (5200K ±200K; CRI 70+; 1,050 lumens). Beam angles available are 30° and 60°.

<14W dimmable models with Taiwan LEDs are available in warm white (3000K ±200K; CRI 80; 720 lumens) and daylight white (5200K ±200K; CRI 71; 1,150 lumens). Beam angles available are 30° and 60°.

11W non-dimmable models with universal voltage (100~277Vac) and Nichia LEDs are available in warm white (3000K ±200K; CRI 60; 800 lumens) and daylight white (5200K ±200K; CRI 83; 920 lumens). Beam angles available are 30° and 60°.

<14W non-dimmable models with universal voltage (100~277Vac) and  CREE LEDs are available in warm white (3000K ±200K; CRI 80+; 910 lumens) and daylight white (5200K ±200K; CRI 70+; 1,050 lumens). Beam angles available are 30° and 60°

<14W non-dimmable models with universal voltage (100~277Vac) and  Taiwan LEDs are available in warm white (3000K ±200K; CRI 80; 880 lumens) and daylight white (5200K ±200K; CRI 70+; 1,040 lumens). Beam angles available are 30° and 60°.

3. R5-AR111-WHT: Non-dimmable <12.5W R5-AR111-WHT lamps with a built-in driver, suitable for existing fixtures, are available with LEDs with CREE or Taiwan chips. Beam angles: 30° and 60°.

R5-AR111-WHT (12 VAC/VDC) lamps with CREE LEDs are available in warm white (3000K ±200K; CRI 80+; 680 lumens) and daylight white (5000K ±200K; CRI 70+; 980 lumens). Beam angles available are 30° and 60°.

R5-AR111-WHT-T (12 VAC/VDC) lamps with Taiwan LEDs are available in warm white (3000K ±200K; CRI 80; 560 lumens) and daylight white (5000K ±200K; CRI 70; 770 lumens). Beam angles available are 30° and 60°.

4. R5-AR111-GU10-WHT: The R5-AR111-GU10-WHT LED lamps are AR111 lamps with a GU10 base.

>12W dimmable models with CREE LEDs are available in warm white (3000K ±200K; CRI 84; 724 lumens) and daylight white (5200K ±200K; CRI 76; 1,122 lumens). Beam angles available are 30° and 60°.

<13W dimmable models with Nichia LEDs are available in warm white (3000K ±200K; CRI 80; 715 lumens) and daylight white (5200K ±200K; CRI 75; 1,000 lumens). Beam angles available are 30° and 60°.

12W dimmable models with Taiwan LEDs are available in warm white (3000K ±200K; CRI 80; 780 lumens) and daylight white (5200K ±200K; CRI 70; 850 lumens). Beam angles available are 30° and 60°.

12.5W non-dimmable models with Taiwan LEDs are available in warm white (3000K ±200K; CRI 76; 655 lumens) and daylight white (5200K ±200K; CRI 70; 874 lumens). Beam angles available are 30° and 60°.

5. R5-PAR20-WHT: Dimmable R5-PAR20-WHT lamps are available with CREE, Nichia or Taiwan LEDs. Non-dimmable models with universal voltage 100~277Vac) are available with Nichia or Taiwan LEDs.  The 120V dimmable models are ETL certified. LM-79 is available for the lamps with CREE LEDs. Lighting Facts are available for the 120V lamps with CREE LEDs. The 230V lamps are CE certified and RoHS compliant.

<10W dimmable models with CREE LEDs are available in warm white (3000K ±200K; CRI 82; 680 lumens) and daylight white (5200K ±200K; CRI 66; 1,000 lumens).  Beam angles available: are 30° and 60°.

<11W dimmable models with Taiwan LEDs are available in warm white (3000K ±200K; CRI 80; 674 lumens) and daylight white (5200K ±200K; CRI 70; 750 lumens).  Beam angles available: are 30° and 60°.

Non-dimmable models with universal voltage (100~277Vac) and Nichia or Taiwan LEDs are also available.

<8W non-dimmable models with universal voltage (100~277Vac) and Nichia LEDs are available in warm white (3000K ±200K; CRI 80; 600 lumens) and daylight white (5200K ±200K; CRI 75; 630 lumens). Beam angles available are 30° and 60°.

<8W non-dimmable models with universal voltage (100~277Vac) and Taiwan LEDs are available in warm white (3000K ±200K; CRI 80; 600 lumens) and daylight white (5200K ±200K; CRI 70; 630 lumens). Beam angles available are 30° and 60°.

6. R5-PAR30-WHT: Dimmable R5-PAR30-WHT lamps are available with CREE, Nichia or Taiwan LEDs. Non-dimmable models with universal voltage (100~277Vac) are available with Nichia or Taiwan LEDs.  The 120V dimmable models are ETL certified. LM-79 is available for the lamps with CREE LEDs. Lighting Facts are available for the 120V lamps with CREE LEDs. The 230V lamps are CE certified and RoHS compliant. Beam angles available are 30°, 60° and 160° with diffused lens.

>12W dimmable models with CREE LEDs are available in warm white (3000K ±200K; CRI 84; 724 lumens; beam angles: 30° and 60°) and daylight white (5200K ±200K; CRI 66; 1,122 lumens; beam angles: 30° and 60°).

<13W dimmable models with Nichia LEDs are available in warm white (3000K ±200K; CRI 80; 715 lumens; beam angles: 30° and 60°) and daylight white (5200K ±200K; CRI 75; 1,000 lumens; beam angles: 30° and 60°).

12W dimmable models with Taiwan LEDs are available in warm white (3000K ±200K; CRI 80; 780 lumens; beam angles: 30° and 60°) and daylight white (5200K ±200K; CRI 70; 850 lumens; beam angles: 30° and 60°).

<13W dimmable models with Nichia LEDs and a 160° beam angle are available in warm white (3000K ±200K; CRI 80; 778 lumens) and daylight white (5200K ±200K; CRI 87; 760 lumens).

12W non-dimmable models with universal voltage (100~277Vac) and Taiwan LEDs are available in warm white (3000K ±200K; CRI 71; 910 lumens) and daylight white (5200K ±200K; CRI 71; 850 lumens). Beam angles available are 30° and 60°.

Non-dimmable models with universal voltage (100~277Vac) and Nichia LEDs are also available.

7. R5-PAR38-WHT: A red dot award winner: product design 2012, the dimmable 17W R5-PAR38-WHT lamps, are available with LEDs with CREE, Nichia or Taiwan chips. Non-dimmable models with universal voltage (100~277Vac) are available with Nichia and Taiwan LEDs.  The 120V dimmable models are ETL certified. LM-79 is available for the lamps with CREE LEDs. Lighting Facts are available for the 120V lamps with CREE LEDs. The 230V lamps are CE certified and RoHS compliant. Beam angles available are 30°, 60° and 160° with diffused lens.

<17W dimmable models with CREE LEDs are available in warm white (3000K ±200K; CRI 83; 1,030 lumens; beam angles: 30° and 60°) and daylight white (5200K ±200K; CRI 66; 1,460 lumens; beam angles: 30° and 60°).

<16W dimmable models with Nichia LEDs are available in warm white (3000K ±200K; CRI81; 815 lumens; beam angles: 30° and 60°) and daylight white (5200K ±200K; CRI 83; 900 lumens; beam angles: 30° and 60°).

<17W dimmable models with Taiwan LEDs are available in warm white (3000K ±200K; CRI 80; 900 lumens; beam angles: 30° and 60°) and daylight white (5200K ±200K; CRI 72; 1,077 lumens; beam angles: 30° and 60°).

<17W dimmable models with Nichia LEDs and a 160° beam angle are available in warm white (3000K ±200K; CRI 81; 1,143 lumens) and daylight white (5200K ±200K; CRI 76; 1,285 lumens).

Non-dimmable models with universal voltage (100~277Vac) and Nichia LEDs are available in warm white (3000K ±200K; CRI 80; <16W) and daylight white (5200K ±200K; CRI 76; <17W). Beam angles available are 30° and 60°.

Non-dimmable models with universal voltage (100~277Vac) and Taiwan LEDs are available in warm white (3000K ±200K; CRI 80; 900 lumens; <16W) and daylight white (5200K ±200K; CRI 72; 1,245 lumens; <17W). Beam angles available are 30° and 60°.

Non-dimmable models with universal voltage (100~277Vac) and Nichia LEDs are also available.

8. R5-MR16-WHT: The 6W R5-MR16-WHT lamps, with a GU5.3 bi-pin base, are available with either CREE or Taiwan LEDs.  Beam angles include a narrow beam angle of 15° as well as 30° and 60°.

Models with CREE LEDs include the R5-MR16-WHT-W (3000K ±200K; CRI 77; 265 lumens) and the R5-MR16-WHT-D (5200K ±200K; CRI 64; 403 lumens).

Models with Taiwan LEDs include the R5-MR16-WHT-W-T (3000K ±200K; CRI 80; 300 lumens) and the R5-MR16-WHT-D-T (5200K ±200K; CRI 66; 377 lumens).

R4S Series. The R4S Series LED lamps are 7W lamps with E27, GU10 and MR16 bases and have up to 42% more lumen output than the R4 Series (see below). The R4S Series lamps can now be produced with either CRI70 or CRI80 chips.  Caution: The R4S Series lamps should not be used in enclosed fixtures.

9. R4S-MR16-WHT: The R4S-MR16-WHT series lamps are 7W MR16 LED lamps with a GU5.3 bi-pin base got open installations. The lumen output has been increased up to 42% over the R4 Series lamps as a result of new chips.  The lamps are dimmable with linear AC transformers.

The lamps are available in warm white (3000K ±200K) and daylight white (5500K ±200K), two beam angles (30°, 45° and 85°) and a color rendering index of CRI 70 or CRI 80.

Specific models with lumen output are as follows: R4S-MR16-WHT-D-30 (5500K ±200K; beam angle: 30°; CRI 70; 500 lumens); R4S-MR16-WHT-W-30 (3000K ±200K; beam angle: 30°; CRI 70; 420 lumens); R4S-MR16-WHT-D-45 (5500K ±200K; beam angle: 45°; CRI 70; 470 lumens); R4S-MR16-WHT-W-45 (3000K ±200K; beam angle: 45°; CRI 70; 400 lumens); R4S-MR16-WHT-D-30 (5500K ±200K; beam angle: 30°; CRI 80; 420 lumens); R4S-MR16-WHT-W-30 (3000K ±200K; beam angle: 30°; CRI 80; 360 lumens); R4S-MR16-WHT-D-45 (5500K ±200K; beam angle: 45°; CRI 80; 400 lumens); R4S-MR16-WHT-W-45 (3000K ±200K; beam angle: 45°; CRI 80; 340 lumens).

10. R4S-E27-WHT: The R4S-E27-WHT Series lamps are 7W E27 LED lamps with new chips that provide an increase in lumen output of up to 42% over the R4-E27-WHT Series lamps.

The lamps are available in warm white (3000K ±200K) and daylight white (5500K ±200K), two beam angles (30° and 45°) and a color rendering index of CRI 70 or CRI 80.

Specific models with lumen output are as follows: R4S-E27-WHT-D-30 (5500K ±200K; beam angle: 30°; CRI 70; 500 lumens); R4S-E27-WHT-W-30 (3000K ±200K; beam angle: 30°; CRI 70; 420 lumens); R4S-E27-WHT-D-45 (5500K ±200K; beam angle: 45°; CRI 70; 470 lumens); R4S-E27-WHT-W-45 (3000K ±200K; beam angle: 45°; CRI 70; 400 lumens); R4S-E27-WHT-D-30 (5500K ±200K; beam angle: 30°; CRI 80; 420 lumens); R4S-E27-

11. R4S-GU10-WHT: The R4S-GU10-WHT Series lamps are 7W GU10 LED lamps with new chips that provide an increase in lumen output of up to 42% over the R4-GU10-WHT Series lamps.

The lamps are available in warm white (3000K ±200K) and daylight white (5500K ±200K), two beam angles (30° and 45º) and a color rendering index of CRI 70 or CRI 80.

Specific models with lumen output are as follows: R4S-GU10-WHT-D-30 (5500K ±200K; beam angle: 30°; CRI 70; 500 lumens); R4S-GU10-WHT-W-30 (3000K ±200K; beam angle: 30°; CRI 70; 420 lumens); R4S-GU10-WHT-D-45 (5500K ±200K; beam angle: 45°; CRI 70; 470 lumens); R4S-GU10-WHT-W-45 (3000K ±200K; beam angle: 45°; CRI 70; 400 lumens); R4S-GU10-WHT-D-30 (5500K ±200K; beam angle: 30°; CRI 80; 420 lumens); R4S-GU10-WHT-W-30 (3000K ±200K; beam angle: 30°; CRI 80; 360 lumens); R4S-GU10-WHT-D-45 (5500K ±200K; beam angle: 45°; CRI 80; 400 lumens); R4S-GU10-WHT-W-45 (3000K ±200K; beam angle: 45°; CRI 80; 340 lumens).

The R4 Series LED lamps include (1) 6-watt, 4-chip retrofit lamps (E10~E27, GU10 and MR16 with GU5.3 bi-pin base); (2) 12W and 24W downlights; (3) 8W A19 lamps and (4) an 8W G24 lamp. They are available in warm white and daylight white. Note: The R4-MR16-WHT lamps can be used in semi-enclosed fixtures.

12. R4-MR16-WHT: This 6-watt lamp has a GU5.3 bi-pin base and features a heatsink that allows for high lumen output. It is dimmable with linear AC transformers.  It is available in warm white and daylight white and 5 beam angles: 30°, 45° and 85°. Specific models with beam angles and lumen output are as follows:  R4-MR16-WHT-W-30 (3000k ±200k; 30° and 285 lumens ±10%), R4-MR16-WHT-W-45 (3000k ±200k; 45° and 270 lumens ±10%), R4-MR16-WHT-W-85 (3000k ±200k; 85° and 245 lumens ±10%),  R4-MR16-WHT-D-30 (5500k ±200k; 30° and 350 lumens ±10%), R4-MR16-WHT-D-45 (5500k ±200k; 45° and 330 lumens ±10%), R4-MR16-WHT-D-85 (5500k ±200k; 85° and 260 lumens ±10%). Length: 38mm; Diameter: 49.5mm.

13. R4-GU10-WHT: This 6-watt lamp has a GU10 base and features a new heatsink that allows for higher lumen output. It is available in warm white and daylight white and 5 beam angles: 30°, 45°, and 85°. Specific models with beam angles and lumen output are as follows: R4-GU10-WHT-W-30 (lens) (3000k ±200k; 30° and 285 lumens ±10%), R4-GU10-WHT-W-45 (3000k ±200k; 45° and 270 lumens ±10%), R4-GU10-WHT-W-85 (lens) (2700k ±200k; 85° and 245 lumens ±10%), R4-GU10-WHT-D-30 (5500k ±200k; 30° and 350 lumens ±10%), R4-GU10-WHT-W-45 (5500k ±200k; 45° and 330 lumens ±10%), R4-GU10-WHT-D-85 (5500k ±200k; 85° and 260 lumens ±10%). Length: 46.2mm; Diameter: 49.5mm.

14. R4-E27-WHT: This 6-watt lamp is available in E10, E11, E14, E17, E26 and E27 base and features a new heatsink that allows for higher lumen output. It is available in warm white (3000k ±200k) and daylight white and 5 beam angles: 30°, 45°, and 85°.  Specific models with beam angles and lumen output are as follows: R4-E27-WHT-W-30 (lens) (3000k ±200k; 30° and 285 lumens ±10%), R4-E27-WHT-W-45 (3000k ±200k; 45° and 270 lumens ±10%), R4-E27-WHT-W-85 (lens) (2700k ±200k; 85° and 245 lumens ±10%), R4-E27-WHT-D-30 (5500k ±200k; 30° and 350 lumens ±10%), R4-E27-WHT-W-45 (5500k ±200k; 45° and 330 lumens ±10%), R4-E27-WHT-D-85 (5500k ±200k; 85° and 260 lumens ±10%) Length: 62.1mm; Diagram: 49.5mm.

R4 Single-Color Lamps

R4-MR16 lamps are available in single colors: red, blue, green and amber. There is an MOQ of 250 pcs.

R4-E27 and R4-GU10 lamps are available in red and blue. For green and amber, there is a minimum order quantity of at least 1,000 pcs because the LEDs have to be specially packaged with phosphor.  (Because the color can vary from batch to batch, the order quantity should be sufficient to handle a given project.)

15. R4-DL6-WHT Downlight: The 12W R4-DL6-WHT is a lightweight and thin 6-inch downlight requiring only 10cm of ceiling space.  Equal to 60W incandescent lamps, the lights have a single light source with no dark spots.  Lumen output ranges from 610 lm ±10% for warm-white (3000K ±300K) to 720 lm ±10% for daylight white (5500K ±500K). Beam angle is 150°. Dimmable models are also available. Dimensions: 67 x Ø175mm.

17. R4-DL6-RGB Downlight:  The R4-DL6-RGB is a 12W color-changing RGB lamp with a single light source that results in no dark spot. It has an IR receiver that allows the lamp to be activated by the TRISTAR-IR1627 remote controller as well as a line switch.  It is lightweight and thin, requiring only 10cm of ceiling space.

18. R4-A19-WHT: Two types of LED A19 lamps are available in the R4 Series – the 6W R4-A19-WHT-6U and the 10W R4-A19-WHT-10U.  The 'U' refers to universal voltage (100~240Vac). The R4-A19-WHT-6U lamps are lightweight, only 50g, have a uniform light source and provide the same brightness as a 40W incandescent lamp with up to 85% power savings. 

Models are available in daylight white (5500K ±500K; CRI>70; 450 lumens) and warm-white (3000K ±300K; CRI>70; 380 lumens).  The base is E27.

The R4-A19-WHT-10U lamps are lightweight, 75g, have a uniform light source and provide the same brightness as a 60W incandescent lamp with up to 85% power savings. Models are available in daylight white (5500K ±500K; CRI>70; 850 lumens) and warm-white (3000K ±300K; CRI>70; 720 lumens).

The R4-A19-WHT-120 (110Vac; <100mA) and R4-A19-WHT-230 (220Vac; <50mA) lamps are dimmable with a TRIAC dimmer.  Models are available in daylight white (5500K ±500K; CRI>70; 850 lumens) and warm-white (3000K ±300K; CRI>70; 720 lumens).

Dimmable and non-dimmable models of the R4-A19-WHT-10 are also available with CRI80.  Dimmable models are available in daylight white (5500K ±500K; CRI>80; 720 lumens) and warm-white (3000K ±300K; CRI>80; 610 lumens).

Non-dimmable models are available in daylight white (5500K ±500K; CRI>80; 720 lumens) and warm-white (3000K ±300K; CRI>80; 610 lumens).

The R4-A19-WHT-10U and the dimmable lamps are available with an E26, E27 or B22 base.

19. R4-G24-WHT-8:  The R4-G24-WHT-8 is an 8W G24 lamp with CREE or Taiwan LEDs. It has a beam angle of 270° and a rotary angle.  With CREE LEDs it is available in daylight-white (5300K ±300K; CRI >70; 550 lumens ±10%) and warm-white (3000K ±300K; CRI >80; 500 lumens ±10%). With Taiwan LEDs it is available in daylight-white (5300K ±300K; CRI >70) and warm-white (3000K ±300K; CRI >80).

20. R3-MR16-WHT: The 5W R3-MR16-WHT lamp can be used in enclosed fixtures.  The 5-watt MR16 LED lamp has a GU5.3 bi-pin base.  It is dimmable with AC linear transformers.  Specific models with beam angles and lumen output are as follows:  R3-MR16-WHT-W-30 (3000k ±200k; 30° and 250 lumens ±10%), R3-MR16-WHT-W-45 (3000k ±200k; 45° and 235 lumens ±10%), R3-MR16-WHT-D-30 (5500k ±200k; 30° and 300 lumens ±10%), R3-MR16-WHT-D-45 (5500k ±200k; 45° and 285 lumens ±10%). Length: 38mm; Diameter: 49.5mm.

21. R1-MR16-WHT:  The R1-MR16-WHT LED lamps are economical 4-watt MR16 lamps with a GU5.3 bi-pin base. They are available in daylight white (5500k ±200K; CRI 70) and warm-white (3000K ±200K; CRI 70). Lumen output and beam angles are as follows: R1-MR16-WHT-30 (WHT-D: 250 lm ±10%; WHT-W: 200 lm ±10%; Beam angle: 30°) and the R1-MR16-WHT-45 (WHT-D: 240 lm ±10%; WHT-W: 190 lm ±10%; Beam angle: 45°)

22. COZY-A19-WHT: The COZY-A19-WHT Series are dimmable 5W weatherproof lamps with an IP65 rating for outdoor use. The lamps feature the same patented optical lens design as the AMBY-A19-WHT that provides nearly a 360° light distribution. Dimmable with TRIAC dimmers, the lamps are available in warm white (3000K ±200K; CRI 83; 290 lm ±10%; power factor: 0.94) and daylight white (5000K ±200K; CRI 82; 322 lm ±10%; power factor 0.92).

23. CANDLE Series.  The 3W CANDLE-E12-WHT-110/220 and CANDLE-E14-WHT-110/220 lamps are lightweight (31g), candelabra LED lamps available in CANDLE (CA) and CRYSTAL (CR) models. Lumen output is as follows:  CANDLE-E12/E14-WHT-D-110/220-CA (5500K ±500K) 200 lumens; CANDLE-E12/E14-WHT-D-110/220-CR (5500K ±500K) 170 lumens; CANDLE-E12/E14-WHT-W-110/220-CA (3000K ±300K) 170 lumens; CANDLE-E12/E14-WHT-W-110/220-CR (3000K ±300K) 140 lumens;

24. TRISTAR®-IR1627 Remote Controllers: These provide a remote control function and are available in a large (L) or small (S) size. The remote can activate four color-changing patterns, 16 single colors and four color-intensity levels.

Other Light Sources:

25. AQUA™-RGB Series: The AQUA™-RGB Series are lamps with an IP68 rating for underwater applications. The AQUA™-RGB-60 is a 24V, 60-watt, IP68 rated RGB lamp suitable for pool lighting.  This 90mm (dia.) x 120 mm (H) lamp has a 60 ° beam angle.

The AQUA™-RGB-30 and the AQUA™-RGB-15 are 12V 30-watt and 15-watt lamps respectively.

26. AQUA™-WHT Series: The AQUA™-WHT Series are lamps with an IP68 rating for underwater applications. The AQUA™-WHT-60 is a 24V, 60-watt, IP68 rated lamp suitable for pool lighting.  This 90mm (dia.) x 120 mm (H) lamp has a 60 °  beam angle and a lumen output of 4,200~4,800 lumens. The AQUA™-WHT-30 is a 12V, 30-watt, IP68 rated lamp suitable for pool lighting.  This 63.5mm (dia.) x 95 mm (H) lamp has a 60 °  beam angle and a lumen output of 2,100~2,400 lumens.  The AQUA™-WHT-15 is a 12V, 15-watt, IP68 rated lamp suitable for pool lighting.  This 50mm (dia.) x 65mm (H) lamp has a 60 °  beam angle and a lumen output of 1,050~1,200 lumens. Color temperatures available are warm white (3300K ±100K) and daylight white (5500K ±250K). The lamps come with a 5-meter cable and mounting brackets.

27. BOBBY™-AR111-RGB-40-DMX.  The BOBBY™-AR111-RGB-40-DMX is a 24-watt AR111 RGB color-changing spot light with a 40° beam angle together with the CCD350-DMX-24 – 350mA Constant Current Driver (24VDC, 24W Max.; with auto DMX address setting).

28. EZSTAR™-RGB LED Modules: EZSTAR™-RGB LED modules are suitable for cabinet, accent and cove lighting and are available in 10 cm and 30 cm lengths.  EZSTAR™-RGB waterproof models with an IP67 protection rating are available.

29. EZSTAR™-Single-Color LED Modules: EZSTAR™-Single-Color LED modules are suitable for cabinet, accent and cove lighting and are available in red, green, blue and amber, plus warm white (2900k ±100k) and daylight white (5500k), and in lengths of 15 cm and 30 cm.  EZSTAR™--WHT waterproof models with an IP67 protection rating are available.

30. HIGH-BAY Series: This series of LED high-bay lamps are available in 120W, 150W and 180W models with either an E39 and E40 base, a foundation base (with UL and ETL approval), a ring and bare wires, or a foundation base with a ring and bare wires.  They are available with CREE, Nichia or local Taiwan LED chips. The lamps are lightweight and easily installed and have an automatic protection shut-off when the temperature rises above 105° C. The 180W models outperform 450W metal halide bulbs. The high-bay lamps are suitable for factories, warehouses, auditoriums and convention centers.

The HB-F-WHT-XXX lamps with stand are now UL and ETL certified.

The lamps are available with either a diffused lens to reduce glare or a transparent lens for maximum lumen output.  The following lumen output figures are based on lamps with the transparent lens.

37. SunSumLite.  The SunSumLite is a 1W solar-powered LED lamp with 90~100 lumens and an optional mobile phone charger.  It can be used as a flashlight or as a light-source while camping or in rural areas in developing countries with minimal electrical power.  The SumSumLite comes with a solar module for charging. There are three light settings that provide continuous lighting for periods of 4 hours (high), 10 hours (medium) and 200 hours (low).

38. STARSTREAM™24 Single-Color Light Strips: The STARSTREAM™24 Single-Color light strip is a 24VDC flexible strip available in warm white (3000k) and daylight white (5000k), red, green, blue and amber. The maximum usable length of the single-color light strips is 30 meters.

39. STARSTRIP™-24-RGB Light Strips: The STARSTRIP™-24-RGB light strips are 24V color-changing light strips with 14 x SMD RGB LED in each 30 cm length of rigid aluminum alloy. Each 30 cm length has a power consumption of 3.4 watts. They are available in lengths of 32, 62, 92 and 122 cm.  Waterproof models with an IP67 protecting rating are also now available.

40. STARSTRIP™-24 Single-Color Light Strips: The STARSTRIP™-24-WHT light strips are 24V light strips with 16 x SMD single-color LED in each 30 cm length of rigid aluminum alloy. Each 30 cm of length has 5 watts of power consumption and a lumen output of 180 lumens.  They are available in warm white (3300k) and daylight white (5000k). They are available in lengths of 32, 62, 92 and 122 cm.  Waterproof models with an IP67 protection rating are also now available.

41. T5™ .  The T5™ is a 24V strip light 58 cm in length with 21 LEDs x 0.4W for a total of 8.4 watts. Available in both warm white (3000k) and daylight white (6000k), the T5™ is ideal for office lighting, cabinet lighting or other small area lighting.  Up to four T5™ light strips can be connected together.

42. TB600 LED Ceiling Panels: These 40W T-bar 60x60 LED light panels are ultra-thin (10 mm) and feature a uniform light source with no hot spot and no stacking shadow.  They are ideal for offices, conference rooms, hotels, factories or other commercial lighting applications.

The panels are available in warm white (3000K ±300K; CRI 80; 3,000 lumens) and daylight white (5500K ±500K; CRI 80; 3000 lumens). Non-dimmable, dimmable and CCT changing (2700K~5500K) models are available.

43.  TB600 series LED panel light with UL certification – The ultra-think (10mm) panels available are the TB-2x2-WHT (50W), TB-1x2-WHT (50W) and the TB-2x4-WHT (75W). They are available in 3000K, 4000K and 5000K color temperatures, or the warm-white, natural-white and day-light white.

44. TRISTAR-T8 Series:  The TRISTAR-T8 Series are 60cm (10W) and 120cm (20W) T8 tubes with diffused lens. These LED T8 replacements are available in either daylight-white (5000~5500K) or warm-white (2600~3300K).  Lumen output for the 60cm models are 800 lumens for daylight-white and 650 lumens for warm-white.  Lumen output for the 120cm models are 1,800 lumens for daylight-white and 1,500 lumens for warm-white. 

45. ZZ-BRIGHT™-WHT Channel Letter LEDs: ZZ-BRIGHT™ channel-letter LEDs are suitable for tube lights, box signage, 3D letters, decoration lighting and indirect lighting. The ZZ-BRIGHT™-215-WHT has 2 high-brightness SMD-type LEDs on each PCB and the ZZ-BRIGHT™-415-WHT has 4 high-brightness SMD-type LEDs on each PCB.  Both models have a constant current regulating IC to provide the same level of brightness, protect against power surges and extend the lifetime of the LEDs. The PCBs have a water resistant coating that prevents water from entering the PCB and causing corrosion. They are available in warm white (3200k), daylight white (4000k) and cool white (6500k), as well as red, blue, green and amber.

46. ZZ-BRIGHT™ -RGB Channel Letter LEDs: ZZ-BRIGHT™-RGB channel-letter LEDs are suitable for tube lights, box signage, 3D letters, decoration lighting, indicating lighting and indirect lighting.  Each PCB has 3 SMD-

We grant a small number of certain distributors the right in defined territories to distribute our products. We have not entered into any written agreements with these distributors.  As such, if our distributors are not adequately performing, we have the option to terminate our relationship at any time with them. Our distributors could also discontinue marketing and distributing our products with little or no notice.  If our distributors were to discontinue marketing and distributing our products for any reason, we believe that, due to an abundance of distributors in the LED lighting product sector, we could find an alternative distributor within a short duration of time; however, until we locate another distributor, our business and results of operations could be adversely impacted.

We are not dependent on, nor expect to become dependent on, any one or a limited number of suppliers for essential raw materials or other items. Our manufacturing operations, which are outsourced to various companies, are located in Taiwan where there is an extensive infrastructure of companies supplying raw materials to the LED lighting industry. In 2013, we added one new distributor in the Middle East region and one new distributor in Germany. Our largest supplier accounted for approximately 23.72% of total purchases by the Company in 2015.

Customers

We sell our products primarily to professional wholesale lighting distribution companies, some of whom are companies with many years of experience distributing traditional lighting products and some of whom are strictly distributors of LED lighting products and have fewer years of experience.  We also distribute our LED lighting to lighting engineers engaged in specific lighting projects.  Typically, we do not sell our products directly to end-users. Our largest customer accounted for approximately 61.59% of the total revenue in 2015.

In 2015 we experienced an overall decrease in the number of customers globally, as global competition increased. At this time, the LED market is being flooded with low-priced products from China. Many of our customers are either evaluating or switching to low-priced suppliers as opposed to opting for premium quality products with superior engineering and design.

Product Research and Development

We are engaged in research and development on a variety of consumer and professional lighting products. Among these products are LED Panel Lights with changeable color-temperature and dimming capability, and WiFi based smart control system. Some of these products are in the certification process. During the past two fiscal years, we spent approximately $11,165 in 2014 and $3,822 in 2015 on research and development.

Competition

We sell our products globally primarily to lighting distributors selling LED lamps and lighting fixtures for commercial lighting.  As forecast in the Next Generation Lighting Industry Alliance (“NGLIA”) report, we expect this market to grow rapidly, especially as incandescent and fluorescent lamps are replaced by LEDs in commercial lighting because of energy savings, greater design flexibility, the elimination of pollutants, greater ruggedness, longer lifetimes and lack of catastrophic failures.

According to the NGLIA, an industry consortium involved in solid-state-lighting (“SSL”) working in cooperation with the United States Department of Energy (“DOE”), the size of the domestic market for lamps (light bulbs), ballasts, lighting fixtures, and lighting controls is about $12 billion. Globally, this market is about $40 billion.

It is estimated that greenhouse gas emissions will be cut by 800,000 tonnes (Australia's current emission total is 564.7 million tonnes), a reduction of approximately 0.14%.

There have been some initiatives to encourage people to switch to compact fluorescent lamps.

New Zealand

In February 2007, then Climate Change Minister David Parker announced a similar proposal to the one in Australia, except that importation for personal use would have been allowed.  However, the proposed ban was scrapped by the new government in December 2008 in a move that appears to have been politically motivated to distinguish the new government as being opposed to a 'nanny State' that tells its citizens what to do rather than a policy favoring incandescent bulbs.

Environmental Regulations

ENERGY STAR is a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy helping us all save money and protect the environment through energy efficient products and practices.

The Energy Star is awarded to only certain bulbs that meet strict efficiency, quality, and lifetime criteria.

Energy Star Qualified LED Lighting:

·       Reduces energy costs — uses at least 75% less energy than incandescent lighting, saving on operating expenses.

·       Reduces maintenance costs — lasts 35 to 50 times longer than incandescent lighting and about 2 to 5 times longer than fluorescent lighting. There are no bulb-replacements, no ladders, no ongoing disposal program.

·       Reduces cooling costs — LEDs produce very little heat.

·       Is guaranteed — comes with a minimum three-year warranty — far beyond the industry standard.

·       Offers convenient features — available with dimming on some indoor models and automatic daylight shut-off and motion sensors on some outdoor models.

·       Is durable — won’t break like a bulb.

·       To qualify for Energy Star certification, LED lighting products must pass a variety of tests to prove that the products will display the following characteristics:

·       Brightness is equal to or greater than existing lighting technologies (incandescent or fluorescent) and light is well distributed over the area lighted by the fixture.

·       Light output remains constant over time, only decreasing towards the end of the rated lifetime (at least 35,000 hours or 12 years based on use of 8 hours per day).

·       Excellent color quality. The shade of white light appears clear and consistent over time.

·       Efficiency is as good as or better than fluorescent lighting.

·       Light comes on instantly when turned on.

·       No flicker when dimmed.

·       No off-state power draw. The fixture does not use power when it is turned off, with the exception of external controls, whose power should not exceed 0.5 watts in the off state.

We are in the process of applying for the Energy Star certification for most of our products for general lighting applications.

As of December 31, 2015, we had a total of 6 full-time employees and 1 part-time employee. There are no collective bargaining agreements between us and our employees. We do not have any supplemental benefits or incentive arrangements for employees at the present time. Such benefits and arrangements will be considered and developed over the next 12 months.

Reports to Security Holders

We are a reporting company and will comply with the requirements of the Exchange Act.  We will file quarterly and annual reports and other information with the SEC, and we will send a copy of our annual report together with audited consolidated financial statements to each of our shareholders.

The public may read and copy any materials the Company files with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which can be found at http://www.sec.gov.

As we are a smaller reporting company, we are not required to provide the information required by this item.

None.

We do not own any property, real or otherwise. We currently lease the following properties:

We lease our principal office from Mr. Wei-Rur Chen, our president, at a consideration of NTD $120,000 (USD $4,133.51) per month (NTD $1,440,000 (USD $48,510.03) annually).  The initial lease term for the agreement was from November 2005 to November 2010.  The lease was extended for another five (5) years to November 2015. The lease was then extended for another five (5) years to November 2020.  This office is the main operational office in Taiwan with the address of 10F, No. 566 and 568 Jungjeng Road, Sindian City, Taipei County, Taiwan 231.

On July 1, 2013, we signed a month to month lease agreement at a consideration of USD $2,136 per month (USD $25,632 annually). This leased property is located at 515 N. Smith Avenue, Suite 101, Corona, California 92880. This lease was terminated on April 30, 2015.

On September 1, 2011, we signed a two (2) year lease agreement at a consideration of NTD $60,000 (USD $2,066.76) per month (NTD $720,000 (USD $24,801.08) annually).  This property is used as a warehouse and shipping area with the address of 9F, No. 566 Jungjeng Road, Sindian City, Taipei County, Taiwan 231.  The first lease term ended on August 31, 2013, resulting in total lease payments of NTD $480,000 (USD $16,534.05) for the 2013 term. This lease agreement was extended for another two (2) year period. This lease term ended August 31, 2015, resulting in total lease payments of NTD $720,000 (USD $24,801.08) for the partial 2013, 2014 and partial 2015 term. This lease was terminated on August 31, 2015.

There are no legal proceedings that have occurred within the past year concerning our directors, or control persons which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one’s participation in the securities or banking industries, or a finding of securities or commodities law violations.

PART II

Market Information

Our Common Stock trades on the OTC Bulletin Board under the symbol “CSTU”. The following table sets forth, for the periods indicated, the high and low bid information for our Common Stock as determined from sporadic quotations on the OTC Bulletin Board. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

Security Holders

As of December 31, 2015, there were 239 record holders of 67,448,890 shares of our Common Stock

Dividends

Dividends, if any, will be contingent upon our revenues and earnings, capital requirements and financial conditions.  The payment of dividends, if any, will be within the sole discretion of our Board of Directors. We presently intend to retain all earnings, if any, for use in our business operations.

Securities authorized for issuance under equity compensation plans

We have never and have no current plans to issue securities under any equity compensation plans.

Common Stock

The authorized capital stock of our Company consists of 450,000,000 shares of Common Stock, par value $0.001 per share, of which there are 67,448,890 issued and outstanding.

All outstanding shares of Common Stock are of the same class and have equal rights and attributes. The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of our stockholders.

Net cash (used in) provided by investing activities.  During the fiscal year ended December 31, 2015, net cash used in investing activities was $(10,002) compared with $0 used in investing activities for the fiscal year ended December 31, 2014. The cash flow provided by investing activities in the fiscal year ended December 31, 2015 was primarily the result of the newly installed air conditioning units in the Taiwan office. No cash flow was used in investing activities in the fiscal year ended December 31, 2014.

Net cash (used in) provided by financing activities. During the fiscal year ended December 31, 2015, net cash provided by financing activities was $0 compared with $135,439 provided by financing activities for the fiscal year ended December 31, 2014.  No additional cash flow was provided by financing activities in the fiscal year ended December 31, 2015. Net cash flow generated in financing activities in the fiscal year ended December 31, 2014 was from the increase of the short term loan from Bank SinoPac.

We currently anticipate that our available cash and cash resources from expected revenues will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next twelve months.

We currently have an outstanding short-term loan with Bank SinoPac of Taiwan. We entered into one written, short-term loan agreements with this bank on February 25, 2015. The loan is secured by real property of Tsui-Ling Lee, spouse of Wei-Rur Chen, our president and CEO. The terms of the loan agreement is described in further detail in the chart below:

(1) NTD $17,000,000 is approximately USD $517,600

Our continued existence is dependent upon several factors, including increased sales volumes, collection of existing receivables and the ability to achieve profitability from the sale of our products. In order to increase our cash flow, we are continuing our efforts to stimulate sales.

Comparison of Fiscal Year Ended December 31, 2015 to Fiscal Year Ended December 31, 2014

Net Sales.  Net sales decreased to $1,279,879 for the year ended December 31, 2015 from $1,456,958 for the year ended December 31, 2014. The decrease in sales was due to the majority of the street lighting project being completed in 2014, rather than 2015.

Cost of Goods Sold.  Cost of goods sold decreased to $1,104,570 for the year ended December 31, 2015 from $1,257,494 for the year ended December 31, 2014. The decrease in cost of goods sold was due to decrease in overall sales.

Selling, General and Administrative Expenses.   Selling, general and administrative expenses decreased to $467,506 for the year ended December 31, 2015 from $529,833 for the year ended December 31, 2014. The decrease in selling, general and administrative expenses was primarily related to the termination of the Corona office lease in the second quarter of 2015 and the warehouse in Taipei in the third quarter of 2015.

Research and Development.  R&D expense decreased to $3,822 for the year ended December 31, 2015 from $11,165 for the year ended December 31, 2014. Research and development was primarily related to the new product lines that are still under evaluation.

Depreciation, Amortization, and Depletion.  Depreciation, amortization, and depletion decreased to $35,938 for the year ended December 31, 2015 from $40,061 for the year ended December 31, 2014, mainly due to less overall value of fixed property after years of use.

Interest Expense.  Interest expense increased to $10,856 for the year ended December 31, 2015 compared with $8,849 for the year ended December 31, 2014. The increase in interest expense was due to the increase of the company’s short term loan from $15M NTD in 2014 to $17M NTD in 2015.

Net Loss.  For the year ended December 31, 2015, we incurred a net loss of $(318,095) as compared to a net loss of $(363,525) for the year ended December 31, 2014. The net loss was primarily a result of insufficient revenue from sales and low profit margin due to competition and price erosion.

ColorStars products are sold in over 25 different countries around the world.

Product revenues for the fiscal year ended December 31, 2015 are as follows:

Product revenues for the fiscal year ended December 31, 2014 are as follows:

COLORSTARS GROUP AND SUBSIDIARY

AUDITED CONSOLIDATED BALANCE SHEETS

(IN US$)

COLORSTARS GROUP AND SUBSIDIARY

AUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

 (IN US$)

COLORSTARS GROUP AND SUBSIDIARY

AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

COLORSTARS GROUP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 – Summary of Significant Accounting Policies (continued)  

Accounts Receivable and Allowance for Doubtful Accounts - Accounts receivable are recorded at net realizable value. The Company provides for the possibility of customers’ inability to make required payments by recording an allowance for doubtful accounts. The Company writes-off an account when it is considered to be uncollectible. The Company evaluates the collectability of its accounts receivable on an on-going basis. The Company records an allowance for doubtful accounts based on the length of time the receivables are past due, the current business environment and the Company’s historical experience. As of December 31, 2015 and 2014, the allowance for doubtful accounts was $73,754 and $53,327 respectively.

Inventory – Inventory is stated at the lower of cost or market (weighted average method).  Any write-down of inventory to the lower of cost or market at the close of a fiscal period creates a new cost basis that subsequently would not be marked up based on changes in underlying facts and circumstances. Inventories on hand are evaluated on an on-going basis to determine if any items are obsolete or in excess of future needs. Items determined to be obsolete are reserved for. The Company provides for the possible inability to sell its inventories by providing an excess inventory reserve. As of December 31, 2015 and 2014, the allowance for obsolete inventory was $321,368 and $184,592 respectively.

Intangible Assets - Intangible assets with finite lives are amortized over their respective estimated useful lives. The amount of intangible assets to be amortized shall be the amount initially assigned to that asset less any residual value. Identifiable intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate long-lived described below.

Investments –If the Company determines an unrealized loss is other-than-temporary, the Company recognizes the loss in earnings. 

At December 31, 2015 and 2014, the Company has investments stated at cost method.  

Impairment of long-lived assets - The Company reviews the recoverability of its long-lived assets, such as property and equipment and intangible assets, when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows, undiscounted and without interest charges, of the related operations. If these cash flows are less than the carrying value of such assets, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires management to estimate future cash flows and the fair value of long-lived assets.

Fair Value of Financial Instruments - The Company values financial assets and liabilities using fair value measurements. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount of cash and cash equivalents, accounts receivable, other current assets, accounts payable, accrued liabilities, and other current liabilities in the Consolidated Financial Statements approximates fair value because of the short-term nature of the instruments.

The Company adopted the provisions of ASC 820, which require us to determine the fair value of financial assets and liabilities using a specified fair-value hierarchy. The objective of the fair-value measurement of our financial instruments is to reflect the hypothetical amounts at which we could sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

COLORSTARS GROUP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 – Earnings per share

Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock outstanding during the period.

The following table sets forth the computation of basic and diluted net income (loss) per share for the periods indicated:

Note 6 - Accumulated Other Comprehensive loss

The components of accumulated other comprehensive losses were as follows: 

COLORSTARS GROUP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 – Long term investment (continued)

The unaudited financial information of Anteya Technology Corp. as of December 31, 2015 and 2014 and for the year ended December 31, 2015 and 2014 (in US dollars) are as follows:

Note 8 – Inventory

Inventories stated at the lower of cost or market value are as follows:

Note 9 – Equipment

Equipment and the related accumulated depreciation consisted of the following at December 31:

Depreciation was $27,299 and $31,611 for the years ended December 31, 2015 and 2014 respectively.

Department to obtain cost accounted basis, to extend the number of years of durable fixed assets major improvements, updates and additional capital expenditures included as part of the fixed assets, recurrent expenditure will be used for repair and maintenance costs of treatment. Depreciation of fixed assets system cost method, and 3 to 5 years of age, in order to raise the average calculated columns.

Note 10 - Income Taxes

The Company is subject to U.S. federal income tax as well as income tax in states and foreign jurisdictions. For the major taxing jurisdictions, the tax years 2006 through 2014 remain open for state and federal examination.  The Company believes assessments, if any, would be immaterial to its consolidated financial statements.  With respect to the foreign jurisdiction, the Company is no longer subject to income tax audits for the year 2014 (inclusive).

The income tax provision information is provided as follows:

COLORSTARS GROUP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Income Taxes (continued)  

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. The sources and tax effects of the differences, for the years ended December 31, 2015 and 2014 are as follows:

As of December 31, 2015, there was gross U.S. federal net operating loss carry forwards of approximately $1,200,000, which may be available to offset future federal income tax liabilities. All of the gross federal net operating losses are limited by certain provisions of the U.S. tax code which restricts their utilization in the future.

The federal net operating losses expire at various dates through 2027 to 2035.

Note 11 – Accrued Expenses

Note 12 - Bank Short Term Debt

The Company signed revolving credit agreements with a lending institution. The interest rate on short-term borrowings outstanding as of December 31, 2015 is 1.94% per annum, as of December 31, 2014, interest rate is 1.94% per annum.  The short term debt is secured by:

At this time, we do not have any changes in and disagreements with accountants and financial disclosure to report.

We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) that are designed to assure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.  As required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this report, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of that date.

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s chief executive and chief financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external purposes in accordance with the U.S. generally accepted accounting principles. The Company’s internal control over financial reporting includes policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

There was no change in our internal control over financial reporting during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

None.

PART III

The following persons are our executive officers and directors. Directors are elected to hold offices until the next annual meeting of shareholders and until their successors are elected or appointed and qualified. Officers are appointed by the board of directors until a successor is elected and qualified or until resignation, removal or death.

WEI RUR CHEN, age 55, has served as our Chief Executive Officer and President since 2003.  Prior to joining us, Mr. Chen was Executive Vice President of Primo Lite Co., Ltd. from 2002 to 2003, Executive Vice President of Tinya Engineering Co., Ltd. from 2000 to 2002, Vice President of Hi-Doer Power Co., Ltd. from 1997 to 2000, Manager of Sales and Marketing of Westinghouse Elec. from 1991 to 1997 and Manufacturing Engineer of Westinghouse Elec. from 1984 to 1989.  Mr. Chen earned a Master of Science, Industrial Engineering from Clemson University SC, USA in 1990 and resides in Taipei, Taiwan.

HSIU-FU LIU, age 61 has been serving on our board since December 2008.  Mr. Liu currently serves as the chairman of Hsuhta Industrial Group, a company that owns and operates many precision plastic moulding and injection companies in Taiwan and China.  Mr. Liu graduated from Hsinchu Technical high school in 1973.

MEI-YING (EASTER) CHIU, age 63, has served as our Secretary since 2004.  Prior to joining us, Ms. Chiu was Vice President of Sales and Marketing for 5E Chemical Co., Ltd. from 2003 to 2004, Manager of Marketing for Tingya Engineering from 2001 to 2003, Project Manager for Stone & Webster Taiwan from 1999 to 2001 and Project Manager for Gibsin Engineering Co., Ltd. from 1980 to1997.  Ms. Chiu earned a Bachelor of Arts, Business Administration from Mingchuan University, Taiwan in 2001 and a Master’s degree of Executive Management of Business and Administration from Hong Kong Chinese University.

The business address for each of our officers and directors is 10F, No. 566 JungJeng Rd., Sindian City, Taipei County 231, Taiwan, R.O.C.

Our bylaws authorize no less than one (1) and no more than seven (7) directors.  We currently have three (3) Directors.

There have been no events under any bankruptcy act, criminal proceedings, judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of our Company during the past five years.

Significant Employees.   

None.

  Board of Directors

All of our directors hold office until the next annual meeting of stockholders and the election and qualification of their successors. Our executive officers are elected annually by the board of directors to hold office until the first meeting of the board following the next annual meeting of stockholders and until their successors are chosen and qualified. 

Directors’ Compensation

We reimburse our directors for expenses incurred in connection with attending board meetings but we do not pay our directors fees or other cash compensation for services rendered as a director

Our executive officers are currently earning compensation. Set forth below is the aggregate compensation for services rendered in all capacities to us during our fiscal years ended December 31, 2012, 2013 and 2014 by our executive officers. Except as indicated below, none of our executive officers were compensated in excess of $100,000.

On March 1, 2007, we entered into an employment agreement with our CEO, Mr. Wei-Rur Chen (the “Original Employment Agreement”). The Original Employment Agreement was for a term of five years from the effective date, March 1, 2007. Under the Original Employment Agreement, Mr. Chen agreed to serve as our Chairman, President, and CEO.  Mr. Chen was granted such authority and responsibility as may reasonably be assigned to him by our board of directors. Pursuant to the Original Employment Agreement, Mr. Chen was eligible to receive a salary no higher than $120,000 per annum, and Mr. Chen was entitled to participate in any and all deferred compensation, 401(k) or other retirement plans, medical insurance, dental insurance, group health, disability insurance, pension and other benefit plans that are made generally available by us to our executives who have similar responsibilities and perform similar functions as Mr. Chen.

As the term of the Original Employment Agreement expired, on March 1, 2012, we entered into a new employment agreement (the “Employment Agreement”) with Mr. Chen.

The Employment Agreement has a term of five years from the effective date, March 1, 2012, subject to the termination provisions contained therein. Under the Employment Agreement, Mr. Chen shall have such authority and responsibility as may be assigned to him by the Company’s board of directors. Furthermore, under the Employment Agreement, Mr. Chen is subject to certain non-competition, non-solicitation and confidentiality covenants, the terms and conditions of which are described in further detail therein.

Pursuant to the Employment Agreement, Mr. Chen shall receive the following compensation in exchange for his services:

(i)    an annual base salary in the amount of NT $715,000 (US $20,500)

Mr. Chen shall also be entitled to participate in any and all deferred compensation, 401(k) or other retirement plans, medical insurance, dental insurance, group health, disability insurance, pension and other benefit plans that are made generally available by the Company to such executives who have similar responsibilities and perform similar functions as Mr. Chen

We have no pension, health, annuity, bonus, insurance, stock options, profit sharing or similar benefit plans. No stock options or stock appreciation rights were granted to any of our directors or executive officers. We have no equity incentive plans.

SUMMARY COMPENSATION TABLE

Options/SAR Grants In the Last Fiscal Year

None.

Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End Option/SAR Values

None.

Compensation Committee

At this time, we do not have a compensation committee. The salaries of our executive officers are determined by our board of directors. Our board of directors determines the compensation of our executive officers based on our financial and operating performance and success.  As we continue to grow, we may form a compensation committee charged with the oversight of our executive compensation plans, policies and programs, and the authority to determine and approve the compensation of our executive officers and make recommendations with respect to the same.

The Company leases office space from Mr. Wei-Rur Chen. Mr. Wei-Rur Chen is the President, Chief Executive Officer, Chief Financial Officer, and Chairman of the Board of the Company, as well as beneficial owner of more than five percent (5%) of the Company’s common stock. The current term for the lease agreement is from November 2015 to November 2020. During 2015, the Company paid USD $43,844 in rent pursuant to this lease agreement.  Mr. Wei-Rur Chen owns one hundred percent (100%) interest in the lease agreement.

The Company also conducted business with a related party company Anteya Technology Corp. The Company owns 13.68% of the outstanding common stock of Anteya Technology Corp as of December 31, 2015.  All transactions were at market-based prices. For the year ended December 31, 2015, the Company has purchased from Anteya for a total of USD$116,163 and has sold to Anteya for a total of USD$0 of goods and services.

The following table sets forth the aggregate fees billed to us by Michael F. Albanese, CPA, the Company’s independent registered public accountant, for fiscal years ended December 31, 2015 and 2014:

 (1) Audit fees consist of fees billed for professional services rendered for the audit of the Company’s annual financial statements and review of the interim consolidated financial statements included in quarterly reports and services in connection with statutory and regulatory filings or engagements.

(2) Audit-Related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under "Audit Fees".

(3) Tax fees consist of fees billed for professional services rendered for tax compliance, tax advice and tax planning (domestic and international). These services include assistance regarding federal, state and international tax compliance, acquisitions and international tax planning.

(4) There were no fees that were classified as All Other Fees as of the fiscal years ended December 31, 2015 and 2014.

As the Company does not have a formal audit committee, the services described above were not approved by the audit committee under the de minimus exception provided by Rule 2-01(c)(7)(i)(C) under Regulation S-X.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.