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EX-32.2 - ColorStars Groupex32-2.htm
EX-32.1 - ColorStars Groupex32-1.htm
EX-31.2 - ColorStars Groupex31-2.htm
EX-31.1 - ColorStars Groupex31-1.htm

 

 

 

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2018

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission File Number: 000-54107

 

COLORSTARS GROUP

(Exact name of registrant as specified in its charter)

 

Nevada   06-1766282
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

10F, No. 566 Jung Jeng Rd. Sindian City, New Taipei City 231, Taiwan, R.O.C.

(Address of principal executive offices)

 

(949) 336-6161

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [  ] No [X]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ] No [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer,” “non-accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
    Emerging growth [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Check whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

 

As of December 4, 2018, there were 102,274,515 shares of common stock, par value $0.001, issued and outstanding.

 

 

 

   
 

 

COLORSTARS GROUP

FORM 10-Q

INDEX

 

  Page
PART I – FINANCIAL INFORMATION  
 
Item 1 Financial Statements 3
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
Item 3 Quantitative and Qualitative Disclosures About Market Risk 15
Item 4 Controls and Procedures 15
   
PART II – OTHER INFORMATION
   
Item 1 Legal Proceedings 16
Item 1A Risk Factors 16
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3 Defaults Upon Senior Securities 16
Item 4 Mine Safety Disclosures 16
Item 5 Other Information 16
Item 6 Exhibits 16
SIGNATURES 17

 

 2 
 

 

PART I—FIANCIAL INFORMATION

 

COLORSTARS GROUP

CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

TABLE OF CONTENTS

 

  PAGE NO.
   
Consolidated Balance Sheets As of March 31, 2018(Unaudited) and December 31, 2017(Audited) 4
   
Consolidated Statements of Comprehensive Loss (Unaudited) for the three months ended March 31, 2018 and 2017 5
   
Consolidated Statement of Cash Flows (Unaudited) for the three months ended March 31, 2018 and 2017 6
   
Notes to Consolidated Financial Statements(Unaudited) 7-12

 

 3 
 

 

COLORSTARS GROUP

CONSOLIDATED BALANCE SHEETS

March 31, 2018(Unaudited) and December 31, 2017(Audited)

(in USD)

 

 

   March 31, 2018   December 31, 2017 
Assets          
Current assets:          
Cash and equivalents  $368,104   $359,403 
Accounts receivable, net of allowance for doubtful accounts of $156,216 at March 31, 2018 and $152,883 at December 31, 2017.   -    - 
Prepaid expenses and other current assets   2,663    18,056 
           
Total current assets   370,767    377,459 
           
Equipment, net of accumulated depreciation   36,368    36,057 
Other assets   20,741    20,299 
           
Total assets  $427,876   $433,815 
           
Liabilities and stockholders’ equity          
Current liabilities:          
Short term loan  $-   $- 
Accounts payable   16,553    15,524 
Advance from shareholder   380,115    441,603 
Accrued expenses   4,972    3,708 
Other current liabilities   58    199,967 
Current portion of long term loan   -    87,538 
           
Total current liabilities   401,698    748,340 
Long term loan   -    - 
Total liabilities  $401,698    748,340 
Commitments and contingencies   -    - 
Stockholders’ equity          
Common Stock ––Par Value $0.001 102,274,515 and 90,274,515 shares issued and outstanding, 450,000,000 shares are authorized at March 31, 2018 and December 31, 2017   102,275    90,275 
Additional paid in capital   4,157,518    3,759,260 
Accumulated other comprehensive income   137,681    139,825 
Accumulated deficit   (4,371,296)   (4,303,885)
           
Total stockholders’ equity   26,178    (314,525)
           
Total liabilities and stockholders’ equity  $427,876   $433,815 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 4 
 

 

COLORSTARS GROUP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(in USD)

 

 

   Three months ended March 31, 
   2018   2017 
         
Net sales  $1,185   $16,328 
Cost of goods sold   597    12,562 
           
Gross profit   588    3,766 
Operating expenses          
Selling, general and administrative   36,608    36,308 
Bad debt Selling   -    - 
Rent   15,566    11,460 
Depreciation & Amortization   470    2,057 
Research and development   -    - 
           
Total operating expenses   52,644    49,825 
           
Loss from operations   (52,056)   (46,059)
           
Other expenses          
Interest expense (net)   (11,364)   (5,090)
Loss on foreign exchange, net   (3,991)   - 
Bad debt recovery   -    3,537 
Impairment loss   -    (1,636)
           
Loss before income tax   (67,411)   (49,248)
Income tax provision   -    - 
           
Net loss   (67,411)   (49,248)
           
Other comprehensive gain/(loss):          
Foreign currency translation gain/(loss)   (2,144)   (43,678)
           
Comprehensive loss  $(69,555)  $(92,926)
Earnings per share attributable to common stockholders:          
Basic and diluted per share  $0.00   $0.00 
           
Weighted average shares outstanding:          
Basic and diluted   98,274,515    67,448,890 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 5 
 

 

COLORSTARS GROUP

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

in USD

 

 

   Three months ended March 31, 
   2018   2017 
         
Cash flows from operating activities          
Net loss  $(67,411)  $(49,248)
Depreciation   470    2,057 
Gain on reversal of bad debts   -   (3,537)
Impairment loss   -    1,634 
Changes in operating assets and liabilities:          
Accounts receivable   -    3,205 
Prepaid expenses and other current assets   14,951    (2,993)
Accounts payable   1,028    (18,354)
Accrued expenses   1,264    1,001 
Receipts in advance and other current liabilities   (199,909)   60 
           
Cash flows provided by (used for) operating activities   (249,607)   (66,175)
           
Cash flows from financing activities          
Advance from shareholder   96,475   70,910 

Repay advance from shareholder

   (157,963)   

-

 
Increase (decrease) in short-term loans   (87,538)   (9,952)
Increase (decrease) in capital   410,258    - 
           
Cash flows provided by financing activities   261,232    60,958 
           
Effect of exchange rate changes on cash and cash equivalents   (2,924)   (14,681)
           
Net increase in cash and cash equivalents   8,701    (19,898)
Beginning cash and cash equivalents   359,403    32,433 
           
Ending cash and cash equivalents  $368,104   $12,535 
           
Supplemental disclosure of cash flow information          
Cash paid during the period for:          
Interest  $-   $5,090 
Tax paid  $-   $- 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 6 
 

 

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

Note 1 – Nature of Business and Basis of Presentation

 

Nature of Business – Circletronics Inc., now ColorStars Group (“the Company”), was incorporated in Canada on January 21, 2005. Circletronics Inc.- was redomiciled to Nevada and its name changed to ColorStars Group on November 3, 2005. ColorStars Group owns 100% of the shares of ColorStars Inc.

 

Color Stars Inc. (“Color Stars TW”, “the Subsidiary”) was incorporated as a limited liability company in Taiwan, Republic of China in April 2003 and commenced its operations in May 2003. The Company through its wholly owned Subsidiary is mainly engaged in manufacturing, designing and selling light-emitting diode and lighting equipment.

 

The company will be transformed into a holding company due to environmental changes at 2018. Invest in various potential companies.

 

Basis of Presentation - The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for a complete presentation of the financial statements.

 

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair statement of the financial position, results of operations and cash flows for the three months ended March 31, 2018 and 2017 have been included. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for any subsequent interim period or for the year ending December 31, 2018.

 

The balance sheet at December 31, 2017 included herein was derived from the consolidated financial statements included in the Company’s Annual Report on Form 10-K as of that date. Accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission (“SEC”) on November 5, 2018.

 

Certain previsouly reported amounts have been reclassified to conform to current-period presentation, although no net effect on the previously-reported financial information

 

Basis of Consolidation - The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.

 

Note 2 - Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has negative working capital of $30,931 and an accumulated deficit of $4,371,296 as of March 31, 2018, and it reported net losses for past two years. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The Company need to raise additional capital from external sources or from shareholder loans to support it operation. There is no assurance that the Company will be able to obtain funding with acceptable terms.

 

 7 
 

 

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

Note 3 - Concentration of Risk

 

For the three months ended March 31, 2018, products sold to largest customers accounted for approximately 100% of total revenue. Products purchased from largest suppliers accounted for approximately 100% of total purchases during the three months ended March 31, 2018.

 

For the three months ended March 31, 2017, products sold to largest customers accounted for approximately 31% of total revenue. Products purchased from two suppliers accounted for approximately 66% and 28% of the total purchases during the three months ended March 31, 2017.

 

Note 4 - Long Term Investments

 

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). ASC 820 describes three levels of inputs that may be used to measure fair value, as follows:

 

Level 1 value is based on observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

Level 2 value is based on inputs other than quoted market prices included in Level 1 that are observable for the asset or liability either directly or indirectly.

 

Level 3 values are driven by models with one or more significant inputs or significant value drivers that are unobservable.

 

Anteya Technology Corp (Anteya) is a private company incorporated in Taiwan. The equity interest held by the Company is 13.68% on March 31, 2018.

 

Anteya Technology ceased operations in April 2017 and, as a result, no future economic benefit was considered realizable by the Company and, as a result, the investment was fully impaired in the year ended December 31, 2015 resulting in a loss of $113,177.

 

 8 
 

 

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

Note 5- Inventory

 

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

 

   March 31, 2018   December 31, 2017 
         
Finished goods  $817,691   $800,246 
Allowance for Inventory Valuation and Obsolescence Losses   (817,691)   (800,246)
Total  $-   $- 

 

The Company decided to shift in operational focus and that it was determined remaining inventory had little-to-no value, thus fully impaired at December 31, 2015.

 

Note 6 - Income Taxes

 

The Company is subject to U.S. federal income tax as well as income tax in states and foreign jurisdictions(Taiwan). For the major taxing jurisdictions, the tax years 2016 through 2018 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 years prior to 2017 (inclusive).

 

The income tax provision information is provided as follows:

 

   Three months ended
March 31,
 
   2018   2017 
Component of income (loss) before income taxes:        
United States  $(15,645)  $(2,000)
Foreign   (51,766)   (47,248)
           
Net loss  $(67,411)  $(49,248)
Provision for income taxes          
Current          
U.S. federal   -    - 
State and local   -    - 
Foreign   -    - 
Income tax benefit(loss)  $-   $- 

 

The income tax section listed above are taxes charged by the US federal, State and Local, and Foreign authorities for income taxes and taxes associated with doing business in the region.

 

Note 7 - Bank Short Term Debt

 

    March 31, 2018    December 31, 2017 
Short term loan  $-   $- 

 

The Company signed revolving credit agreements with a lending institution.. All loans have been fully repaid on December 5 2017.The short term debt is secured by a personal guarantee from directors and the realty property of a spouse of a director. There was no short term loan for the period ended March 31, 2018.

 

 9 
 

 

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

Note 8 - Long Term Loan

 

The Company signed sales with buyback agreement of 5 million New Taiwan Dollars (US$164,542) with Chailease Finance Co., Ltd. in July 2016. The loan is amortized to 36 months and the monthly repayment amount is based on the remaining principal at the beginning of each 12 months. The interest rate is fixed at 6.37% per annum over the term of the agreement. For the first 12 months of the term the monthly repayment was $196,000 NTD (US$6,450) beginning in July 2016, and fixed for the following 12 months until June 2017. The monthly repayment was reduced to $168,000 NTD (US$5,529) beginning in July 2017, and fixed for the following 12 months until June 2018. However, the company made an overall repayment of the remaining amounts due of $2,283,954 NTD (US$75,161) on Feb. 13, 2018 and terminated this loan agreement. An imputed effective interest of $11,364 on this pay off was recognized as interest expense for the reporting period ended March 31, 2018.

 

Note 9 - Geographic Information

 

Product revenues for the three months ended March 31, 2018 and 2017 are as follows:

 

   Three months ended
March 31,
 
   2018   2017 
         
Customers based in:          
Europe  $-   $9,114 
Asia   -    2,206 
United States   1,185    5,008 
Others   -    - 
           
   $1,185   $16,328 

 

Note 10 - Related Party Transactions

 

The Company has recorded expenses for the following related party transactions for three months ended March 31, 2018 and 2017:

 

  Three months ended March 31, 
   2018   2017 
         
Purchase from Anteya Technology Corp  $   -   $8,091 
Rent paid to Mr. Wei-Rur Chen  $-   $11,460 

 

Mr. Chen was willing to exempt the rent payment of the Company for the period ended March 31, 2018, as the Company was going through transformation and seeking new business opportunities.

 

As of the balance sheet date indicated, the Company had the following receivable and liabilities recorded with respect to related party transactions:

 

   March 31, 2018   March 31, 2017 
Anteya Technology Corp          
Due (to) from affiliate  $14,075   $13,774 
Mr. Wei-Rur Chen          
Payable to Shareholder  $(380,115)  $(441,603)

 

The Company 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 March 31, 2018. All transactions were at market-based prices.

 

Mr. Wei-Rur Chen made various advances to the Company as personal loan. This personal loan carried no interest and was payable upon request. For the 3 months ended March 31, 2018, advances from Mr. Chen totaled $96,475, and repayment to Mr. Chen totaled $157,963 and the net repayment to Mr. Chen was $61,488. The balance of advance from Mr. Chen was $380,115 as of March 31, 2018,

 

 10 
 

 

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

Note 11 - Commitments

 

The company leases offices in Taiwan. The main office is relocated in New Taipei City with monthly rental of NTD$120,000, and the term is from 11-7-2015 to 10-6-2020. The company rented a branch office located in Taipei City with a monthly rental of NTD$160,000 on 11-11-2017, and the term is from 12-1-2017 to 11-30-2019. However this branch office is closed on April 10, 2018 and the lease is cancelled. The minimum future rental payments due under non-cancelable operating leases with remaining terms at March 31, 2018 are as follows:

 

   For the year ended
March 31,2018
 
     
2018   44,103 
   $44,103 

 

   Three months ended March 31, 
    2018    2017 
           
Rent expenses  $15,566   $11,460 

 

Note 12 - Issuance of New Shares and Proceeds

 

The Company issued a total of 12,000,000 shares of Company common stock to 23 investors at a price per share of US $0.034188 for a total proceeds of US $410,256.38 on February 5, 2018. Part of this total proceeds of $199,967 was collected and deposited by the Company in the reporting period ended December 31, 2017 and was recorded as current liabilities. Upon the issuance of these new shares the current liabilities were reduced by the same amount for this reporting period. The proceeds were used for the repayment of the short-term loan and some of the shareholder's personal loan to the Company and fund for operations.

 

 11 
 

 

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

Note 13 - Subsequent Events

 

The Company evaluated all events subsequent to March 31, 2018 through the date of the issuance of the financial statements, there are no other significant or material transactions to be reported except as follows:

 

On September 17, 2018, the U.S. Securities and Exchange Commission (“Commission”) announced the temporary suspension of trading in the securities of the Company, commencing at 9:30 a.m. EDT on September 18, 2018 and terminating at 11:59 p.m. EDT on October 1, 2018. The Commission temporarily suspended trading in the securities of the Company due to a lack of current and accurate information about the Company because it has not filed certain periodic reports with the Commission. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (“Exchange Act”) and was accompanied by an Order Instituting Administrative Proceedings and Note of Hearing pursuant to Section 12(j) of the Exchange Act. The stated purpose of the order and hearing is for the Commission to determine whether it is necessary and appropriate to continue the suspension in the trading of the securities of the Company for a period not exceeding twelve months, or to revoke the registration of the Company’s securities pursuant to Section 12 of the Exchange Act.

 

On October 18, 2018, the Company had a pre-hearing telephone conference with the Commission regarding the Proceeding. During the pre-hearing conference, it was agreed that the Commission’s motion for summary disposition against the Company would be due on November 15, 2018; the Company’s opposition brief would be due on December 13, 2018; and that the Commission’s reply brief would be due on December 20, 2018. The Commission has offered the Company the alternative to consent to the revocation of the registration of the Company’s securities pursuant to Section 12 of the Exchange Act to avoid the time and cost associated with contesting the Proceeding. If the Company were to consent to the revocation of its registration, the Company would then need to file a registration statement (with two years of audited financials) with the Commission and cause that registration statement to become effective in order to reinstate the registration of the Company’s securities. It is the Company’s understanding from the pre-hearing conference with the Commission that the only remedy the Commission has for delinquent filers such as the Company, even if the filer becomes current by the date of the hearing, is the revocation of the registration of the Company’s securities pursuant to Section 12 of the Exchange Act. Therefore, the Company cannot provide any assurances that it will be able to avoid the revocation of the registration of the Company’s securities pursuant to Section 12 of the Exchange Act due to the Company becoming delinquent in its filings. If the registration of the Company’s securities is revoked, the Company intends to file a registration statement with the Commission to reinstate the registration of the Company’s securities. The Company cannot provide any assurances as to the timing of the filing and effectiveness of such a registration statement.

 

On November 10, 2018, Mr. Hsui-Fu Liu resigned as a Director of the Company . His resignation was not the result of any disagreements with the Company.

 

On November 29, 2018, the remaining two directors on the Board of Directors of the Company appointed Mr. Michael Chung to the Board of Directors to fill the vacancy created by the resignation of Mr. Liu Hsiu-Fu.

 

 12 
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

 

Forward Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes”, “project”, “expects”, “anticipates”, “estimates”, “intends”, “strategy”, “plan”, “may”, “will”, “would”, “will be”, “will continue”, “will likely result”, and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

 

Overview

 

(a) Business Overview.

 

ColorStars Group (“we”, “us”, “our”, the “Company”) was initially incorporated in the Province of Ontario, Canada on January 21, 2005. On November 3, 2005, we converted to a Nevada corporation. We have historically operated as a vertically integrated lighting company that develops light emitting diodes (“LED”) based lighting products for general consumer applications as well as LED lighting products for professional lighting installations. Our LED lighting application development activity has historically ranged from LED packaging to optical lens and heat management, from retrofit LED lamps and bulbs to lighting fixtures designed for general and special lighting applications. Due to evironmental changes in 2018 adversely affecting the LED lighting market, in 2018 the Company began to phase out of the LED lighting market and change its business model into a holding company to acquire and operate other companies. There is no assurance that the Company will be able to acquire any operating companies.

 

(b) Material Transactions During the Reporting Period.

 

None.

 

 13 
 

 

Results of Operations

 

Comparison of Three Months Ended March 31, 2018 to Three Months Ended March 31, 2017

 

Net Sales. Net sales decreased to $1,185 for the three months ended March 31, 2018, from $16,328 for the three months ended March 31, 2017. The decrease in sales was due to global competition and lack of new products launching this period.

 

Cost of Goods Sold. Cost of goods sold decreased to $597 for the three months ended March 31, 2018, from $12,562 for the three months ended March 31, 2017. The decrease in cost of goods sold was due to the lack of sales.

 

Gross Profit. Gross profit decreased to $588 for the three months ended March 31, 2018, from $3,766 for the three months ended March 31, 2017. The decrease in gross profit was due to the lack of sales.

 

Gross Profit Percentage. Gross profit percentage increased to 49.6% for the three months ended March 31, 2018, from 23.1% for the three months ended March 31, 2017. The increase in gross profit percentage was due high margin items sold for smaller quantities.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $36,608 for the three months ended March 31, 2018, from $36,308 for the three months ended March 31, 2017. The is only minor increase in selling, general and administrative expenses as the activities for the period is very similar.

 

Research and Development Expenses. Research and development (R&D) expenses were $0 for the three months ended March 31, 2018, from $0 for the three months ended March 31, 2017. The lack of research and development expenditure was due to overall lack of profitability.

 

Depreciation and Amortization. Depreciation and amortization decreased to $470 for the three months ended March 31, 2018, from $2,057 for the three months ended March 31, 2017.. The decrease in depreciation and amortization was mainly due to some assets were of end of life value for the period.

 

Interest Expense. Interest expense increased to ($11,364) for the three months ended March 31, 2018, from $(5,090) for the three months ended March 31, 2017. The increase in interest expense was due to full repayment of the long-term loan.

 

Net Income (loss). For the three months ended March 31, 2018, we incurred a net loss of $(67,411) as compared to a net loss of $(49,248) for the three months ended March 31, 2017. The decrease in net loss was primarily a result of the lack of total sales and increase in interest expense and loss in foreign exchange.

 

Financial Condition, Liquidity and Capital Resources

 

Our historical revenues are primarily derived from the sale of LED devices and systems. Although our historical financial results are mainly dependent on sales, general and administrative, compensation and other operating expenses, our financial results have also been dependent on the level of market adoption of LED technology as well as general economic conditions. As the LED lighting business has become very competitive, the Company has been seeking for other business lines or investment opportunities.

 

Net cash provided by (used in) operating activities. During the three months ended March 31, 2018, net cash used by operating activities was $(249,607) compared with $(66,175) used in operating activities for the three months ended March 31, 2017. The cash flow used by operating activities in the three months ended March 31, 2018 was primarily the repayment of the long-term loan and interest, and the net loss in operations. The cash flow used in operating activities in the three months ended March 31, 2017 was primarily the result of the Company’s increase in accounts payable payments and operating net loss.

 

Net cash provided by (used in) financing activities. During the three months ended March 31, 2018, net cash provided by financing activities was $261,232 compared with $60,958 provided for the three months ended March 31, 2017. The cash flow provided by financing activities in the three months ended March 31, 2018 was primarily the proceeds from issuance of new shares. The cash flow provided by financing activities in the three months ended March 31, 2017 was primarily from the advance of shareholders.

 

The Company needs to raise additional capital from external sources or from shareholder loans to support its operation. There is no assurance that the Company will be able to obtain funding with acceptable terms.

 

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Recent Developments

 

There are no recent developments to report.

 

Inflation

 

At this time, we do not believe that inflation and changes in price will have a material effect on operations.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Related Party Transactions

 

Please refer to Note 10 in the Financial Statement protion above for all related party transactions.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

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

 

Item 4. Controls and Procedures.

 

Evaluation of disclosure controls and procedures.

 

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 not effective as of that date.

 

Changes in internal control over financial reporting.

 

There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

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PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

There are no legal proceedings that have occurred within the past five years 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 finding of securities or commodities law violations.

 

Item 1A. Risk Factors.

 

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

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

(a) Unregistered Sales of Equity Securities.

 

None.

 

(b) Use of Proceeds.

 

Not applicable.

 

(c) Purchases by the Issuer and Affiliated Purchasers of Equity Securities.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

INDEX TO EXHIBITS

 

Exhibit   Description
     
31.1   Certification of our Chief Executive Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
     
31.2   Certification of our Chief Financial Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
     
32.1   Certification of our Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
     
32.2   Certification of our Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
     
**101.INS   XBRL Instance Document
     
**101.SCH   XBRL Taxonomy Extension Schema Document
     
**101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
     
**101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
     
**101.LAB   XBRL Taxonomy Extension Label Linkbase Document
     
**101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document
     
*   Included in previously filed reporting documents.
     
**   Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: December 4, 2018 By: /s/ Wei-Rur Chen
    Wei-Rur Chen
   

President, Chief Executive Officer (Principal

Executive Officer), Chief Financial Officer

(Principal Financial Officer),

Chairman of the Board of Directors

 

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