Securities Registration Statement (s-1)

Date : 07/02/2018 @ 6:56PM
Source : Edgar (US Regulatory)
Stock : 12 Retech Corporation (QB) (RETC)
Quote : 0.0003  0.0001 (50.00%) @ 8:29PM

Securities Registration Statement (s-1)

 

As filed with the U.S. Securities and Exchange Commission on July 2, 2018.

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

12 ReTech Corporation

(Exact Name of Registrant as Specified in its Charter)

 

Nevada

 

7371

 

38-3954047

(State or Other Jurisdiction of

Incorporation)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

 

701 S. Carson Street, Suite 200

Carson City, Nevada 89701

(530) 539-4329

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Angelo Ponzetta

Chief Executive Officer

12 ReTech Corporation

701 S. Carson Street, Suite 200
Carson City, Nevada 89701

(530) 539-4329

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

John P. Cleary, Esq.

Christopher L. Tinen, Esq.

Procopio, Cory, Hargreaves & Savitch LLP

12544 High Bluff Drive, Suite 300

San Diego, California 92130

(619) 515-3221

 

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: [X]

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering. [  ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “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 [  ] (Do not check if a smaller reporting company) Smaller reporting company [X]
Emerging growth company [  ]  

 

CALCULATION OF REGISTRATION FEE

 

Title of Each
Class of Securities
to be Registered
  Amount to be
Registered (1)
    Proposed
Maximum
Offering
Price Per
Share (2)(3)
    Proposed
Maximum
Aggregate
Offering Price(2)
   

Amount of

Registration Fee

 
Common Stock, $0.00001 value per share     20,000,000     $ 0.07     $ 1 ,400,000.00     $ 174.30  

 

 

  (1) An indeterminate number of additional shares of common stock shall be issuable pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”) to prevent dilution resulting from stock splits, stock dividends or similar transactions and in such an event the number of shares registered shall automatically be increased to cover the additional shares in accordance with Rule 416.
     
  (2) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(c) under the Securities Act.
     
(3)

Based on the average of the high and low sales prices for the registrant’s common stock on June 28, 2018.

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

 

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED JULY 2, 2018

 

PRELIMINARY Prospectus

 

12 ReTech Corporation

 

20,000,000 Shares of Common Stock

 

 

 

This prospectus relates to the offer and resale of up to 20,000,000 shares of our common stock, par value $0.00001 per share, by the selling stockholders identified on page 11. All such shares represent shares that Oasis Capital, LLC (“Oasis Capital”) has agreed to purchase from us pursuant to the terms and conditions of an Equity Purchase Agreement we entered into with them as of June 22, 2018 (the “Equity Purchase Agreement”). Subject to the terms and conditions of the Equity Purchase Agreement, we have the right to “put,” or sell, up to $12,000,000 worth of shares of our common stock to Oasis Capital. This arrangement is also sometimes referred to herein as the “Equity Line.”

 

For more information about the selling stockholders, please see the section of this prospectus entitled “Selling Stockholders” beginning on page 11.

 

The selling stockholders may sell any shares offered under this prospectus at fixed prices, prevailing market prices at the time of sale, at varying prices or negotiated prices.

 

Oasis Capital is an “underwriter” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), in connection with the resale of our common stock under the Equity Line, and any broker-dealers or agents that are involved in such resales may be deemed to be “underwriters” within the meaning of the Securities Act in connection therewith. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. For more information, please see the section of this prospectus titled “Plan of Distribution” beginning on page 12.

 

We will not receive any proceeds from the resale of shares of common stock by the selling stockholders. We will, however, receive proceeds from the sale of shares directly to Oasis Capital pursuant to the Equity Line.

 

Our common stock is quoted on the OTC Marketplace operated by the OTC Markets Group, Inc., or “OTC,” under the ticker symbol “RETC.” On June 28, 2018, the average of the high and low sales prices of our common stock was $0.07 per share.

 

Investing in our common stock involves risks that are described in the “Risk Factors” section beginning on page 3 of this prospectus.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is         , 2018.

 

 

 

 

Table of Contents

 

PROSPECTUS SUMMARY 1
   
RISK FACTORS 3
   
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS 9
   
USE OF PROCEEDS 9
   
THE OFFERING 10
   
SELLING STOCKHOLDERS 11
   
PLAN OF DISTRIBUTION 12
   
DESCRIPTION OF SECURITIES 13
   
EXPERTS 19
   
LEGAL MATTERS 20
   
INTERESTS OF NAMED EXPERTS AND COUNSEL 20
   
BUSINESS 20
   
LEGAL PROCEEDINGS 26
   
MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 26
   
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 27
   
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 33
   
DIRECTORS AND EXECUTIVE OFFICERS 34
   
EXECUTIVE COMPENSATION 37
   
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 39
   
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS AND CORPORATE GOVERNANCE 39
   
WHERE YOU CAN FIND MORE INFORMATION 41
   
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 41
   
INDEX TO FINANCIAL STATEMENTS F-1

 

You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We have not authorized anyone to provide you with different information. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of shares of our common stock. Our business, financial condition, operating results and prospects may have changed since that date.

 

12 ReTech Corporation, the 12 ReTech Corporation logo, and other trademarks or service marks of 12 ReTech Corporation appearing in this prospectus are the property of 12 ReTech Corporation. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and tradenames.

 

   

 

 

Prospectus Summary

 

The following summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision in our common stock. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes included in this prospectus and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As used in this prospectus, unless the context otherwise requires, references to “we,” “us,” “our,” “Company,” “12 ReTech,” or “RETC” refer to 12 ReTech Corporation.

 

Our Business

 

12 ReTech Corporation, a Nevada corporation, is a software company whose technology allows retailers to combat the dual threats of Walmart and Amazon — both online and in physical stores. Our microbrand rollup acquisition strategy allows us to demonstrate the effectiveness of our software, devise and test new products, while achieving revenue and earnings growth. The Company operates through our subsidiaries on three continents: 12 Hong Kong, Limited (“12HK”, “12 Hong Kong, Ltd.”), 12 Japan, Limited (“12JP”, “12 Japan, Ltd.”), 12 Europe A.G. (“12EU”, “12 Europe AG”), and 12 Retail Corporation (“12 Retail”) (and its subsidiary, E-Motion Apparel, Incorporated (“EAI”, “E-Motion Apparel, Inc.”) in North America.

 

The Subsidiaries:

 

  12 Hong Kong, Ltd. a corporation organized in the special economic region of Hong Kong. On June 27, 2017 the Company acquired 12 Hong Kong, Ltd. in a share exchange transaction (see “Management’s Discussion & Analysis of Financial Condition and Results of Operations”). This is the technology company that manages all the Company’s proprietary and licensed technology that is utilized and sold by the other subsidiaries. In addition, this subsidiary serves as an additional marketing and sales hub for Asia, particularly the Chinese market, excluding Japan.
     
  12 Japan, Ltd. a corporation organized in Japan. The Company acquired 12 Japan, Ltd, located in Tokyo, Japan on July 31, 2017 in a share exchange (see “Management’s Discussion & Analysis of Financial Condition and Results of Operations”). This subsidiary operates in the country of Japan. It is this subsidiary that services our first customer, Itoya Ltd., where our technology was successfully implemented and proven.
     
  12 Europe A.G. a corporation organized in Switzerland. The Company acquired 12 Europe A.G. on October 26, 2017 in a share exchange transaction (see “Management’s Discussion & Analysis of Financial Condition and Results of Operations”). This subsidiary markets, sells, and services the Company’s proprietary and licensed technology to retailers in the European market from its base in Zurich, Switzerland. Since its acquisition, this subsidiary has already signed agreements with 4 retailers, 1 department store and 3 local businesses, to deploy our technology and 12Sconti app (see Our Technology).
     
  12 Retail Corporation was formed in the state of Arizona, USA and maintains an office in Scottsdale, Arizona. This subsidiary was formed on Sept. 18, 2017 to execute the Company’s microbrand roll up acquisition strategy as well as to penetrate the North American market with our technology to select retailers. All of the microbrands that are acquired will retain their own brand name and identity although they will share some economies of scale and benefit from the management expertise, resources and capital allocation available as a subsidiary of the Company. The microbrands will become subsidiaries of 12 Retail Corporation.
     
  E-motion Apparel, Inc. (“EAI”) On May 1, 2018, the Company acquired 100% of the equity in E-motion Apparel, Inc, a California corporation, though the 12 Retail subsidiary, pursuant to a Share Exchange Agreement (see “Subsequent Events”), which itself owns four other microbrands that target specific niche markets: Lexi-Luu Dancewear, Punkz Gear, Cleo VII and Skipjack Dive & Dance Wear. This company, now located in Salt Lake City, Utah, operates its own production and fulfillment facility that management believes can be utilized by all of the Company’s future microbrand acquisitions as a competitive advantage to quickly produce, market, sell and deliver many smaller quantities of garments, keeping online sales channels fresh. The Company’s Current Reports on Form 8–K dated March 15, 2018 and April 27, 2018, respectively, provide more detailed information on transactions with EAI.

 

Our principal executive office is located at 701 S. Carson, Suite 200, Carson City, NV 89701. Our telephone number is (530) 539-4329 and our website is www.12retech.com. Unless expressly noted, none of the information on our website is part of this prospectus or any prospectus supplement. Our common stock is quoted on the OTC Marketplace operated by the OTC Markets Group, Inc., or “OTC,” under the ticker symbol “RETC.”

 

1
 

 

Offering SUMMARY

 

Common stock that may be offered by
selling stockholders

20,000,000 shares

   
Common stock outstanding before this offering 82,968,338 shares
   
Common stock to be outstanding after this offering

102,968,338 shares (1)

   

Use of proceeds

We will not receive any proceeds from the resale or other disposition of the shares covered by this prospectus by the selling stockholders. We will receive proceeds from the sale of shares to Oasis Capital. Oasis Capital has committed to purchase up to $12,000,000 worth of shares of our common stock over a period of time terminating on the earlier of (i) the date on which Oasis Capital shall have purchased shares under the Equity Purchase Agreement for an aggregate purchase price of $12,000,000, (ii) June 1, 2020, or (iii) written notice of termination by the Company to Oasis Capital (which shall not occur at any time that the Investor holds any of the put shares).

   
  Oasis Capital will pay a purchase price equal to 85% of the “Market Price,” which is defined as the lowest one (1) traded price on the OTC Marketplace, as reported by Bloomberg Finance L.P., during the five trading days following the date on which the applicable put shares are delivered to Oasis Capital (the “Pricing Period”). In order to exercise the put, certain conditions must be met at each put notice date including, but not limited to: (i) we must have an effective registration statement, (ii) our common stock must be deposit/withdrawal at custodian (“DWAC”) eligible, (iii) the minimum price must exceed $0.0005, and (iv) the number of shares to be purchased by Oasis Capital may not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned by Oasis Capital, would exceed 4.99% of our shares of common stock outstanding.
   
 

For further information, see “The Offering” beginning on page 10.

   
Plan of Distribution The selling stockholders may, from time to time, sell any or all of their shares of common stock on the stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices.
   
 

For further information, see “Plan of Distribution” beginning on page 12.

   
Risk factors You should read the “Risk Factors” section of this prospectus and the other information in this prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our common stock.

 

 

(1) Assumes the issuance of 20,000,000 shares offered hereby that are issuable under our Equity Purchase Agreement with Oasis Capital.

 

2
 

 

Risk Factors

 

An investment in our common stock involves a high degree of risk, and should not be made by anyone who cannot afford to lose their entire investment. You should consider carefully the risks set forth in this section, together with the other information contained in this report, before making a decision to invest in our common stock. Our business, operating results and financial condition could be seriously harmed and you could lose your entire investment if any of the following risks were to occur. This document is not intended to be an offer of any securities nor a solicitation of any offer to buy or sell.

 

Risks Related to Our Business

 

Until the acquisition of our microbrands, we are a company with limited operating history, little revenue and still have to rely on our ability to raise capital to fund operations and there can be no assurance we will ever reach profitability or be able to continue to raise capital to fund operations.

 

The Company commenced limited operations in June of 2017, with the acquisition of 12 Hong Kong, Ltd. The Company then acquired 12 Japan, Ltd in August 2017 followed by 12 Europe A.G. in October 2017. 12 Japan, Ltd brought a small portion of revenue, insufficient to fund operations while 12 Europe A.G. brought no revenue but brought a base of operations whereby the Company was able to secure retail customers in Europe that may begin to provide significant revenue in May 2018. The microbrand acquisitions are too new to provide sufficient working capital to the Company. Therefore, we have limited operating history on which to make an investment decision. Accordingly, the Company has a limited operating history and the business strategy while promising may not be successful. Failure to implement the business strategy could materially adversely affect our business, financial condition and results of operations. Through December 31, 2017, the Company’s business has not shown a profit in operations and has generated little revenues. There can be no assurance we will achieve or attain profitability or be able to raise sufficient capital to stay in business. If we cannot achieve operating profitability or raise capital, we may not be able to meet our working capital requirements, which could have a material adverse effect on our business operating results and financial condition resulting in the loss of an investors’ entire investment in us.

 

We need substantial additional capital to grow and fund our present and planned business and business strategy. Until we have made significant microbrand acquisitions, the Company’s working capital may not be sufficient for our needs.

 

Our current and planned operations contemplate funding in the future. Failure to meet funding milestones may have a significant adverse effect on our growth and anticipated revenues and we may have to curtail our business strategy. If we receive less funding than planned, we will have to revise our business model and reduce proposed plans. Without significant funding, we will not be able to execute on our business operations and may be forced to cease operations. At this time, there can be no assurance we will be able to obtain the funding we need and even if we obtain such funding that it will be on terms and conditions favorable to us and our existing shareholders. Without funding we will not be able to proceed with planned operations or meet existing obligations.

 

Our independent registered public accounting firm’s report states that there is substantial doubt that we will be able to continue as a going concern. Our possible inability to stay in business could result in a total loss on investment by our shareholders.

 

Our accompanying financial statements have been prepared assuming that we will continue as a “going concern.” As discussed in Note 2 to the Company’s December 31, 2017 consolidated financial statements, we had little revenues, have minimal business operations, have recurring losses and have negative working capital and a stockholders’ deficit. These issues raise substantial doubt about our ability to continue as a “going concern.” Our ability to stay in business will, in part, depend on our ability to raise additional funding or continue to make microbrand acquisitions similar to the ones we have completed subsequent to year end. Our financial statements do not include any adjustment that might result from the outcome of this uncertainty.

 

We may experience service failures or interruptions due to defects in the software, infrastructure or processes that comprise our Apps and other software, any of which could adversely affect our business.

 

Our software may contain undetected defects in the software, infrastructure or processes. If these defects lead to failures in our Apps, we could experience delays or lost revenues during the period required to correct the cause of the defects. Furthermore, we cannot be certain that defects will not be found in new software or upgraded existing software or that service disruptions will not occur in the future, resulting in loss of, or delay in, market acceptance, which could have an adverse effect on our business, results of operations and financial condition.

 

3
 

 

If we do not successfully maintain the 12 ReTech brand in our existing markets or successfully market the 12 ReTech brand in new markets, our revenues and earnings could be materially and adversely affected.

 

We believe that developing, maintaining and enhancing the 12 ReTech brand in a cost-effective manner is critical in expanding our customer base. Promotion of our brand will depend largely on continuing our sales and marketing efforts and providing high-quality products and App software to our customers. We cannot be assured that these efforts will be successful in marketing the 12 ReTech brand. If we are unable to successfully promote our brand, or if we incur substantial expenses in attempting to do so, our revenues and earnings could be materially and adversely affected.

 

Our internal systems and operations are untested and may not be adequate and could adversely affect our ability to continue our planned business.

 

Our internal systems and operations are new and unproven at scale. On the technology portion of our business we have not demonstrated the ability to make the large-scale deployments necessary if a large retailer would indicate they wanted to fully implement our solutions. We may need to find an installation partner with the necessary experience to perform these large-scale installations. Our inability to scale or find that experienced partner or vendor could have a material adverse effect upon our business, results of operations and financial condition and could force us to halt our planned operations or continued expansion of those planned operations, causing us to lose any opportunity to gain significant anticipated market share in our industry. Our ability to compete effectively and to manage future growth will require us to continue to improve our operational systems, our organization and our financial and management controls, reporting systems and deployment procedures. We may fail to make these improvements effectively. Additionally, our efforts to make these improvements may divert the focus of our personnel and we may not be able to effectively continue our planned operations, which may materially and adversely affect our business, results of operations and financial condition.

 

Our inability to attract and maintain key personnel required to implement our business strategy could adversely affect our ability to continue our current and planned business resulting in slower growth.

 

While we have so far been able to attract high caliber people, we are competing with many other entities for these services some of whom are better funded then we are. We are trying to grow our effort to provide services and we are still hiring key positions and integrating personnel at all levels into a cohesive team. If executives or other new hires integrate poorly, perform badly, or do not have the anticipated experience or skill sets required, our current and planned business endeavors could be harmed. Planned personnel, management practices and controls may also prove to be inadequate to provide services, acquire customers and partners and operate the business, and any gaps or failures may have a material adverse effect on our business, financial condition and results of operations.

 

Increased competition may have an adverse effect on our ability to continue our current and planned business operations and result in our going out of business and may have a material adverse effect on our business, financial condition and results of operations.

 

We may see increased competition in our markets. On the technology side of our business many players are entering the market place including Hitachi, IBM, and others. While we believe that our solutions are better due to our experience as retailers our competitors are entrenched and very well-funded. The competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements and devote greater resources to develop, promote and sell their products or services. In addition, increased competition could result in reduced fees, reduced margins and loss of market share, any of which could harm our business. We cannot guarantee that we can compete successfully against current or future competitors, many of which have substantially more capital, existing brand recognition, resources and access to additional financing. All these competitive pressures may result in increased marketing costs, or loss of market share or otherwise may materially and adversely affect our business, results of operations and financial condition.

 

We may be unable to protect our patents, may be unable to patent future improvements and/or update our technology.

 

We use technology advancements of our own and from suppliers to provide more advanced services with more efficient economics for our customers. Technology advancement is very fast paced in today’s digital world and can lead to changing standards and new modes of providing services. The advancement of other technology not available to us or within our financial ability to adopt that may make our products or future products unsaleable. Keeping pace with the introduction of new standards, customer requirements or the advancement of other technology may make our products un-competitive or obsolete. The failure to keep pace with these changes and to continue to enhance and improve our products and features could harm our ability to attract and retain customers for our technology.

 

4
 

 

The retail industry is changing rapidly and management’s strategy to address the changes may not be successful.

 

The retail industry in general is changing. More people are shopping online and there is a general consolidation of major brands and a large number of well-known brands are stressed, including former industry giants like Sears, K-Mart and J.C. Penney. As of the writing of this filing Abercrombie & Fitch is closing 60 more stores, American Apparel has filed for Bankruptcy, BCBG closed 118 stores, Bebe has closed all their stores, Bon-ton has filed Chapter 11, HHGregg is closing 22 stores, the Limited has closed all of their stores, Sports Authority has closed, Toys R Us is liquidating all of their assets and closing all of their American stores, and many more are announcing closings or filing for bankruptcy. While this provides opportunity for new brands or microbrands, it also provides risk as many of our microbrands also sell to well-known retailers and any one of them may announce closings or even a Chapter 11 filing. Therefore, there is no guarantee that the changes sweeping the retail industry today may negatively affect our business. With a changing retail environment like we are in today there are no guarantees that management’s strategy will be successful. Further the creditworthiness of many of the retailers most needing our technology products may be suspect and we may be negatively impacted by adverse credit risks associated with our future best customers.

 

Our operating results may be substantially different than that which management projects. The creditworthiness of our customers, changes in the availability of capital due to a downturn in the economy undue regulation and legal uncertainties, all of which would increase our cash requirements which may materially and adversely affect our business, results of operations and financial condition.

 

An increase in laws and regulations could contribute to a decline in the growth of the industry and could decrease demand for our products and services and increase our cost of doing business. Moreover, the applicability of existing laws is uncertain with regard to many issues. Our business, financial condition and results of operations could be seriously impaired by any new legislation or regulation. The application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations and to other services which may materially and adversely affect our business, results of operations and financial condition. Therefore, financial results could materially differ from that projected by management. Projections are less and less reliable the further out those projections are made based on all of the above reasons.

 

Planned acquisitions come with various risks, along with dilution to our shareholders, which could negatively affect our stock prices and may materially and adversely affect our business, results of operations and financial condition.

 

Acquisitions, mergers, and joint ventures entered into by us may have an adverse effect on our business. We expect to engage in acquisitions, mergers, or joint ventures as part of our long-term business strategy. These transactions involve significant challenges and risks including that the transaction does not advance our business strategy, that we do not realize a satisfactory return on our investment, or that we experience difficulty in the integration of new assets, employees, business systems, and technology, or diversion of management’s attention from our other businesses. These events may materially and adversely affect our business, results of operations and financial condition.

 

Risks related to the competition of our current and future microbrands acquired or to be acquired by our subsidiary, 12 Retail Corporation.

 

Our current and planned microbrand acquisitions are in the highly competitive fashion industry. Many of those acquisitions will compete directly with better funded and better-known brands. While Management believes that it can compete directly with these larger brands, gambling on the public’s changing attitudes towards “looking the same as everyone else” and wanting individuality and on the Company’s proprietary technology to provide positive results there are no guarantees that the Company will be able to compete effectively.

 

The current and future state of the economy may materially and adversely affect our business, results of operations and financial condition.

 

Our business may be adversely affected by changes in domestic economic conditions, including inflation or deflation, changes in consumer preferences, changes in consumer spending rates, personal bankruptcy and the ability to collect our customer accounts. Changes in economic conditions may adversely affect the demand for our products and make it more difficult to collect customer accounts, thereby negatively affecting our business, operating results and financial condition. The recent disruptions in credit and other financial markets and deterioration of national and global economic conditions could, among other things, impair the financial condition of some of our customers and suppliers, thereby increasing customer bad debts or non-performance by suppliers. If we experience bad debts or slow paying customers in significant quantities, our cash flow will be limited and our ability to pay our own obligations will be questionable. As a small business these issues will affect us more than our larger competitors putting financial strain on our business and threatening our survival particularly since we have limited capital to rely on to overcome cash flow issues of slow paying customers. If our customers are unable to pay or pay slowly it may materially and adversely affect our business, results of operations and financial condition.

 

5
 

 

Future stock issuances could severely dilute our current shareholders’ interests.

 

Our Board of Directors has the authority to issue up to 1,000,000,000 authorized shares of our common stock or stock warrants and options to acquire such common stock. Our Board of Directors has the authority to issue up to 50,000,000 shares of preferred shares that have various rights of conversion to common stock. Refer to Description of Registrant’s Securities below for full details of Series A, Series B, Series C, and Series D Preferred Shares. The future issuance of common stock may result in dilution in the percentage of our common stock held by our existing stockholders. Also, any stock we sell in the future may be valued on an arbitrary basis by us and the issuance of shares of common stock for future services, acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our existing stockholders .

 

We do not expect to pay dividends on our common shares in the near future .

 

We do not expect to declare or pay any dividends on our common stock in the foreseeable future. The declaration and payment in the future of any cash or stock dividends on the common stock will be at the discretion of our Board of Directors and will depend upon a variety of factors, including our ability to service our outstanding indebtedness, if any, and to pay dividends on securities ranking senior to the common stock, our future earnings, if any, capital requirements, financial condition and such other factors as our Board of Directors may consider to be relevant from time to time. Our earnings, if any, are expected to be retained for use in expanding our business.

 

Risks Related to Our Common Stock

 

Our common stock is classified as a “penny stock” under SEC Rules and Regulations, which means there may be very limited trading market for our shares .

 

Our common stock is deemed to be “penny stock” as that term is defined in Rule 3a51-1 of the Securities Exchange Act of 1934, as amended (“the Exchange Act”). Penny stocks are stocks (i) with a price of less than five dollars per share; (ii) that are not traded on a “recognized” national exchange; (iii) whose prices are not quoted on an automated quotation system sponsored by a registered national securities association; or (iv) whose issuer has net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years); or $5,000,000 (if in continuous operation for less than three years); or with average revenues of less than $6,000,000 for the last three years.

 

Section 15(g) of the Exchange Act and Rule 15g-2 promulgated thereunder require broker dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stock.”

 

Moreover, Rule 15g-9 of the Exchange Act requires broker dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker dealer to (i) obtain from the investor information concerning his, her or its financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor, and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for investors in our common stock to resell their shares to third parties or to otherwise dispose of such shares.

 

Due to the substantial instability in our common stock price, you may not be able to sell your shares at a profit or at all, and as a result, any investment in our shares could be totally lost.

 

The public market for our common stock is very limited. As with the market for many other small companies, any market price for our shares is likely to continue to be very volatile. Our common stock has very limited volume and as a “penny stock,” many brokers will not trade in our stock limiting our stocks’ liquidity. As such it may be difficult to sell shares of our common stock.

 

Our common stock has a limited trading history, and it will be difficult to determine any market trends or prices for our shares and additional shares that become available under Rule 144 could cause the price of our stock to decrease.

 

Our common stock currently is quoted on the OTC Pink Sheets under the symbol “RETC”. However, with very little trading history, a trading market that does not represent an “established trading market”, volatility in the bid and asked prices and the fact that our common stock is very thinly traded, you could lose all or a substantial portion of your funds if you make an investment in us. Additionally, as more shares become available for resale, it is likely there will be negative pressures on our stock price. The sale or potential sale of shares of our common stock that may become publicly tradable under Rule 144 in the future may have a severe adverse impact on any market that develops for our common stock, and you may lose your entire investment or be unable to resell any shares in us that you purchase.

 

6
 

 

Risks Related to Our International Operations

 

Certain risks of loss arise from our need to conduct transactions in foreign currencies.

 

Our business activities outside the United States and its territories may be conducted in foreign currencies. In the future, our capital costs and financial results may be affected by fluctuations in exchange rates between the applicable currency and the dollar. Other currencies used by us may not be convertible at satisfactory rates. In addition, the official conversion rates between a particular foreign currency and the U.S. dollar may not accurately reflect the relative value of goods and services available or required in other countries. Further, inflation may lead to the devaluation of such other currencies.

 

Foreign governmental entities may have the authority to alter the terms of our rights or agreements if we do not comply with the terms and obligations indicated in such agreements.

 

Pursuant to the laws in some jurisdictions in which we may develop or operate our business, foreign governmental entities may have the authority to alter the terms of our contractual or financial rights or override the terms of privately negotiated agreements. In extreme circumstances, some foreign governments have taken the extreme step of confiscating private property on the assertion that such action is necessary in the public interest of such country. If this were to occur, we may not be compensated fairly or at all. We cannot assure that we have complied, and will comply, with all the terms and obligations imposed on us under all foreign laws to which one or more of our operations and assets may be subject.

 

Our operations will require our compliance with the Foreign Corrupt Practices Act.

 

We must conduct our activities in or related to foreign companies in compliance with the U.S. Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery laws that generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. Enforcement officials interpret the FCPA’s prohibition on improper payments to government officials to apply to officials of state-owned enterprises, including state-owned enterprises with which we may develop or operate or businesses. While our employees and agents are required to acknowledge and comply with these laws, we cannot assure that our internal policies and procedures will always protect us from violations of these laws, despite our commitment to legal compliance and corporate ethics. The occurrence or allegation of these types of risks may adversely affect our business, performance, prospects, value, financial condition, reputation, and results of operations.

 

Our competitors may not be subject to laws similar to the FCPA, which may give them an advantage in negotiating with underdeveloped countries and the government agencies.

 

Our competitors outside the United States may not be subject to anti-bribery or corruption laws as encompassing or stringent as the U.S. laws to which we are subject, which may place us at a competitive disadvantage.

 

We may encounter difficulties repatriating income from foreign jurisdictions.

 

As we develop and place our businesses into operation, we intend to enter into only revenue-generating agreements in which we are paid in U.S. dollars directly to our U.S. banks or through countries in which repatriation of the funds to our U.S. accounts is unrestricted. However, situations could arise in which we agree to accept payment in foreign jurisdictions and for which restrictions make it difficult or costly to transfer these funds to our U.S. accounts. In this event, we could incur costs and expenses from our U.S. assets for which we cannot recover income directly. This could require us to obtain additional working capital from other sources, which may not be readily available, resulting in increased costs and decreased profits, if any.

 

Risks Relating to our Equity Line with Oasis Capital

 

Resales of shares purchased by Oasis Capital under the Equity Purchase Agreement may cause the market price of our common stock to decline.

 

Subject to the terms and conditions of the Equity Purchase Agreement, we have the right to “put,” or sell, up to $12,000,000 worth of shares of our common stock to Oasis Capital. Unless terminated earlier, Oasis Capital’s purchase commitment will automatically terminate on the earlier of (i) the date on which Oasis Capital shall have purchased shares under the Equity Purchase Agreement for an aggregate purchase price of $12,000,000, (ii) June 1, 2020, or (iii) written notice of termination by the Company to Oasis Capital (which shall not occur at any time that the Investor holds any of the put shares). This arrangement is also sometimes referred to herein as the “Equity Line.” The common stock to be issued to Oasis Capital pursuant to the Equity Purchase Agreement will be purchased at a price equal to 85% of the “Market Price,” which is defined as the lowest one (1) traded price on the OTC, as reported by Bloomberg Finance L.P., during the five trading days following the date on which the applicable put shares are delivered to Oasis Capital. Oasis Capital will have the financial incentive to sell the shares of our common stock issuable under the Equity Purchase Agreement in advance of or upon receiving such shares and to realize the profit equal to the difference between the discounted price and the current market price of the shares. This may cause the market price of our common stock to decline.

 

7
 

 

The foregoing description of the terms of the Equity Purchase Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the Equity Purchase Agreement itself.

 

Puts under Equity Purchase Agreement may cause dilution to existing stockholders.

 

From time to time during the term of the Equity Purchase Agreement, and at our sole discretion, we may present Oasis Capital with a put notice requiring Oasis Capital to purchase shares of our common stock. As a result, our existing stockholders will experience immediate dilution upon the purchase of any of the shares by Oasis Capital. Oasis Capital may resell some, if not all, of the shares that we issue to it under the Equity Purchase Agreement and such sales could cause the market price of our common stock to decline significantly. To the extent of any such decline, any subsequent puts would require us to issue and sell a greater number of shares to Oasis Capital in exchange for each dollar of the put amount. Under these circumstances, the existing stockholders of our company will experience greater dilution. The effect of this dilution may, in turn, cause the price of our common stock to decrease further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by Oasis Capital, and because our existing stockholders may disagree with a decision to sell shares to Oasis Capital at a time when our stock price is low, and may in response decide to sell additional shares, further decreasing our stock price. If we draw down amounts under the Equity Line when our share price is decreasing, we will need to issue more shares to raise the same amount of funding.

 

There is no guarantee that we will satisfy the conditions to the Equity Purchase Agreement.

 

Although the Equity Purchase Agreement provides that we can require Oasis Capital to purchase, at our discretion, up to $12,000,0000 worth of shares of our common stock in the aggregate, our ability to put shares to Oasis Capital and obtain funds when requested is limited by the terms and conditions of the Equity Purchase Agreement, including restrictions on when we may exercise our put rights, restrictions on the amount we may put to Oasis Capital at any one time, which is determined in part by the trading volume of our common stock, and a limitation on our ability to put shares to Oasis Capital to the extent that it would cause Oasis Capital to beneficially own more than 4.99% of the outstanding shares of our common stock.

 

We may not have access to the full amount available under the Equity Purchase Agreement with Oasis Capital.

 

Our ability to draw down funds and sell shares under the Equity Purchase Agreement requires that a registration statement be declared effective and continue to be effective registering the resale of shares issuable under the Equity Purchase Agreement. The registration statement of which this prospectus is a part registers the resale of 20,000,000 shares of our common stock issuable under the Equity Line. Our ability to sell any additional shares under the Equity Purchase Agreement will be contingent on our ability to prepare and file one or more additional registration statements registering the resale of such additional shares. These registration statements (and any post-effective amendments thereto) may be subject to review and comment by the staff of the Securities and Exchange Commission, and will require the consent of our independent registered public accounting firm. Therefore, the timing of effectiveness of these registration statements (and any post-effective amendments thereto) cannot be assured. Even if we are successful in causing one or more registration statements registering the resale of some or all of the shares issuable under the Equity Purchase Agreement to be declared effective by the Securities and Exchange Commission in a timely manner, we may not be able to sell the shares unless certain other conditions are met. For example, we might have to increase the number of our authorized shares in order to issue the shares to Oasis Capital. Increasing the number of our authorized shares will require board and stockholder approval. Accordingly, because our ability to draw down any amounts under the Equity Purchase Agreement with Oasis Capital is subject to a number of conditions, there is no guarantee that we will be able to draw down all of the proceeds of $12,000,000 under the Equity Purchase Agreement.

 

8
 

 

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

 

This prospectus may contain certain “forward-looking” statements as such term is defined by the Securities and Exchange Commission in its rules, regulations and releases, which represent the registrant’s expectations or beliefs, including but not limited to, statements concerning the registrant’s operations, economic performance, financial condition, growth and acquisition strategies, investments, and future operational plans. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intent,” “could,” “estimate,” “might,” “plan,” “predict” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the registrant’s control, and actual results may differ materially depending on a variety of important factors, including uncertainty related to acquisitions, governmental regulation, managing and maintaining growth, the operations of the company and its subsidiaries, volatility of stock price, commercial viability of our technology and business plan and any other factors discussed in this and other registrant filings with the Securities and Exchange Commission.

 

These risks and uncertainties and other factors include, but are not limited to those set forth under “Risk Factors” of this prospectus. Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as otherwise required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this prospectus or in the documents we incorporate by reference, whether as a result of new information, future events, changed circumstances or any other reason after the date of this prospectus.

 

This prospectus contains forward-looking statements, including statements regarding, among other things:

 

  our ability to continue as a going concern;
     
  our anticipated needs for working capital;
     
  our ability to secure financing;
     
  actual capital costs, operating costs, production and economic returns may differ significantly from those that we have anticipated;
     
  the financial model for our proposed projects has been minimally tested and may not be successful;
     
  our efforts to develop our retail technology are subject to many financial, managerial, and sales risks that may make us unsuccessful; and
     
  technological advances may render our technologies obsolete.

 

Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “ Risk Factors ” and matters described in prospectus generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this prospectus will in fact occur. We caution you not to place undue reliance on these forward-looking statements. In addition to the information expressly required to be included in this prospectus, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.

 

These risks and uncertainties and other factors include, but are not limited to, those set forth under “ Risk Factors . ” All subsequent written and oral forward-looking statements attributable to the company or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

USE OF PROCEEDS

 

We will not receive any proceeds from the sale of the common stock by the selling stockholders. However, we will receive proceeds from the sale of shares of our common stock pursuant to Oasis Capital under the Equity Purchase Agreement. We will use these proceeds for general corporate and working capital purposes, or for other purposes that our Board of Directors, in its good faith, deems to be in the best interest of our Company. We have agreed to bear the expenses relating to the registration of the offer and resale by the selling stockholders of the shares being offered hereby.

 

9
 

 

THE OFFERING

 

The selling stockholders may offer and resale of up to 20,000,000 shares of our common stock, par value $0.00001 per share, pursuant to this prospectus. All of such shares represent shares that Oasis Capital has agreed to purchase from us pursuant to the terms and conditions of an Equity Purchase Agreement we entered into with them as of June 22, 2018 (the “Equity Purchase Agreement”), which are described below.

 

Equity Purchase Agreement and Registration Rights Agreement with Oasis Capital, LLC

 

Subject to the terms and conditions of the Equity Purchase Agreement, we have the right to “put,” or sell, up to $12,000,000 worth of shares of our common stock to Oasis Capital. Unless terminated earlier, Oasis Capital’s purchase commitment will automatically terminate on the earlier of the date on which Oasis Capital shall have purchased shares pursuant to the Equity Purchase Agreement for an aggregate purchase price of $12,000,000 or June 1, 2020. We have no obligation to sell any shares under the Equity Purchase Agreement. This arrangement is also sometimes referred to herein as the “Equity Line.”

 

As provided in the Equity Purchase Agreement, we may require Oasis Capital to purchase shares of common stock from time to time by delivering a put notice to Oasis Capital specifying the total number of shares to be purchased (such number of shares multiplied by the purchase price described below, the “Investment Amount”); provided there must be a minimum of seven (7) trading days between delivery of each put notice. We may determine the Investment Amount, provided that such amount may not be more than 200% of the average daily trading volume in dollar amount for our common stock during the seven (7) trading days preceding the date on which we deliver the applicable put notice. Additionally, such amount may not be lower than $10,000 or higher than $500,000. Oasis Capital will have no obligation to purchase shares under the Equity Line to the extent that such purchase would cause Oasis Capital to own more than 4.99% of our common stock.

 

For each share of our common stock purchased under the Equity Line, Oasis Capital will pay a purchase price equal to 85% of the “Market Price,” which is defined as the lowest closing traded price on the OTC Marketplace, as reported by Bloomberg Finance L.P., during the five trading days following the date on which the applicable put shares are delivered to Oasis Capital (the “Pricing Period”). On the settlement date, Oasis Capital will purchase the applicable number of shares subject to customary closing conditions, including without limitation a requirement that a registration statement remain effective registering the resale by Oasis Capital of the shares to be issued under the Equity Line as contemplated by the Registration Rights Agreement described below. The Equity Purchase Agreement is not transferable and any benefits attached thereto may not be assigned.

 

The Equity Purchase Agreement contains covenants, representations and warranties of us and Oasis Capital that are typical for transactions of this type. In addition, we and Oasis Capital have granted each other customary indemnification rights in connection with the Equity Purchase Agreement. The Equity Purchase Agreement may be terminated by us at any time, except while Oasis Capital holds any of the put shares.

 

In connection with the Equity Purchase Agreement, we also entered into Registration Rights Agreement with Oasis Capital requiring us to prepare and file a registration statement registering the resale by Oasis Capital of shares to be issued under the Equity Line, to use commercially reasonable efforts to cause such registration statement to become effective, and to keep such registration statement effective until (i) the date as of which Oasis Capital may sell all of the put shares without restriction pursuant to Rule 144, or (ii) the date Oasis Capital no longer owns any of the shares. In accordance with the Registration Rights Agreement, on July 2, 2018, we filed the registration statement of which this prospectus is a part registering the resale by Oasis Capital of up to 20,000,000 shares that may be issued and sold to Oasis Capital under the Equity Line. This registration statement was declared effective by the SEC on _______, 2018.

 

The 20,000,000 shares being offered pursuant to this prospectus by Oasis Capital will represent approximately 37% of our shares of common stock issued and outstanding held by non-affiliates of our Company as of the date of this prospectus assuming the offering is fully subscribed.

 

The foregoing description of the terms of the Equity Purchase Agreement and Registration Rights Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the agreements and instruments themselves, copies of which are filed as Exhibits 10.1 and 10.2 to our Current Report on Form 8-K dated June 28, 2018, and incorporated into this prospectus by reference. The benefits and representations and warranties set forth in such agreements and instruments are not intended to and do not constitute continuing representations and warranties of the Company or any other party to persons not a party thereto.

 

10
 

 

We intend to sell Oasis Capital periodically our common stock under the Equity Purchase Agreement and Oasis Capital may, in turn, sell such shares to investors in the market at the market price or at negotiated prices. This may cause our stock price to decline, which will require us to issue increasing numbers of common shares to Oasis Capital to raise the intended amount of funds, as our stock price declines.

 

Likelihood of Accessing the Full Amount of the Equity Line

 

Notwithstanding that the Equity Line is in an amount of $12,000,000, we anticipate that the actual likelihood that we will be able access the full amount of the Equity Line is low due to several factors, including that our ability to access the Equity Line is impacted by our average daily trading volume, which may limit the maximum dollar amount of each put we deliver to Oasis Capital, and our stock price. Our use of the Equity Line will continue to be limited and restricted if our share trading volume or and market price of our stock continue at their current levels or decrease further in the future from the volume and stock prices reported over the past year. Further, if the price of our stock remains at $0.07 per share (which represents the average of the high and low reported sales prices of our common stock on June 28, 2018), the sale by Oasis Capital of all 20,000,000 of the shares registered in this prospectus would mean we would receive only $1,400,000 from our sale of shares under the Equity Line. Our ability to issue shares in excess of the 20,000,000 shares covered by the registration statement of which this prospectus is a part will be subject to our filing a subsequent registration statement with the SEC and the SEC declaring it effective.

 

In addition, we may have to increase the number of our authorized shares in order to issue shares to Oasis Capital in the future. Increasing the number of our authorized shares will require further board and stockholder approval. Accordingly, because our ability to deliver puts to Oasis Capital under the Equity Purchase Agreement is subject to a number of conditions, there is no guarantee that we will receive all or any portion of the $12,000,000 that is available to us under the Equity Line.

 

SELLING STOCKHOLDERS

 

This prospectus covers the resale by the selling stockholders or their respective permitted transferees of 20,000,000 shares of our common stock which may be issued by us to Oasis Capital under the Equity Purchase Agreement. Oasis Capital is an “underwriter” within the meaning of the Securities Act in connection with its resale of our common stock pursuant to this prospectus. The selling stockholder has not had any position or office, or other material relationship with us or any of our affiliates over the past three years. The following table sets forth certain information regarding the beneficial ownership of shares of common stock by the selling stockholders as of May 9, 2018 and the number of shares of our common stock being offered pursuant to this prospectus:

 

    Shares beneficially
owned as of the
          Number of shares to be beneficially owned and percentage of beneficial ownership after the offering (1)(2)  

Name of selling

Stockholder

  date of this prospectus (1)(2)    

Number of shares

being offered

   

Number of

shares

   

Percentage of

class (3)

 
Oasis Capital LLC (4)     4,140,120       20 ,000,000       4,140,120       4.99 %

 

 

  * Less than 1%.

 

  (1) Beneficial ownership is determined in accordance with Securities and Exchange Commission rules and generally includes voting or investment power with respect to shares of common stock. Shares of common stock subject to options and warrants currently exercisable, or exercisable within 60 days, are counted as outstanding for computing the percentage of the person holding such options or warrants but are not counted as outstanding for computing the percentage of any other person.
     
  (2) In connection with the Equity Purchase Agreement, Oasis Capital was issued 311,250 shares of the Company’s Series D-1 Preferred Stock which is convertible, at the option of Oasis Capital, into shares of our common stock, subject to a beneficial ownership limitation of 4.99% of the then outstanding shares of common stock (the “Commitment Shares”). Other than the Commitment Shares, the amount and percentage of shares of our common stock that will be beneficially owned by the selling stockholder after completion of the offering assume that they will sell all shares of our common stock being offered pursuant to this prospectus.
     
  (3)

Based on 82,968,338 shares of our common stock issued and outstanding as May 9, 2018. All shares of our common stock being offered pursuant to this prospectus by the selling stockholder are counted as outstanding for computing the percentage beneficial ownership of such selling stockholder.

     
  (4) Adam Long possesses voting and investment control over shares owned by Oasis Capital.

 

11
 

 

PLAN OF DISTRIBUTION

 

The selling stockholders or their respective permitted transferees may, from time to time, sell any or all of shares of our common stock covered hereby on the OTC Marketplace operated by the OTC Markets Group, Inc., or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. The selling stockholders may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices or at negotiated prices. The selling stockholders may use any one or more of the following methods when selling securities:

 

  ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
     
  block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
     
  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
     
  an exchange distribution in accordance with the rules of the applicable exchange;
     
  privately negotiated transactions;
     
  in transactions through broker-dealers that agree with the selling stockholders to sell a specified number of such securities at a stipulated price per security;
     
  through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
     
  a combination of any such methods of sale; or
     
  any other method permitted pursuant to applicable law.

 

The selling stockholders may also sell securities under Rule 144 under the Securities Act, if available, rather than under this prospectus.

 

Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, provided such amounts are in compliance with FINRA Rule 2121. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of common stock will be paid by the selling stockholders and/or the purchasers.

 

Oasis Capital, LLC is an underwriter within the meaning of the Securities Act and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Because Oasis Capital is an underwriter within the meaning of the Securities Act, it will be subject to the prospectus delivery requirements of the Securities Act.

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of securities of the common stock by the selling stockholders or any other person. We will make copies of this prospectus available to the selling security holders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale.

 

Although Oasis Capital has agreed not to enter into any “short sales” of our common stock, sales after delivery of a put notice of a number of shares reasonably expected to be purchased under a put notice shall not be deemed a “short sale.” Accordingly, Oasis Capital may enter into arrangements it deems appropriate with respect to sales of shares of our common stock after it receives a put notice under the Equity Purchase Agreement so long as such sales or arrangements do not involve more than the number of put shares reasonably expected to be purchased by Oasis Capital under such put notice.

 

12
 

 

DESCRIPTION OF SECURITIES

 

Capital Stock

 

Pursuant to our Articles of Incorporation, as amended and restated to date (“Amended and Restated Articles of Incorporation”), our authorized capital stock consists of One Billion Fifty Million (1,050,000,000) shares, comprised of (a) One Billion (1,000,000,000) shares of Common Stock, par value $0.00001 per share (the “Common Stock”) and (b) fifty million (50,000,000) shares of Preferred Stock, par value $0.00001 per share (the “Preferred Stock”). The Preferred Stock is currently designated into four (4) Series: Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, as follows:

 

  Series A Preferred Stock which consists of ten million (10,000,000) shares authorized of which five million (5,000,000) are issued and outstanding;
     
  Series B Preferred Stock which consists of one million (1,000,000) shares authorized of which two hundred sixty-six thousand (266,000) are issued and outstanding;
     
  Series C Preferred Stock which consists of two (2) shares authorized none of which are issued and outstanding; and
     
  Series D Preferred Stock which consists of one million (1,000,000) shares of stock that are designated as “Blank Check Preferred” allowing the Board of Directors to set the rights privileges and voting as determined by the Board of Directors as well as dividing this Series into other series as the need may arise, three hundred eleven thousand two hundred fifty (311,250) of which are currently issued and outstanding and designated as “Series D-1 Preferred Stock.”

 

Common Stock

 

Each share of Common Stock shall have, for all purposes, one (1) vote per share. Subject to the preferences applicable to Preferred Stock outstanding at any time, the holders of shares of Common Stock shall be entitled to receive such dividends and other distributions in cash, property or shares of stock of the Company as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Company legally available therefore. The holders of Common Stock issued and outstanding have and possess the right to receive notice of shareholders’ meetings and to vote upon the election of directors or upon any other matter as to which approval of the outstanding shares of Common Stock or approval of the common shareholders is required or requested.

 

Voting Rights

 

Except as otherwise required by law or as may be provided by the resolutions of the Board of Directors authorizing the issuance of Common Stock, all rights to vote and all voting power shall be vested in the holders of Common and Preferred Stock. Each share of Common Stock shall entitle the holder thereof to one vote.

 

No Cumulative Voting

 

Except as may be provided by the resolutions of the Board of Directors authorizing the issuance of Common Stock, cumulative voting by any shareholder is expressly denied.

 

Rights upon Liquidation, Dissolution or Winding-Up of the Company

 

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the remaining net assets of the Company shall be distributed first to holders of Preferred Stock, excluding Series C Preferred Shares and then pro rata to the holders of the Common Stock.

 

We refer you to our Amended and Restated Articles of Incorporation and certificate of designation Bylaws, and the applicable provisions of the Nevada Revised Statutes for a more complete description of the rights and liabilities of holders of our securities.

 

Conversion, Redemption and Preemptive Rights. Holders of our Common Stock have no conversion, redemption, preemptive, subscription or similar rights.

 

The transfer agent and registrar for our Common Stock is Action Stock Transfer Corp., 2469 E. Fort Union Blvd, Suite 214, Salt Lake City, UT 84121.

 

13
 

 

Series A Preferred Stock

 

The following summary of the Company’s Series A Preferred Stock is merely a summary, we refer you to our Amended and Restated Articles of Incorporation and the applicable provisions of the Nevada Revised Statutes for a more complete description of the rights and liabilities of holders of our securities.

 

Liquidation Rights

 

In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the Holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any Distribution of any of the assets of the Company to the Holders of any Junior Stock by reason of their ownership of such stock an amount per share for each share of Series A Preferred Stock held by them equal to the sum of the Liquidation Preference. If upon the liquidation, dissolution or winding up of the Company, the assets of the Company legally available for distribution to the Holders of the Series A Preferred Stock are insufficient to permit the payment to such Holders of the full amounts specified in this Section then the entire remaining assets of the Company legally available for distribution shall be distributed with equal priority and pro rata among the Holders of the Series A Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to this Section.

 

Redemption Rights

 

The Series A Preferred Stock shall have no redemption rights.

 

Conversion

 

The “Conversion Ratio” per share of the Series A Preferred Stock in connection with any Conversion shall be at a ratio of 1:20, meaning every (1) one Preferred A share shall convert into 20 shares of Common Stock of the Company (the “Conversion”). Holders of Class A Preferred Shares shall have the right, exercisable at any time and from time to time (unless otherwise prohibited by law, rule or regulation), to convert any or all their shares of the Class A Preferred Shares into Common Stock at the Conversion Ratio.

 

Voting Rights

 

The Holder of each share of Series A Preferred Stock shall have such number of votes as is determined by multiplying (a) the number of shares of Series A Preferred Stock held by such holder; and, (b) by 20. With respect to any shareholder vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the Bylaws of this Corporation, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. The holders of Series A Preferred Stock shall vote together with all other classes and series of common and preferred stock of the Company as a single class on all actions to be taken by the Common Stock shareholders of the Company, except to the extent that voting as a separate class or series is required by law.

 

Series B Preferred Stock

 

The following summary of the Company’s Series B Preferred Stock is merely a summary, we refer you to our Amended and Restated Articles of Incorporation and the applicable provisions of the Nevada Revised Statutes for a more complete description of the rights and liabilities of holders of our securities.

 

Designation and Amount

 

The total number of shares of Series B Preferred Stock this Corporation is authorized to issue is One Million (1,000,000), with a stated par value of $0.00001 per share. The designations, powers, preferences, rights and restrictions granted or imposed upon the Series B Preferred Stock and holders thereof are as follows unless otherwise agreed to by agreement between the Company and the purchasers of the Series B Preferred Stock.

 

Ranking

 

The Series B Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends and right of liquidation with the Company’s Common Stock (“Common Stock”), (b) junior with respect to dividends and right of liquidation with the Company’s Series A Preferred Stock; and (c) junior with respect to dividends and right of liquidation to all existing and future indebtedness of the Company. Without the prior written consent of Holders holding a majority of the outstanding shares of Series B Preferred Stock, the Company may not issue any Preferred Stock that is senior to the Series B Preferred Stock in right of dividends and liquidation.

 

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Liquidation Preference

 

Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, after payment or provision for payment of debts and other liabilities of the Company, and after payment or provision for any liquidation preference payable to the holders of any Preferred Stock ranking senior upon liquidation to the Series B Preferred Stock, but prior to any distribution or payment made to the holders of Common Stock or the holders of any Preferred Stock ranking junior upon liquidation to the Series B Preferred Stock by reason of their ownership thereof, the Holders of Series B Preferred Stock will be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount with respect to each share of Series B Preferred Stock equal to the then Stated Value as adjusted pursuant to the terms hereof (including but not limited to the additional of any accrued unpaid dividends and the Default Adjustment, if applicable).

 

If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company will be insufficient to make payment in full to all Holders, then such assets will be distributed among the Holders at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled.

 

Conversion

 

Holders of Series B Preferred Stock shall have the right, exercisable at any time and from time to time (unless otherwise prohibited by law, rule or regulation, or agreement between the Corporation and the holders of the Series B Preferred Stock), to convert any or all their shares of the Series B Preferred Stock into Common Stock. B. Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Series B Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of the Series B Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series B Preferred Stock, the Corporation will within a reasonable time period make a good faith effort to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. C. Effect of Conversion. On any Conversion Date, all rights of any Holder with respect to the shares of the Series B Preferred Stock so converted, including the rights, if any, to receive distributions of the Corporation’s assets (including, but not limited to, the Liquidation Preference) or notices from the Corporation, will terminate, except only for the rights of any such Holder to receive certificates (if applicable) for the number of shares of Common Stock into which such shares of the Series B Preferred Stock have been converted.

 

Voting

 

Series B Preferred Stock shall be non-voting on any matters requiring shareholder vote.

 

Dividends

 

Series B Preferred Stock will carry an annual cumulative dividend, compounded monthly, payable solely upon redemption, liquidation or conversion as agreed to by and between the Company and the holder of the Series B Preferred Stock.

 

Redemption

 

The Series B Preferred Stock shall be redeemable by the Company as set forth in the agreement by and between the Company and the holder of the Series B Preferred Stock.

 

Protective Provisions

 

So long as any shares of Series B Preferred Stock are outstanding, the Company will not, without the affirmative approval of the Holders of a majority of the shares of Series B Preferred Stock then outstanding (voting as a class),

 

(i) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock or alter or amend this Certificate of Designations,

(ii) authorize or create any class of stock ranking as to distribution of dividends senior to the Series B Preferred Stock,

(iii) amend its articles of incorporation or other charter documents in breach of any of the provisions hereof,

(iv) increase the authorized number of shares of Series B Preferred Stock,

(v) liquidate, dissolve or wind-up the business and affairs of the Company, or effect any Deemed Liquidation Event (as defined below), or

(vi) enter into any agreement with respect to any of the foregoing.

 

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A “Deemed Liquidation Event” will mean: (a) a merger or consolidation in which the Company is a constituent party or a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Company or a subsidiary in which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of the surviving or resulting corporation or, if the surviving or resulting corporation is a wholly-owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company. The Company shall not have the power to effect a Deemed Liquidation Event unless the agreement or plan of merger or consolidation for such transaction provides that the consideration payable to the stockholders of the Company will be allocated among the holders of capital stock of the Company in accordance hereof.

 

Series C Preferred Stock

 

The following summary of the Company’s Series C Preferred Stock is merely a summary, we refer you to our Amended and Restated Articles of Incorporation and the applicable provisions of the Nevada Revised Statutes for a more complete description of the rights and liabilities of holders of our securities.

 

Designation and Amount

 

The total number of shares of Series C Preferred Stock this Corporation is authorized to issue is two (2) shares, with a stated par value of $0.00001 per share. The designations, powers, preferences, rights and restrictions granted or imposed upon the Series C Preferred Stock and holders thereof are as follows unless otherwise agreed to by agreement between the Company and the purchasers of the Series C Preferred Stock. For clarification, issuances of additional authorized shares of Series C Preferred Stock under the terms herein and as agreed to by and between the Company and the holder of such Series C Preferred Stock shall not require the authorization or approval of the existing shareholders of any other class of preferred stock.

 

Ranking

 

The Series C Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends and right of liquidation with the Company’s Common Stock, (b) junior with respect to dividends and right of liquidation with the Company’s Series A Preferred Stock and the Company’s Series B Preferred Stock; and (c) junior with respect to dividends and right of liquidation to all existing and future indebtedness of the Company. Without the prior written consent of Holders holding a majority of the outstanding shares of Series C Preferred Stock, the Company may not issue any Preferred Stock that is senior to the Series C Preferred Stock in right of dividends and liquidation.

 

Liquidation Preference

 

The Series C Preferred Stock shall have no liquidation preference.

 

Conversion

 

The Series C Preferred Stock shall not be convertible into any other classes of capital stock of the Company.

 

Voting

 

Each issued and outstanding shares of Series C Preferred Stock shall be entitled to One Billion (1,000,000,000) votes at each meeting of shareholders of the Company with respect to any and all matters presented to the shareholders of the Company for their action or consideration (by vote or written consent). Holders of shares of Series C Preferred Stock shall vote together with the holders of Common Shares as a single class.

 

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Dividends

 

Series C Preferred Stock shall not accrue dividends.

 

Redemption

 

The Series C Preferred Stock shall not be redeemable by the Company.

 

Series D Preferred Stock

 

The following summary of the Company’s Series D Preferred Stock is merely a summary, we refer you to our Amended and Restated Articles of Incorporation and the applicable provisions of the Nevada Revised Statutes for a more complete description of the rights and liabilities of holders of our securities.

 

Designation and Amount

 

The total number of shares of Series D Preferred Stock this Company is authorized to issue is one million (1,000,000) shares, with a stated par value of $0.00001 per share with such powers, preferences, rights and restrictions which shall be determined by the Company’s Board of Directors in its sole discretion, and which designations and issuances shall not require the approval of the shareholders of the Company.

 

Series D-1 Preferred Stock

 

The following summary of the Company’s Series D-1 Preferred Stock is merely a summary, we refer you to our Amended and Restated Articles of Incorporation and the applicable provisions of the Nevada Revised Statutes for a more complete description of the rights and liabilities of holders of our securities.

 

Designation and Amount

 

The total number of shares of Series D-1 Preferred Stock this Company is authorized to issue 311,250 shares, with a par value of $0.0001 per share and a stated value of $2.00 per share (the “Stated Value”). The Series D-1 Preferred Stock as a whole, of which Series D-1 is a subset, has such powers, preferences, rights and restrictions which shall be determined by the Company’s Board of Directors in its sole discretion, and which designations and issuances shall not require the approval of the shareholders of the Company.

 

Ranking

 

The Series D-1 Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends and right of liquidation with the Company’s Common Stock, (b) junior with respect to dividends and right of liquidation with the Company’s Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock; and (c) junior with respect to dividends and right of liquidation to all existing and future indebtedness of the Company. Without the prior written consent of Holders holding a majority of the outstanding shares of Series D-1 Preferred Stock, the Company may not issue any Preferred Stock that is senior to the Series D-1 Preferred Stock in right of dividends and liquidation.

 

Liquidation Preference

 

Upon any liquidation, dissolution or winding-down of the Company, the holders of the shares of Series D-1 Preferred Stock shall be paid in cash, before any payment shall be paid to the holders of Common Stock, or any other Junior Securities, an amount for each share of Series D-1 Preferred Stock held by such holder equal to 140% of the Stated Value thereof plus any dividends accrued but unpaid thereon.

 

Conversion

 

Each share of Series D-1 Preferred Stock together with accrued but unpaid dividends thereon shall be convertible at the option of the holder thereof, in whole or in part, at any time, without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Stated Value per share being converted plus accrued and unpaid dividends thereon by the Series D-1 Conversion Price in effect at the time of conversion. The “Series D-1 Conversion Price” per share of Common Stock shall be the lowest traded price of the Common Stock during the thirty (30) trading day period ending, in Holder’s sole discretion on each conversion, on either (i) the last complete trading day prior to the Conversion Date or (ii) the Conversion Date (subject to adjustment as provided therein).

 

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Voting

 

Series D-1 Preferred Stock shall be non-voting except on certain major corporate actions or as required by law. In the event of such a right to vote, each holder of Series D-1 Preferred Stock shall have the right to the number of votes equal to the number of Conversion Shares then issuable upon conversion of the Series D-1 Preferred Stock held by such holder.

 

Dividends

 

Before any dividends shall be paid or set aside for payment on any Junior Security of the Company, each holder of the Series D-1 Preferred Stock shall be entitled to receive dividends, in the manner provided herein, payable on the Stated Value of the Series D-1 Preferred Stock at a rate of 8% per annum, which shall be cumulative and be due and payable in shares of Common Stock on the Conversion Date. Such dividends shall accrue from the date of issue of each share of Series D-1 Preferred Stock, whether or not declared.

 

Redemption

 

Shares of the Series D-1 Preferred Stock shall be redeemable, in whole or in part, at the option of the Company, by resolution of its Board of Directors, in cash, at any time during the initial 60 calendar day period after the issuance of the respective Series D-1 Preferred Stock, subject to the Redemption Notice requirements below, at a price per share equal to 125% of the Stated Value plus the amount of accrued but unpaid dividends thereon, provided, however, that 125% shall be replaced with 140% if the Company exercises its option to redeem the Series D-1 Preferred Stock after the initial 60 calendar day period.

 

Anti-Takeover Provisions

 

Some features of the Nevada Revised Statutes, which are further described below, may have the effect of deterring third parties from making takeover bids for control of our company or may be used to hinder or delay a takeover bid.

 

This would decrease the chance that our stockholders would realize a premium over market price for their shares of Common Stock as a result of a takeover bid.

 

Acquisition of Controlling Interest

 

The Nevada Revised Statutes contain provisions governing acquisition of a controlling interest of a Nevada corporation. These provisions provide generally that any person or entity that acquires a certain percentage of the outstanding voting shares of a Nevada corporation may be denied voting rights with respect to the acquired shares, unless the holders of a majority of the voting power of the corporation, excluding shares as to which any of such acquiring person or entity, an officer or a director of the corporation, and an employee of the corporation exercises voting rights, elect to restore such voting rights in whole or in part. These provisions apply whenever a person or entity acquires shares that, but for the operation of these provisions, would bring voting power of such person or entity in the election of directors within any of the following three ranges:

 

  20% or more but less than 33-1/3%;
     
  33-1/3% or more but less than or equal to 50%; or
     
  more than 50%.

 

The stockholders or Board of Directors of a corporation may elect to exempt the stock of the corporation from these provisions through adoption of a provision to that effect in the articles of incorporation or bylaws of the corporation. Our Amended and Restated Articles of Incorporation and Bylaws do not exempt our Common Stock from these provisions.

 

These provisions are applicable only to a Nevada corporation, which:

 

  has 200 or more stockholders of record, at least 100 of whom have addresses in Nevada appearing on the stock ledger of the corporation; and
     
  does business in Nevada directly or through an affiliated corporation.

 

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At this time, we do not believe that these provisions apply to acquisitions of our shares and will not until such time as these requirements have been met. At such time as they may apply to us, these provisions may discourage companies or persons interested in acquiring a significant interest in or control of our company, regardless of whether such acquisition may be in the interest of our stockholders.

 

Combination with Interested Stockholder

 

The Nevada Revised Statutes contain provisions governing combination of a Nevada corporation that has 200 or more stockholders of record with an interested stockholder. As of May 31 2018, we had 705 stockholders. Therefore, we believe that these provisions governing combination of a Nevada corporation may apply to us and may have the effect of delaying or making it more difficult to effect a change in control of our company. However, the stockholders or Board of Directors of a corporation may elect to exempt the stock of the corporation from these provisions through adoption of a provision to that effect in the articles of incorporation or bylaws of the corporation. Our Amended and Restated Articles of Incorporation and Bylaws exempt our Common Stock from these provisions.

 

If such provisions did apply, a corporation affected by these provisions may not engage in a combination within three years after the interested stockholder acquires his, her or its shares unless the combination or purchase is approved by the Board of Directors before the interested stockholder acquired such shares. Generally, if approval is not obtained, then after the expiration of the three-year period, the business combination may be consummated with the approval of the Board of Directors before the person became an interested stockholder or a majority of the voting power held by disinterested stockholders, or if the consideration to be received per share by disinterested stockholders is at least equal to the highest of:

 

  the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or within three years immediately before, or in, the transaction in which he, she or it became an interested stockholder, whichever is higher;
     
  the market value per share on the date of announcement of the combination or the date the person became an interested stockholder, whichever is higher; or
     
  if higher for the holders of preferred stock, the highest liquidation value of the preferred stock, if any.

 

Generally, these provisions define an interested stockholder as a person who is the beneficial owner, directly or indirectly of 10% or more of the voting power of the outstanding voting shares of a corporation. Generally, these provisions define combination to include any merger or consolidation with an interested stockholder, or any sale, lease, exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions with an interested stockholder of assets of the corporation having:

 

  an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation;
     
  an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation; or
     
  representing 10% or more of the earning power or net income of the corporation.

 

Articles of Incorporation and Bylaws

 

Our Amended and Restated Articles of Incorporation contain provisions for “blank-check preferred stock” that may delay, defer or prevent a change in control of our company and that would operate only with respect to an extraordinary corporate transaction involving our company, such as merger, reorganization, tender offer, sale or transfer of substantially all of its assets, or liquidation.

 

EXPERTS

 

The consolidated financial statements of 12 ReTech Corporation as of and for the years ended December 31, 2017 and 2016, appearing in this prospectus and the registration statement of which it is a part, have been audited by Rotenberg Meril Solomon Bertiger & Guttilla, P.C., an independent registered public accounting firm, as set forth in their report dated April 16, 2018 (which contains an explanatory paragraph regarding the Company’s ability to continue as a going concern) appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

 

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LEGAL MATTERS

 

Procopio, Cory, Hargreaves & Savitch LLP has provided us with an opinion on the validity of the shares of our common stock being offered pursuant to this prospectus.

 

INTERESTS OF NAMED EXPERTS AND COUNSEL

 

No expert named in the registration statement of which this prospectus forms a part as having prepared or certified any part thereof (or is named as having prepared or certified a report or valuation for use in connection with such registration statement) or counsel named in this prospectus as having given an opinion upon the validity of the securities being offered pursuant to this prospectus or upon other legal matters in connection with the registration or offering such securities was employed for such purpose on a contingency basis. Also at the time of such preparation, certification or opinion or at any time thereafter, through the date of effectiveness of such registration statement or that part of such registration statement to which such preparation, certification or opinion relates, no such person had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in our company or any of its parents or subsidiaries. Nor was any such person connected with our company or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.

 

BUSINESS

 

Overview

 

12 ReTech Corporation (“we”, “us”, “our”, “12 ReTech”, “RETC”, or the “Company”) was incorporated under the laws of the State of Nevada, U.S. as DEVAGO INC. on September 8, 2014. On June 8, 2017, we amended our Articles of Incorporation to change the name to 12 ReTech Corporation. At our core, we are a software company whose technology allows retailers to combat the dual threats of Walmart and Amazon — both online and in physical stores. Our microbrand rollup acquisition strategy allows us to demonstrate the effectiveness of our software, devise and test new products, while achieving revenue and earnings growth. The Company operates through our subsidiaries on three continents, Asia, North America and Europe. The Company’s subsidiaries are as follows: 12 Hong Kong, Limited (“12HK”, “12 Hong Kong, Ltd.”), 12 Japan, Limited (“12JP”, “12 Japan, Ltd.”), 12 Europe A.G. (“12EU”, “12 Europe AG”), and 12 Retail Corporation (“12 Retail”) (and its subsidiary, E-Motion Apparel, Incorporated (“EAI”, “E-Motion Apparel, Inc.”) in North America).

 

Subsidiaries

 

12 Hong Kong, Ltd . a corporation organized in the special economic region of Hong Kong. On June 27, 2017 the Company acquired 12 Hong Kong, Ltd. in a share exchange transaction (See Section 7 of the form 10-K for the year ended December 31, 2017 Management Discussion & Analysis). This is the technology company that manages all the Company’s proprietary and licensed technology that is utilized and sold by the other subsidiaries. In addition, this subsidiary serves as an additional marketing and sales hub for Asia, particularly the Chinese market, excluding Japan.

 

12 Japan, Ltd . a corporation organized in Japan. The Company acquired 12 Japan, Ltd, located in Tokyo, Japan on July 31, 2017 in a share exchange (See Section 7 of the form 10-K for the year ended December 31, 2017 Management Discussion & Analysis). This subsidiary operates in the country of Japan. It is this subsidiary that services our first customer, Itoya Ltd, where our technology was successfully implemented and proven.

 

12 Europe A.G . a corporation organized in Switzerland. The Company acquired 12 Europe A.G. on October 26, 2017 in a share exchange. (See Section 7 of the form 10-K for the year ended December 31, 2017 Management Discussion & Analysis). This subsidiary markets, sells, and services the Company’s proprietary and licensed technology to retailers in the European market from its base of operations in Zurich, Switzerland. Since its acquisition, this subsidiary has already signed agreements with 4 retailers, consisting of 1 department store and 3 local businesses, to deploy components of our 12 Technology Suite and 12Sconti app (See Section 7 of the form 10-K for the year ended December 31, 2017 Management Discussion & Analysis).

 

12 Retail Corporation was formed in the state of Arizona, USA and maintains an office in Scottsdale, Arizona. This subsidiary was formed on Sept. 18, 2017 to execute the Company’s microbrand roll up acquisition strategy as well as to penetrate the North American market with our technology to select retailers. All of the microbrands that are acquired will retain their own brand names and identities although they will share some economies of scale and benefit from the management expertise, resources and capital allocation available as a subsidiary of the Company. The microbrand acquisitions will become subsidiaries of 12 Retail Corporation.

 

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E-motion Apparel, Inc . (“EAI”) On May 1, 2018, The Company acquired 100% of the equity in E-motion Apparel, Inc., a California corporation which became effective May 1, 2018, though the 12 Retail subsidiary, pursuant to a Share Exchange Agreement (see Note 11 - Subsequent Events in the consolidated financial statements), which itself owns five microbrands that target specific niche markets: Emotion Apparel, Lexi-Luu Dancewear, Punkz Gear, Cleo VII and Skipjack Dive & Dance Wear. This company, now located in Salt Lake City, Utah, operates its own production and fulfillment facility that management believes can be utilized by all of the Company’s future microbrand acquisitions as a competitive advantage to quickly produce, market, sell and deliver many quantities of small production runs of garments, keeping online sales channels fresh. See Form 8–K dated March 15, 2018 & April 27, 2018.

 

Our Business

 

Brick and mortar retailers continue to struggle against online competition, even though online sites haven’t changed much in 20 years. With consumers looking to purchase products in new ways with a larger focus on individualism and social sharing, retailers and merchants are searching for new ways to entice consumers through software technologies that engage consumers both online and in the physical store (the “Consumer Shift”). These disruptive changes are affecting not just merchants and retailers, but all stages of their supply channel from design and manufacture to distribution and shipping. Consequently, many of the valuations of retailers, merchants, and their suppliers are in the trough while other retailers have simply gone out of business.

 

Management believes that the Company’s software and technologies can benefit almost all retailers, the Company will initially focus on the Apparel and Cosmetics sectors where they believe we can have the biggest impact and that market generated over $378 billion in 2016 revenue in just the U.S. (Statista Feb 2017).

 

The Company benefits shareholders by generating its revenue and earnings two ways: 1) through the revenue and earnings generated from its microbrands, and 2) through the revenue generated through the sale and/or licensing of its proprietary software and technology to third party retailers and merchants.

 

Our Technology

 

The Company’s patent-pending, proprietary technology products, software and services, as well as management expertise, directly addresses the Consumer Shift with software solutions that seamlessly engage consumers both in the physical store and online, encourage social sharing, and advertising while lowering retailer and merchants’ operating costs. We will employ it ourselves at our microbrands where we demonstrate its effectiveness and develop additional feature sets.

 

Adoption and Deployment of our Software

 

Retailers have already expressed interest in our software solutions, recognizing that we demonstrate the 3P’s of successful technology: “Proven, Proprietary, and Patented.” Itoya has already successfully installed our technology in its 13-story lifestyle store in Tokyo and is in talks to install our solutions in more of its stores. Manor, A.G., the largest department store chain in Switzerland with over 60 stores, has now ordered a pilot for two of its stores including its flagship store. The Company’s brand new 12Sconti app has been well received and is being promoted by retailers in Switzerland. In the United States, in January 2018 the Company hosted nearly 60 top retail executives in association with the National Retail Foundation where it introduced its technology to favorable reviews, and has received interest from retailers in the U.S., Mexico, and Brazil. The Company’s first and only deployed technology customer, ITOYA Ltd of Japan just contracted to install elements of the 12 Technology Suite in a second store that is being constructed.

 

Our Microbrand Acquisition Strategy

 

Management defines a “microbrand” as “any brand that generates under $75 million in annual revenue”, and a “minibrand” as “any brand with $75 million to $ 1 billion in annual revenue”. A true “Brand” has over $1 billion in annual revenue. With brick and mortar retail sales in the trough due to the Consumer Shift, management believes that there is a strong opportunity to acquire microbrands based on trough valuations that, through the deployment of our technologies, can produce outsized returns and be generally accretive to our business. Since these microbrands are small, they can be targeted to smaller individual niche demographics, providing the individuality required by the Consumer Shift. Each of our microbrands will be complementary to each other and generally benefit from our technologies.

 

With the acquisition of significant profitable microbrands, the Company becomes self-sufficient, able to generate its own cash flow to minimize the need to raise capital to support its software development, sales and deployment.

 

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Management formed 12 Retail Corporation in Arizona to acquire microbrands and manage its microbrand strategy. On May 1, 2018, subsequent to year ended December 31, 2017 the Company, through its 12 Retail subsidiary, acquired its first microbrand: E-motion Apparel, Inc, (“EAI”), a California corporation founded in 2011, which itself owns four other microbrands that target specific niche markets: Lexi-Luu Dancewear, Punkz Gear, Cleo VII and Skipjack Dive & Dance Wear. This company is now located in Salt Lake City, Utah to take advantage of a “pro-business” well trained employee market, and operates its own production facility that management believes can be utilized by all of the Company’s future microbrand acquisitions as a competitive advantage to produce many small quantity garments that can keep online sales channels fresh, as well as speeding up design and creation of samples so that large scale off-shore production can be accomplished more rapidly. For more information, please visit our website at www.E-motionapparelinc.com or on Facebook at: lexi-luu designs-dancewear.

 

Additional Microbrands Targeted for Acquisition

 

The Company has targeted a number of other potential acquisitions and has announced the execution of two non-binding Letters of Intent (“LOI”) to acquire three of them: Colorado Trading and Clothing Company d/b/a Active Fashion Group, The J. Peterman Company, LLC, and Krazy Larry, Inc., and continues to perform due diligence while final negotiations and documentation are on-going. If these acquisitions are completed, they would add significant additional revenue, and could expect to similarly benefit from the synergies between the other microbrands and the Company’s proprietary technologies.

 

Our Technology Strategy

 

Management believes that adoption of our software technology and strategies by physical and online retailers and merchants is the only way for them to combat the dual threat posed by Amazon and Walmart.

 

12 ReTech Corporation has created a fully-integrated shopping experience driven by new technology and has integrated all aspects of social networking. We refer to our technology simply as the “12 Technology Suite”, or just “12 Suite”. We anticipate we will be the next disruptive innovator in the retail sector. Simply put, 12 Suite is an interactive shopping cart that seamlessly combines shopping and social networking for a fun and unique shopping experience. 12 Suite integrates in-store, online, and mobile shopping with its smart mirror (“12Mirror”), 12Mobile app, and 12Kiosk, while an interactive advertising screen provides special offers from shops, restaurants, and service providers. Over the past 36 months, the Company has developed a proprietary technology suite (software, hardware (the 12Mirror), applications for the iPhone, iPad, and Android phones and tablets (12Mobile)) that integrates traditional shopping, on-line shopping, entertainment and social networking into a “Totally Integrated Retail Platform.”

 

The first fully-integrated store (13 story shopping center) has been fully implemented in Tokyo, Japan and is running successfully since the beginning of 2016. In the meantime, we have been in active negotiations with a Japanese information technology company for distribution rights in Japan and are now working on an enhancement project focusing our system to Promotion / Advertising activities in approximate vicinities. We believe that all elements are in place to continue development and expansion of the concept in department stores, malls and specialized retailers in fashion and/or jewelry.

 

The 12 ReTech Experience

 

USXS – U nifying S hopping e X perience S ystem ® - Management believes that the USXS is the solution for all retail problems related to reaching the consumer; the connector of any available technology system and the generator of a truly shopping and entertainment experience for consumers. Our technology is based on the full integration of the 12Mirror / 12ADScreen connected with 12Kiosk, 12Mobile and e-commerce. The whole technology will enable consumers to be independent and freely share information with friends.

 

We call this the “12 Experience”. We believe that the 12 Experience offers both retailers and customers an exciting, timesaving and efficient way to enjoy and to fully become immersed within the traditional retail environment.

 

We believe that:

 

12 Retech will set a new trend in retailing, changing the way shopping and advertising is done.
12 Retech will connect people to business and people to people
12 Retech will be the first offering a real-time service to consumers wherever they are located
12 Retech will build on the complete integration of four fundamental retail and entertainment components: Traditional Shopping; Online/Mobile Shopping; Social Networking; PR-Advertising and Entertainment

 

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Industry Overview

 

E-commerce has increased 20% on average each year but remains at only 8% of total commerce.
Many shoppers visit physical shops but purchase online looking for lower a price.
Unqualified shop staff cannot help effectively and can struggle to make consumers happy.
Waiting in line, waiting for fitting rooms, or waiting to pay, can be frustrating and has the potential to make customers exit the store without purchasing.
Small retailers cannot afford to spend significant money on advertising or technology.
Retailers are reluctant to fully embrace the potential of new technologies if it costs then significant money and is difficult to implement the new system.
There is need to provide an easier way to get special offers to consumers.

 

Disruptive Technology

 

The Company is deploying its technology in traditional retail outlets in order to allow for a seamless and novel approach to traditional retail shopping models. In order to advance our concept, we have identified several key concepts that we believe are the cornerstones of our business in the coming months and years. We believe that consumers want to shop in a seamless way, avoiding long lines and avoiding the frustrations that traditional retail shopping has long since been mired.

 

We firmly believe that the modern shopper:

 

Wants to evaluate products all the time, not only while shopping.
Likes to learn about a product and get a friend’s recommendation and suggestion through any methodology available, especially social media.
Wants flexible shopping anywhere, online, mobile or at the store.
Wants flexible order and delivery or pick-up at the store.
Wants to receive customized offers and promotions before entering or when they are at the store.
Expects seamless, personalized experience at every touch point-anytime, anywhere.
Wants convenience and value to be assured.

 

What does it bring to Customers?

 

12 ReTech’s technology helps drive more customers to the store and helps to increase sales due to the fact that customer will spend more time in the store browsing and checking products, sales can also be generated after store closure, sales can be generated after the consumer shows the product to friends and speaks with them. The technology allows retailers to receive customized information about customers, learn and understand their behavior and shopping patterns, while providing improved and customized offers to consumers. Customers create free advertising for the retailers through the sharing of pictures taken in the stores.

 

The 12 Suite

 

Our 12 Suite offers a spectrum of smart devices – from mirrors to PR screens to kiosks and more – to help retailers reach new consumers, increasing visibility across all channels and providing a better service.

 

12Mirror

 

The 12Mirror is a unique in-store application, which is truly different from currently existing magic mirrors. Our 12Mirror is a custom-made interactive mirror with touch capability. It recognizes clothes that a person is fitting, and can take pictures, which can be instantly shared with friends and family. When synchronized with the 12Mobile application, it enables shoppers to transfer 12Mirror images to their smart phones, purchase items with ease, and share their experience with friends online.

 

The 12Mirror detects products, gives information and collects data from consumers and products that are important for the shop, designer and manufacturer.

 

It also offers related products in store and from other stores if available.

 

12Kiosk

 

The 12Kiosk is an in-store application to browse products, get information and place orders. In the stores, the 12Kiosk can detect products, provide information, and allow the consumer to checkout on this device as a self-checkout point. It collects data from consumers and products, which in turn are important for the shop, designer, and manufacturer.

 

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12ADScreen

 

The 12ADScreen is a custom-made two-way screen with voice and touch capability. It detects people in front of the screen and calls them up by sound or voice. The consumer can get information on special offers at the store and/or can download advertised pictures or videos and then shop directly out of them.

 

The 12ADScreen is a new way of interactive advertising, attracting consumers in a fun and entertaining way.

 

12Mobile

 

The 12Mobile App is an e-commerce application for iPhone and Android mobile devices. This application can be used to find great offers at nearby member stores, it can make reservations and pay for purchases and services, it can check products in members stores, and it allows the consumer to socialize through the app or share with other social media apps. It allows downloading pictures or videos from the 12Mirror or 12ADScreen, to share with friends. The consumer can receive special offers or coupons from advertisers and can participate in monthly competitions via our app.

 

The Staff/Sales App

 

The Staff/Sales App is an application for vendors, which can be used on smart phones, tablets, or PC’s to communicate with the 12 ReTech technology system, checking product information, inventory and location for a better service to their customers. It also provides product-training sessions for education of the sales staff.

 

12Sconti App

 

The 12Sconti App – a new addition to our 12 Suite – was created to help in reducing food waste. This app helps retailers of perishable products to reduce their waste by offering products at reduced prices to 12Sconti’s users. It allows consumers to buy products at a cheaper price from vendors in their vicinities. 1% of all revenue will be donated to a charity organization dedicated to help mitigate world hunger.

 

12 ReTech Will Make Shopping a “Truly Social Experience”

 

Offers to Consumers

 

Consumers can enjoy shopping while they socialize with friends, being entertained at all times.
Consumers can check products online, in the store, on the 12 Mirror, 12Kiosks or 12Mobile.
Consumers can get customized offers on specific products/brands.
Consumers do not need to wait in line for fittings and paying. They can have the flexibility of home delivery or pick-up at the store.
Consumers can get immediate offers and discounts on products, restaurants or services from business that is in the vicinity (within 10 min walking distance).
Consumers can always get the best immediate deal available on various offers.

 

12 ReTech brings social media to life in a rich, totally immersive and exciting environment. In the store, consumers can connect instantaneously with any available social networking system like Facebook, Skype, WhatsApp, Line, Wechat, etc. Consumers can share pictures and videos, and can get opinions from their families and friends. 12 ReTech actively evolves with the rapidly changing “iGeneration.”

 

Advertising and Entertainment

 

In the retail and advertising business, the ideal customer for adopting this concept are department stores, malls or small retailers who want to improve their sales at the shop and online by empowering consumers and providing them with a total experience and also by reaching them with unique offers. For the first stage of our mobile app, we are targeting small and middle level retailers as well as service providers. On stage two we will target people who have skills and want to provide them privately (Person to Person) generating additional value for consumers. We believe that the concept of allowing the Consumer to have fun, receive special offers and being entertained during their shopping experience is very important. 12 ReTech makes the consumer feel special, important and empowered, allowing them to choose the best offer available right now at the store they are in or at stores in the vicinity.

 

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Intellectual Property

 

The Company has three pending patents covering its Intellectual Property:

 

1. U.S.A.

 

Patent Application # : 14/101,486

 

Description : The patent application relates to an inventive shopping system with enhanced efficiency, including but not limited to, a customer interaction device for communication between a customer and the shopping system, the customer interaction device interacting with the shopping system to conduct activities in a retail store.

 

Filing Date : December 10, 2013

 

2. P.R. China:

 

Patent Application #: 201410418985.X

 

Description : This patent application claims priority from the US application, and it relates to an inventive shopping system with enhanced efficiency, including but not limited to, a customer interaction device for communication between a customer and the shopping system, the customer interaction device interacting with the shopping system to conduct activities in a retail store.

 

Filing Date : August 24, 2014

 

3. Patent Cooperation Treaty (PCT) Application

 

Patent Application #: PCT/IB2014/066751

 

Description : This patent application claims priority from the US application, and it relates to an inventive shopping system with enhanced efficiency, including but not limited to, a customer interaction device for communication between a customer and the shopping system, the customer interaction device interacting with the shopping system to conduct activities in a retail store.

 

Filing Date : December 10, 2014

 

    Patent Application #   Description   Filing Date
1. USA 14/101,486   Unifying Shopping Experience System   Dec 10, 2013
2. P.R. China 201410418985.X   Unifying Shopping Experience System   Aug 24, 2014
3. E. U. 2014/066751   Unifying Shopping Experience System   Dec 10, 2014

 

In addition, as of the date of the report the Company owned the following Universal Resource Locator(s) (URLs)

 

www.12retech.com
www.12japan.jp
www.12hongkong.com
www.12europe.com
www.12retail.com
www.12sconti.com
www.Emotionapparelinc.com

 

Finally, through the acquisition of E-motion Apparel Inc. the Company acquired the rights to 156 patterns as well as the proprietary process for making the fashion clothing owned and marketed by the Company.

 

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Future Intellectual Property Strategy

 

The Company intends to continue its development of its technologies and will continue to apply for patents for future product developments. The Company’s strategy is to protect the technologies with patents in Europe, U.S. and China. Following product development, each product, based on the technologies, will be further protected individually by new patent filings worldwide.

 

Facilities

 

Our principal executive offices are located at 701 S. Carson Street, Suite 200, Carson City, NV 89701. Our telephone number at that address is (530) 539-4329.

 

The Company and its subsidiaries have lease commitments as follows:

 

  The Company is committed to a 12-month lease until December 31, 2018 for office space in New York City at the rates of $2,095 per month
     
  12JP is committed to a two-year lease that expires May 31, 2018 but will automatically renew for 12 additional months at a monthly lease rate of $715.
     
  12HK rents virtual office space on a yearly lease ending October 1, 2018 for an annual cost of $2,310.
     
  12 Retail rents office space where it has access to conference rooms on an as needed basis for a fee.
     
  EAI is committed to a three-year lease which ends on March 31, 2021 but can be extended at a cost of $4,000 per month. This is a triple net lease whereby the tenant pays all repairs, taxes and common area expenses which total about $600 per month. This lease has annual increase clauses of 3% per year.

 

Employees

 

We currently have 10 staff members including officers, directors, full-time and part-time employees and/or consultants. There are no collective-bargaining agreements with our employees, and we have not experienced work interruptions or strikes. We believe our relationship with employees is good.

 

LEGAL PROCEEDINGS

 

From time to time, we may be a party to legal proceedings and subject to claims incident in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we believe that the final outcome of these matters will not have a material adverse effect on our financial condition or business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

 

MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Our common stock was traded under our former name DEVAGO, INC. on the over-the-counter pink market from December 30, 2014 to June 8, 2017 under the symbol “DVGG”. Effective June 22, 2017, the Company changed its name to 12 ReTech Corporation and effective on or around July 20, 2017, the quotation symbol was changed to “RETC” where our stock traded on OTC MARKET’s over-the-counter pink sheet market. On March 16, 2018, the Company filed Form 8A-12G and became a mandatory filer with the United States Securities and Exchange Commission. The following table sets forth the high and low bid prices for our common stock on the over-the-counter pink market from March 31, 2017 to March 31, 2018. The source of these quotations is www.OTCMarkets.com quarterly market summary. The bid prices are inter-dealer prices, without retail markup, markdown or commission, and may not reflect actual transactions.

 

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Quarter Ending (2)   High Bid     Low Bid  
March 31, 2018     0.09       0.85  
December 31, 2017     0.29       0.07  
September 30, 2017     2.61       0.02  
June 30, 2017 (1)     1.20       0.30  
March 31, 2017     0.30       0.30  

 

(1) On June 22, 2017, the Company effected its 6:1 forward split. On the days immediately following the split, the bid ranged from $250 - $500, but since no shares traded, we took the highest bid during the quarter when shares actually traded.

 

(2) Prior to 2017, there was no trading market in the stock.

 

Holders

 

As of May 31, 2018 the closing price for the Company’s common stock on OTC Markets was $0.083 per share. We had 705 stockholders of record.

 

Dividends

 

We have not paid, nor declared, any cash dividends since our inception and do not intend to declare or pay any such dividends in the foreseeable future. Our ability to pay cash dividends is subject to limitations imposed by state law.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this annual report. References in the following discussion and throughout this annual report to “we”, “our”, “us”, “12 ReTech Corporation”, “12 ReTech”, “the Company”, and similar terms refer to, 12 ReTech Corporation. unless otherwise expressly stated or the context otherwise requires. This discussion contains forward-looking statements that involve risks and uncertainties. 12 ReTech Corporation actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this filing.

 

Overview

 

At our core, 12 ReTech Corporation is a software company whose technology allows retailers to combat the dual threats of Walmart and Amazon — both online and in physical stores. Our microbrand rollup acquisition strategy allows us to demonstrate the effectiveness of our software, devise and test new products, while providing shareholder value through immediate revenue and earnings growth. The Company operates through our subsidiaries on three continents: 12 Hong Kong, Ltd. and 12 Japan, Ltd., 12 Europe A.G., 12 Retail Corporation (and subsidiary in North America, E-motion Apparel Inc).

 

The Company’s business strategy is twofold. First, we design, sell and implement software that helps retailers to improve their physical store and online sales operations. We believe that the current slump of the global retail industry will not last forever. We believe that leading retailers, will emerge as industry leaders because they have adapted to the evolving needs of their customers. 12 ReTech owns and licenses several technologies that will be useful to the retailer who is looking to survive the current business environment and even allow these new leaders to thrive in their businesses.

 

Second, we plan to acquire multiple consumer products microbrands in an effort to take advantage of the current slump in the global retail industry. We will use our technology, our management and operational expertise and working capital to improve the microbrands that we acquire and will demonstrate to the investor community as well as the retail industry that our technology and expertise can create significant uplifted revenue and profit results for our retailer clients. By improving our microbrands and expanding their brand awareness and their operations, we hope to create additional value for 12 ReTech’s investors. By using the Company’s technology to improve the Company’s microbrands, the technology which is licensed to retailer customers will also become more effective for and attractive to outside retailer customers.

 

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12 ReTech Corporation is a holding company that operates through its subsidiaries:

 

12 Hong Kong, Ltd. – The technology development arm of the Company which develops and deploys the various technology offerings that the Company sells and/or licenses to their merchant customers.

12 Japan, Ltd. – The Asia located sales organization responsible for recruiting customers in the Asia countries of their territory.

12 Europe, A.G. – The Europe located sales organization responsible for recruiting customers in the European countries of their territory

12 Retail Corporation – The USA based organization which will hold and operate the acquired consumer product brand subsidiaries that result from the Company’s microbrand rollup strategy.

E-motion Apparel, Inc. – The Company’s first microbrand acquisition which was acquired as a subsequent event and as a subsidiary of 12 Retail Corporation. They own the brands, Lexi-Luu, Emotion Apparel, Punks Gear, Skipjack Dive and Dancewear and Cleo VII.

 

There is no assurance that the Company will be able to obtain cash flow from operations or obtain additional financing. If sources of working capital are not available to the Company, the Company may not be able to continue operations. While management remains hopeful that one or more acquisition transactions will proceed, no assurances can be expressed as to the Company’s continuing viability in the absence of revenues. Current funding has come from equity investments. Management views certain debt which due to its convertible nature essentially takes the form of a “PIPE” placement (“ P rivate I nvestment in a P ublic E ntity”) as equity (“debt-equity”) as well as certain preferred share investments as equity and the Company is currently in negotiations with several investment sources for additional equity investment in the Company, which if successful, will satisfy long-term operations and capital expenditures (See Subsequent Events in the footnotes). There are no guarantees that such negotiations will be successful.

 

Business Developments

 

The Company was formed in Nevada on September 8, 2014 as Devago Inc. as a start-up company engaged in the creation of mobile software applications or “apps”.

 

On March 30, 2017, the Company received an S-1 Notice of Effectiveness from the United States Securities and Exchange Commission (the “SEC”).

 

On June 7, 2017, we entered into the Share Exchange Agreement with 12 Hong Kong Limited, a Hong Kong Special Administrative Region corporation, and the Shareholders of 12HK (the “12HK Shareholders”).

 

On June 8, 2017, the Company filed with the State of Nevada Amended and Restated Articles of Incorporation, reflecting: (1) a change the Company’s name from Devago, Inc. to 12 ReTech Corporation; and, (2) an increase in the Company’s authorized shares of Common Stock from 100,000,000 to 500,000,000, and decreases its authorized shares of undesignated Preferred Stock from 100,000,000 to 50,000,000.

 

On June 21, 2017, the Financial Industry Regulatory Authority (“FINRA”) approved a six-for-one (6:1) forward split of the Company’s common stock. The Company also facilitated the cancellation of 19,800,000 pre-split shares of its restricted common stock and such stock was returned to the Company’s treasury.

 

On June 27, 2017 the Company completed the acquisition of 12 Hong Kong, Ltd which became a wholly-owned subsidiary. Pursuant to the Share Exchange Agreement, the Company acquired Four Million (4,000,000) shares of 12HK representing 100% of the issued and outstanding equity of 12HK from the 12HK Shareholders (the “12HK Shares”) in exchange for an aggregate of Fifty Five Million (55,000,000) shares of Company stock, consisting of: (i) Fifty Million (50,000,000) shares of common stock; and, (ii) Five Million (5,000,000) shares of Series A Preferred Stock.

 

On June 27, 2017, as a result of closing the acquisition of 12HK, the Company was no longer a shell corporation as that term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.

 

On July 31, 2017, the Company acquired all of the outstanding equity of 12 Japan, Ltd., which became a wholly owned subsidiary. Pursuant to the Share Exchange Agreement, the Company acquired One Hundred One Thousand (101,000) shares of 12JP, representing 100% of the issued and outstanding equity of 12JP, from the 12JP shareholders in exchange for; i) Five Million (5,000,000) shares of its Common Stock; and, (ii) Five Hundred Thousand (500,000) shares of its Series A Preferred Stock. As required in the Share Exchange Agreement and concurrently with closing, the Company canceled five million (5,000,000) of its common stock and five hundred thousand (500,000) the Company’s Series A preferred stock beneficially owned by the Company’s majority stockholder, which were returned to the Company’s treasury.

 

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On October 26, 2017, pursuant to the Share Exchange Agreement, the Company exchanged Three Million Eight Hundred Seven Thousand Nine Hundred Seventy-Six (3,807,976) of its common shares for One Thousand (1,000) of common shares of 12 Europe A.G., representing 100% of the issued and outstanding equity of 12EU, and 12EU became a wholly-owned subsidiary of the Company.

 

On January 29, 2018, the Company designated three additional classes of Preferred Shares having the rights, preferences and privileges of each class of preferred stock as indicated; i) The Series B Preferred Stock, which will consist of 1,000,000 shares of Series B Preferred Stock, par value $0.00001 per share with each shares having a value of $1.00 when issued and convertible into common stock at a discount to be agreed between the Company and the indicated shareholder, ii) Series C Preferred Stock, which will consist of two shares of Series C Preferred Stock, par value $0.00001 per share and each share shall each cast 1 billion votes for any matters requiring a vote of shareholders, and shall not be convertible into common stock, and iii) Series D Preferred Stock, par value $0.00001 and shall be deemed Blank Check Preferred allowing the Board of Directors at some future date to determine the rights, privileges and preferences as they may deem appropriate.

 

On January 29, 2018 and March 14, 2018, the Company sold 203,000 and 63,000 Preferred Series B shares, respectively to Geneva Roth Remark Holdings, Inc., a New York corporation, for $1.00 per share. These shares may be converted by the Holder at a 35% discount to market after being held for six months under a discount formula. These shares also can be redeemed at the option of the Company at any time for a cash amount equal to the defined redemption percentage and carry a mandatory redemption by the Company of all previously unredeemed or unconverted shares fifteen months following the issuance date.

 

On May 1, 2018, The Company, through its subsidiary 12 Retail, acquired 100% of the equity in E-motion Apparel, Inc, a California corporation, pursuant to a Share Exchange Agreement (see Section “Subsequent Events”), which itself owns four other microbrands that target specify niche markets: Lexi-Luu Dancewear, Punkz Gear, Cleo VII and Skipjack Dive & Dance Wear. This company, now located in Salt Lake City, Utah, operates its own production and fulfillment facility that management believes can be utilized by all of the Company’s future microbrand acquisitions as a competitive advantage to quickly produce, market, sell and deliver many smaller quantities of garments, keeping online sales channels fresh.

 

On March 14, 2018, and upon the written consent of the majority of shareholder votes eligible to vote as of March 14, 2018, the Company increased its common authorized shares from 500 Million (500,000,000) shares to One Billion (1,000,000,000) shares of common stock.

 

On March 16, 2018 the Company filed form 8A-12G announcing that the common stock of the Company as described on Form S-1/A, filed on February 10th, 2015 and effective March 30, 2015 incorporated herein by reference are registered. Through this filing, the Company became a Mandatory Filer with the SEC.

 

YEAR ENDED December 31, 2017 COMPARED TO THE YEAR ENDED December 31, 2016

 

Amounts reflected in our financial statements are accounted for under common control accounting (see footnotes).

 

During the year ended December 31, 2017, we incurred a net loss of $1,418,755 compared to a net loss of $181,040 for the year ended December 31, 2016. The increase in our net loss for the year ended December 31, 2017 over the comparable period of the prior year is primarily due to $587,969 of expenses associated with the raising of capital and investor relations in 2017 whereas there were no capital raising activities and no investor relations activities in 2016. On June 27, 2017 the Company acquired 12 Hong Kong, Ltd which is accounted for as a reverse merger such that the financials of the Company are those of the acquired entity which as a result of this transaction became the public entity. As such, the Company did not have significant public company expenses and working capital raising expenses prior to that date. Of the $587,969 of expenses associated with capital raising and investor relations, $474,000 were non-cash expenses paid to various consultants and advisors with the Company’s stock which further aligned them to the goals of the Company as opposed to having paid their fees in cash. The Company also paid cash compensation of $113,969 as part of the expenses associated to obtaining working capital during the course of 2017.

 

In order to execute the Company’s business plan post reverse merger in 2017 the management and employee compensation costs were higher by $124,077 as a result of management and employee hires who were brought in to pursue the Company’s business plan. Legal and consulting fees related to the costs of being a publicly listed company have risen by $351,084. The remaining $174,586 increase in net loss in 2017 was due to an increase in travel expenses, rent, and office expenses of the new acquisitions as management, employees and advisors continued to pursue the business plan of the Company in 2017.

 

In addition, foreign currency exchange translations created an “Other Comprehensive Income (Loss)” expense of $18,605 in 2017 which were behind the “Comprehensive Loss” of $1,437,630 over and above the “Net Loss” of $1,418,755 for the year ended December 31, 2017

 

The Company is expending working capital to further their business plan. This includes the further development, refinement and improvement of their software technology that is currently in operation in Tokyo, Japan at ITOYA, Ltd., but needs to be adapted to various European languages and geography as well as North American languages and geography. The Company is also expending working capital on the development of new technology which is designed to further enhance the attractiveness of their offerings to their target customer base. Finally, to a lesser extent, the Company is increasing their sales and marketing activities in an effort to recruit customers, recruit potential consumer product brands for acquisition and recruit related technologies for acquisition.

 

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A portion of the Company’s expenses are related to the costs associated with the pending acquisitions that have been announced and are in various stages of completion.

 

Liquidity and Capital Resources

 

Liquidity is a measure of a company’s ability to meet potential cash requirements. We have historically met our capital requirements through the issuance of debt-equity and preferred stock. Management views the working capital that is raised through debt-equity or preferred equity offerings as being equivalent to raising working capital via common equity subscriptions, but with the added bonus of allowing the common equity value to rise through the passage of time and simultaneous achievement of the Company’s business goals. Any conversion of debt into equity could occur at a higher equity valuation then the Company currently has. The Company has reserved the right to repurchase these debt-equity interests and preferred stock at a predetermined premium should management determine that this is in the best interests of shareholders at an appropriate future point in time.

 

Operating expenses for the Company have been paid from revenue as well as from the issuance of debt-equity and preferred stock subscriptions. At December 31, 2017, the Company had a deficit in working capital (current liabilities in excess of current assets) of $1,064,961. A portion of this working capital deficit has been financed loans from stockholders. As of December 31, 2017, amounts owed to stockholders totaled $669,126. The working capital deficit at December 31, 2016 was $308,458. The increase in working capital deficit when compared to December 31, 2016 was principally due to an increase in notes payable (“debt-equity”) due to unrelated parties, amounts owed to stockholders and to a lesser extent, increase in accounts payable.

 

Since inception, we have financed our cash flow requirements through the issuance of debt-equity and preferred stock. As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations, pending generation of significant revenues. Additionally, we anticipate obtaining additional financing to fund operations through debt-equity and preferred stock offerings to the extent available or to obtain additional financing to the extent necessary to augment our working capital. Management believes that our roll-up acquisition strategy if successful would provide significant revenues, potential profits as well as access to traditional bank and asset-based credit lines. In addition, management believes that existing shareholders, lenders and prospective new investors will provide the additional cash needed to meet our obligations as they become due. The Company has negotiated a $1 million debt-equity facility with an institutional investor of which only $250 thousand has been funded to the Company. As a subsequent event, the Company has also been funded in the amount of $266 thousand in 2 tranches of preferred series B equity which provides for a nominal dividend rate of 12% and the ability of the debt holder to convert their preferred stock into common stock at a conversion price that is a 35% discount to market. That institutional investor has indicated a willingness to provide additional funds under the same formula up to $1 million dollars (which is the total amount of the Series B Preferred Shares that are designated. As an additional subsequent event, the Company on April 12, 2018 engaged with Tellson Securities, Inc. (F/K/A 41 North Securities), a licensed investment bank to raise $5 million in additional preferred equity for the Company’s operations and provide the working capital to improve the operations of future acquisitions, once they are transacted. Tellson Securities, Inc. has also indicated it would like to assist the Company to up-list at the appropriate time to a recognized exchange which management believes would make it easier for the Company to raise additional capital at even more attractive rates.

 

In the future we will need to generate sufficient revenues from operations in order to eliminate or reduce the need to sell additional stock or obtain additional loans. However, there can be no assurance we will be successful in raising the necessary funds to execute our high growth business plan.

 

At December 31, 2017, the Cash and Cash Equivalents balance was $100,264 which is $45,620 more than the balance of the prior year. The primary reason for the increase was the successful Debt-Equity raises transacted by the Company during the year.

 

During the twelve months ended December 31, 2017, the current liabilities increased by $760,872 when compared to December 31, 2016. The primary reason for the increase was the increase in notes payable (“debt-equity”) due to unrelated parties, amounts due to stockholders and to a lesser extent, increase in accounts payable. As discussed earlier, it is likely that the Company will need to obtain additional working capital through debt-equity and preferred stock capital raises until the Company can generate sufficiently profitable revenues to sustain the cash burn rate that the Company’s business plan calls for.

 

As our business plan calls for high growth we anticipate that we may continue to incur operating losses during the next twelve months. The Company’s lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies at our stage, particularly companies in new and rapidly evolving markets. Our roll up acquisition strategy seeks to mitigate some of those risks but until more acquisitions can be completed we cannot include their results in our projection of cash needs. As a subsequent event, we acquired our first micro brand with the acquisition of E-motion Apparel, Inc, on May 1, 2018, which may contribute as much as $1.4 million in revenue and $300,000 in EBITDA in the first twelve months of operations after acquisition. Management believes that this acquisition proves the viability of our accretive share exchange acquisition model and anticipates the ability to announce future acquisitions throughout 2018.

 

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Risks include, but are not limited to, an evolving and unpredictable business model and the management of growth and the consummation and assimilation of multiple acquisitions. These factors raise substantial doubt about our ability to continue as a going concern. To address these risks, we must, among other things, increase our customer base, implement and successfully execute our business and marketing strategy, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. Since we have not generated significant revenue, we have negative cash flows from operations, and negative working capital we have included a reference to the substantial doubt about our ability to continue as a going concern in connection with our consolidated financial statements for the period ended March 31, 2018. Our total accumulated deficit as of March 31, 2018 was $3,283,969.

 

These consolidated financial statements have been prepared on the going concern basis, which assumes that adequate sources of financing will be obtained as required and that our assets will be realized, and liabilities settled in the ordinary course of business. If we are unable to obtain additional financing, we may cease operations and not be able to execute on operating plans. Accordingly, these consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.

 

Elected Mandatory Filer Status

 

The Company filed Form 8A-12G with the Securities and Exchange Commission on March 16, 2018 and therefore became a mandatory filer with the Securities and Exchange Commission.

 

Critical Accounting Policies

 

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, and expenses and the disclosure of contingent assets and liabilities. We use assumptions that we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. We believe there have been no significant changes in accounting policies for the period ended March 31, 2018. See Note 3 to the 2017 consolidated financial statements included in this Registration Statement for a complete discussion of our significant accounting policies and estimates

 

Recently Issued Accounting Standards

 

The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its consolidated financial statements. See Note 3 to the March 2018 consolidated financial statements included in this Registration Statement.

 

Revenue Recognition

 

Prior to January 1, 2018, t he Company recognized revenue from the sale of products and services in accordance with ASC 605, “Revenue Recognition.” Revenue was recognized only when all of the following criteria were met: persuasive evidence for an agreement existed, delivery had occurred, or services had been provided, the price or fee was fixed or determinable, and collection was reasonably assured. However, contracts subject to percentage-of-completion accounting were subject to specific accounting guidance that may have required significant estimates.

 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes nearly all existing revenue recognition guidance under accounting principles generally accepted in the United States of America. The core principle of this ASU is that revenue should be recognized for the amount of consideration expected to be received for promised goods or services transferred to customers. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments, and assets recognized for costs incurred to obtain or fulfill a contract. ASU 2014-09 was scheduled to be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date,” which deferred the effective date of ASU 2014-09 by one year and allowed entities to early adopt, but no earlier than the original effective date. ASU 2014-09 is now effective for public business entities for the annual reporting period beginning January 1, 2018. This update allows for either full retrospective or modified retrospective adoption. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” which amends guidance previously issued on these matters in ASU 2014-09. The effective date and transition requirements of ASU 2016-10 are the same as those for ASU 2014-09. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients,” which clarifies certain aspects of the guidance, including assessment of collectability, treatment of sales taxes and contract modifications, and providing certain technical corrections. The effective date and transition requirements of ASU 2016-12 are the same as those for ASU 2014-09.

 

The Company adopted the new guidance as of January 1, 2018. The Company evaluated the new guidance and the adoption is not expected to have a significant impact on the Company’s financial statements and a cumulative effect adjustment under the modified retrospective method of adoption was not necessary. There will be no change to the Company’s accounting policies.

 

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Income Taxes

 

The Company operates in the United States and its wholly-owned subsidiaries operate in Japan, Hong Kong and Switzerland and files tax returns in these jurisdictions.

 

Loss from continuing operations before income tax expense (benefit) is as follows:

 

The following table sets forth the significant components of the aggregate deferred tax assets of the Company as of December 31, 2017 and 2016:

 

    For the Years Ended  
    December 31,  
    2017     2016  
             
Tax jurisdiction from:                
- US   $ (792,206 )   $ -  
- Foreign                
Hong Kong (HK)     (415,435 )     (113,009 )
Japan (JP)     (159,443 )     (74,733 )
Switzerland (EU)     (51,671 )     6,702  
Loss before income taxes   $ (1,418,755 )   $ (181,040 )

 

There was no provision for income taxes for the years ended December 31, 2017 and 2016, as the Company has tax losses in all jurisdictions. The expected approximate income tax rate for 2017 and 2016, for United States is 34%, Hong Kong is 16.5%, Japan is 30%, and Switzerland is 20%, whereas the actual rate was zero. The total income tax benefit differs from the expected income tax benefit principally due to the valuation allowance recorded against the deferred tax assets which are principally comprised of net operating losses (“NOLs”).

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) which supersedes existing guidance on accounting for leases in “Leases (Topic 840).” The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the effects of adopting ASU 2016-02 on its consolidated financial statements but the adoption is not expected to have a significant impact on the Company’s consolidated financial statements as of the date of the filing of this report.

 

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Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities.”

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

We have had no disagreements with our independent auditors on accounting or financial disclosures.

 

KLJ & Associates, LLP (“KLJ”) was the Company’s auditor from inception until the acquisition of 12 Hong Kong, Ltd which occurred on June 27, 2017. Pursuant to Section 12230 of the Securities and Exchange Commission Financial Reporting Manual, which states in part, “unless the same accountant reported on the most recent financial statements of both the registrant and the accounting acquirer, a reverse merger acquisition always results in a change in accounts.” Therefore, on September 26, 2017 Management received notification that KLJ needed to resign in favor of Anthony Kam & Associates, Ltd (“AKAM”) who had performed the 2-year audit on 12 Hong Kong, Ltd the reverse merger acquirer. (see form 8-k filed with the SEC on October 02, 2017).

 

On September 26, 2017 we engaged AKAM as our principal accountant to audit our financial statements as successor to KLJ. During our two most recent fiscal years or subsequent interim periods, we have not consulted with AKAM regarding the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, nor did AKAM provide advice to our company, either written or oral, that was an important factor considered by our company in reaching a decision as to the accounting, auditing or financial reporting issue, other than the 2 year audit of 12 Hong Kong, Ltd.

 

Further, during our two most recent fiscal years or subsequent interim period, we have not consulted AKAM on any matter that was the subject of a disagreement or a reportable event

 

Pursuant to Section 12230.1 of the Financial Reporting Manual, KLJ had to resign in favor of “AKAM”, who performed the two-year audit on 12 Hong Kong, Ltd and KLJ had reviewed in preparation of the “super 8K” filed by the Company in regards to the acquisition of 12 Hong Kong. AKAM agreed to continue as the Company’s auditor.

 

On January 4, 2018 the Company received a letter from the United States Securities and Exchange Commission (“SEC”) stating that the Public Company Audit Oversight Board (“PCAOB”) had revoked the registration of our auditors, AKAM. (See form 8-k filed with the SEC on January 9, 2018).

 

Prior to receipt of this letter from the SEC, Management, under direction of the Board of Directors, had already been interviewing other potential candidates to be the Company’s PCAOB registered auditing firm. The decision by the Board to interview for a new auditor was not a result of any disagreement with our then current (now prior) auditors either AKAM or KLJ.

 

Our fiscal year end was changed on September 12, 2017 (See Form 8-K filed on September 13, 2017) from a November 30 to a December 31 year end.

 

On February 12, 2018 the Company’s Board of Directors engaged with the PCAOB registered accounting firm, Rotenberg Meril Solomon Bertiger & Guttilla, P.C. (“RM”) of Saddle Brook, New Jersey, and New York City, N.Y, as the Company’s independent registered public certifying accountant to perform audit services for the 24-month period(s) ended December 31, 2017.

 

RM has not previously been engaged with nor consulted with the Company nor anyone affiliated with the Company regarding any matters related to the Company during the preceding 2-year period nor any interim period.

 

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The Company has not received any letter from RM nor any prior certifying accountant regarding any disclosures not already publicly filed, nor has there been any disagreement with any Auditors related to accounting or financial disclosures.

 

DIRECTORS AND EXECUTIVE OFFICERS

 

The following table sets forth the names, ages, and positions of our executive officers and directors:

 

Name   Age   Position
         

Angelo Ponzetta

 

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Chairman of the Board, Chief Executive Officer, Secretary, President,

         
Daniele Monteverde   66   Chief Financial Officer, Director
         
Kirk Kimerer   52   Chief Marketing Officer

 

The above listed officers and directors will serve until the next annual meeting of the shareholders or until their death, resignation, retirement, removal or disqualification, or until their successors have been duly elected and qualified. Vacancies in the existing Board of Directors are filled by majority vote of the remaining Directors. Officers of the Company serve at the direction of the Board of Directors. There are no agreements or understandings for any officers or director to resign at the request of another person and no officer or director is acting on behalf of or will act at the direction of any other person.

 

Executive Officers, Directors and Advisory Board Members

 

Angelo Ponzetta

 

Mr. Ponzetta has served as our Chief Executive Officer, President, Secretary and Chairman of the Board of Directors since June 27, 2017. Mr. Ponzetta served as the Chief Executive Officer and Secretary of 12 Hong Kong, Ltd from 2010 and still serves in that capacity since 12 Hong Kong was acquired by the Company on June 27, 2017. Mr. Ponzetta has extensive experience in technology, engineering and retail. It was based on these experiences that he became the driving force behind the Company’s disruptive technology designed to help retailers compete effectively against the dual threats posed by Walmart and Amazon.

 

Mr. Ponzetta was educated in Switzerland where he obtained his first degree in Engineering Micro-Computer from Bern Technikum. He also has a Bachelor’s Degree in Organizational Management from the OMS in Zurich, and a Bachelor’s Degree in Business Administration from the GSBA in Zurich.

 

In the technology field, Mr. Ponzetta worked for over 10 years in programming and development of processing systems at Kern AG and then in the IT department of a Swiss Bank.

 

His retail career began in 1992 in Asia when he joined the Swiss Trading company UTC Japan, in the position as Executive Director to oversee the entire Finance and Marketing department of Fashion, Jewelry, and Watches. In 1994, he was then promoted to President and Representative Director, and managed the entire company including offices in Taiwan, Singapore and Hong Kong.

 

In 1999, he joined CARAN d’ACHE (Luxury Writing Instruments, leather and Fine Art Material manufacturer based in Geneva), to build up the brand in Japan. In 2001, his responsibilities were expanded to oversee all over Asia Pacific as Asia President.

 

Mr. Ponzetta has been actively involved in many business organizations including several Foreign Chambers of Commerce in Japan. He served on the EBC (European Business Council) Board of Governors, as well as the Board of the Japan-Swiss Society, and was for a full term of two years (2005/2006) the President of the Swiss Chamber & Commerce in Japan.

 

Daniele Monteverde

 

Mr. Monteverde was appointed as Chief Financial Officer on June 27, 2017 and as a director of the Company on October 30, 2017 and has served in those capacities since.

 

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From 2015 to the present, Mr. Monteverde has served as the President and Chief Executive Officer of 12 Japan, Ltd where he was instrumental in obtaining the Company’s first retail customer to purchase and use the Company’s cutting-edge technology: Itoya, Ltd. This relationship demonstrates the effectiveness of the company’s technology offerings.

 

In addition to his responsibilities on behalf of the Company, Mr. Monteverde owns and operates a number of successful companies: CEO of Aquarium, Inc a video production, editing and recording company for marketing, distribution and other commercial applications located in Japan (2005- present), Vice President & founding partner (2010-2011) of Alliance Global Partners, Inc in the Advertising and communications sectors , and President & CEO (2010-2012) of S International Architects, Inc., concept development and architectural design.

 

Mr. Monteverde holds a Ph.D. in Engineering (Specializing in Business Administration) from the University of Buenos Aires.

 

Kirk Kimerer

 

Mr Kimerer was appointed as Chief Marketing Officer of the Company on October 13, 2017.

 

Kirk has spent decades in online publishing working with countless digital properties to increase revenue through emerging technologies, including Linn Media, Gannett and Scripts. At 12 ReTech and its subsidiaries, he leads the development and implementation of our marketing efforts with a crucial role that spans programmatic advertising, marketing, publishing, e-commerce development and industry-leading innovation.

 

In 2013, Kimerer ran the digital media operations for the Review Journal in Las Vegas, Nevada. In 2014, inspired by the changing digital landscape, he founded Apollo Media Network, a lifestyle network of websites reaching over 10 million unique monthly users. In 2016, he sold the company to a public entity, where he managed the digital media division prior to joining the Company.

 

Richard J. Berman (Advisory Board Member)

 

Richard J. Berman was appointed as an Advisory Board Member of the Company on October 30, 2017.

 

Richard Berman’s business career spans over 35 years of venture capital, senior management and merger & acquisitions experience. Mr. Berman is a well-respected and seasoned professional, senior executive and public company board member with extensive experience in many business sectors including finance, technology, retail, bio-science and real estate.

 

Mr. Berman has served as a director or officer of more than a dozen public and private companies. In 2016 he joined the advisory board of Medifirst, while in 2014 he was elected Chairman of MetaStat Inc. From 2006-2011, he was Chairman of National Investment Managers, a company with $12 billion in pension administration assets. Mr. Berman is a director of three public healthcare companies: Advaxis, Inc., Caladrius Biosciences, Inc., and Cryoport Inc.

 

From 2002 to 2010, he was a director of Nexmed Inc where he also served as Chairman/CEO in 2008 and 2009 (now called Apricus Biosciences, Inc.). From 1998-2000, he was employed by Internet Commerce Corporation (now Easylink Services) as Chairman and CEO, and was a director from 1998 to 2012. Previously, Mr. Berman worked at Goldman Sachs; was Senior Vice President of Bankers Trust Company, where he started the M&A and Leveraged Buyout Departments; created the largest battery company in the world in the 1980’s by merging Prestolite, General Battery and Exide to form Exide Technologies (XIDE); helped to create what is now Soho (NYC) by developing five buildings; and advised on over $4 billion of M&A transactions in over 300 deals.

 

He is a past Director of the Stern School of Business of NYU where he obtained his BS and MBA. He also has US and foreign law degrees from Boston College and The Hague Academy of International Law, respectively.

 

Director Independence and Board of Directors’ Committees

 

None of our directors is considered to be an independent member of our Board of Directors under NASD Rule 4200(a)(15).

 

Our Board of Directors as a whole acts as our audit committee, compensation committee, and nominating committee.

 

Committees and Terms

 

Other than the formation of a non-voting Advisory Board no committees of the Board of Directors have been formed.

 

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Audit Committee

 

We have not yet appointed an audit committee and our Board of Directors currently acts as our audit committee. At the present time, we believe that the members of the Board of Directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We do look for oversight advice from our Advisory Board as well. Our company, however, recognizes the importance of good corporate governance and intends to appoint an audit committee comprised entirely of independent directors, including at least one financial expert upon completing an acquisition of an operating company.

 

Advisory Board

 

On October 30, 2017 the Company has created an Advisory Board to bring additional experience and strategic contacts to the Company. As of the filing of this report the Advisory Board has only one member; Richard J. Berman (See above for full bio). The Company is actively interviewing other qualified candidates for future consideration.

 

Code of Ethics

 

We have not adopted a code of ethics that applies to all of our employees, including our executive officers, a copy of which is included as an exhibit to this report.

 

Family Relationships

 

There are no family relationships between any director or executive officer of the Company. Angelo Ponzetta’s brother, Gianni Ponzetta, was a shareholder and officer of 12 Europe A.G. and is now a less than 5% shareholder of the Company. See Note 7 to the 2017 consolidated financial statements and Note 7 to the March 2018 consolidated financial statements included in this Registration Statement for further details.

 

Involvement in Certain Legal Proceedings

 

During the past ten years, none of our directors and executive officers has been involved in any of the events described in Item 401(f) of Regulation S-K.

 

Corporate Governance Matters

 

We have not adopted any material changes to the procedures by which security holders may recommend nominees to our Board of Directors.

 

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EXECUTIVE COMPENSATION

 

The Board of Directors makes all compensation decisions for, and approves recommendations regarding equity awards to, the executive officers and Directors of the Company. Decisions regarding the non-equity compensation of other employees of the Company are made by management.

 

The following table sets forth, for the fiscal years ended December 31, 2017 and 2016, the dollar value of all cash and noncash compensation earned by any person that was our principal executive officer, or PEO, during the preceding fiscal year. No executive officer earned more than $100,000 during the fiscal years ended December 31, 2017 and 2016:

 

Summary Compensation Table
Name and Principal Positions   Year     Accrued and Paid Compensation     Bonus     Option Awards   Non-Equity Incentive Plan Compensation   Equity Compensation   All Other Compensation   Total  
Angelo Ponzetta, CEO, Chairman     2016       None       None     None   None   None   None   $ 0  
Angelo Ponzetta, CEO, Chairman (1)     2017     $ 20,000       None      None   None   None   None   $ 20,000  
Daniele Monteverde
CFO, Director
    2016       None       None     None   None   None   None   $ 0  
Daniele Monteverde CFO, Director (2)     2017     $ 20,000       None     None   None   None   None   $ 20,000  
Kirk Kimerer
CMO (3)
Joined 10/19/17
    2017     $ 7,500       None     None   None   None   None   $ 7,500  
Richard J. Berman
Advisory Board (4)
Joined 10/30/17
    2017     $ 25,000       None     None   None   None   None   $ 25,000  

 

(1) Angelo Ponzetta’s monthly salary is to be $10,000 per month beginning in November 2017. Mr. Ponzetta was paid $10,000 in November and $10,000 in December. However, Mr. Ponzetta has agreed to defer regular payment until the Company has more consistent cash flow.
   
(2) Daniele Monteverde’s monthly salary is to be $10,000 per month beginning in November 2017. However, Mr. Monteverde has agreed to defer regular payment until the Company has more consistent cash flow.
   
(3) Kirk Kimerer was paid monthly salary of $2,500 in November 2017 and $5,000 in December 2017. Mr. Kimerer’s monthly salary is to be $8,000 per month for the period of January through April 2018 and then $12,500 per month starting in May 2018.
   
(4) Richard J. Berman was paid a signing bonus of $25,000 in December 2017 and is to be compensated at the rate of $10,000 per month. Unlike the unpaid portions of the compensation to the other officers and directors listed above, the Company is accruing for any portion of Mr. Berman’s compensation that remains unpaid.

 

The Company does not currently offer stock options or warrants and does not have any plans to do so. The Company may at a later date institute a restricted Stock plan to incentivize employees.

 

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Employment Agreements

 

There are no employment agreements in place at the Company although there are the following employment agreements at the subsidiary level:

 

Daniel Wong – 12 Hong Kong Ltd Chief Operating & Technology Officer

 

Mr. Wong. (50 years of age) was appointed on Jan. 1, 2018 as the Chief Operating and Technology Officer of 12 Hong Kong, Ltd under an unspecified term on an “at will” basis agreement with 12 Hong Kong, Ltd with an annual Salary of $150,000 U.S. As part of his employment agreement Mr. Wong will be incentivized based on the results of 12 Hong Kong Ltd on a to be determined basis. His qualifications are:

 

Mr. Wong is a veteran of the consumer electronics, mobile phone, and internet industries with over 20 years’ experience in Greater China and Silicon Valley. Mr. Wong was most recently Managing Partner at Landon Financial Advisors, where he was working on smart home and technology related projects. He is also a mentor and advisor to several startups. As CEO of artificial intelligence startup Rokid, Mr. Wong brought to market a cutting-edge home AI product that captured numerous industry accolades, including CES Innovation Award 2016 and 2017. As Vice President of Media Solution Center at Samsung, Mr. Wong was responsible for the software and services on Samsung mobile phones, tablets, smart TVs and wearables in China. Previous to that, he ran one of China’s largest mobile ad networks as Chief Operating Officer of Madhouse. At Nokia, Mr. Wong launched and built NSeries into a $1.9B USD business across Greater China (covering China, Hong Kong, and Taiwan). While at Nokia, he was also responsible for the company’s Ovi internet services, launching multiple consumer services (app store, games, music, and maps) and establishing the joint-venture company that served as the basis for these services. Under Mr. Wong’s leadership, Nokia became the first foreign entity to obtain an Online Maps license in China’s tightly regulated market. In Silicon Valley, Mr. Wong has held various management positions with industry pioneering companies such as Openwave (WAP and mobile internet) and Excite@Home (broadband internet services and portal). Mr. Wong is a frequent industry event speaker and has extensive experience working with media and government. Mr. Wong holds an MBA from Harvard Business School as well as BS Electrical Engineering and MS Materials Science from Stanford University

 

Stefan Gugisberg – 12 Europe A.G. Chief Executive Officer

 

Mr. Stefan Gugisberg (48 years of age) was appointed on November 1, 2017 as the Chief Executive Officer of 12 Europe A.G., with an annual salary of $144,000 U.S. on an indefinite contract to lead 12 Europe AG which is based in Switzerland. Stefan’s responsibilities include expanding and implementing the 12 ReTech technologies and Management’s vision in Europe. Under his contract, Mr. Gugisberg is to be included in any future Employee Restricted Stock Plan for an amount of compensation to be determined.

 

Mr. Gugusberg has over 19 years of experience in the European markets in the industries of Information Technology with roles in software development and business solutions. So far, in his career he has managed over 100 personnel at the same time and achieved significant results for companies such as SNV Swiss Standard Association and xtendx, AG. He graduated from University of Applied Sciences in Chur, Switzerland with a Master’s Degree, and also has B.A. Degrees in Business, Economy and Law from Zurich University and University at Albany (New York).

 

Hubert J Blanchette- CEO E-motion Apparel Inc.

 


Mr. Hubert J Blanchette has 30 years of experience in the fashion and manufacturing industry and co- founded Lexi Luu Designs. He is an experienced problem solver and administrator with an extensive background in Business and Education. He has a Master’s Degree in Administration from the University of Phoenix as well as a Bachelor’s Degree in Education from University of Lethbridge and Bachelor of Arts Degree from University of Saskatchwen. . He was CEO Bitzio f, a public company, from July 2014 to December 2015 as well as CEO of the subsidiaries of Bitzio, from July 2014 to June 2016 of Lexi Luu Designs, Inc. Punkz Gear and Skipjack Dive and Dance wear. He Co-founded and was CEO of Lexi Luu Designs Inc. and Punkz Gear which are clothing design and manufacturing companies which are now a division of 12 ReTech. He Co-founded “12 Fashion Incubator” now a division of 12 ReTech.

Mr. Hubert Blanchette was appointed as CEO of E-motion Apparel, Inc. on May 1st, 2017 as a full time employee under a one year contract at an annual salary of $60,000 plus $300 a month car allowance. Mr. Hubert Blanchette was not awarded any equity in the Company under his contract.

 


Outstanding Equity Awards at Fiscal Year-End

 

No stock option awards were exercisable or unexercisable, as of December 31, 2017, for any executive officer.

 

Directors Compensation

 

Mr. Angelo Ponzetta, who is our chief executive officer, received no compensation for his service as a director. Mr. Daniele Monteverde received no compensation for his service as an officer.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information regarding the beneficial ownership of our common stock as of May 9, 2018 by (i) each person who is known by us to own beneficially more than 10% of our outstanding common stock; (ii) each of our officers and directors; and (iii) all of our directors and officers as a group.

 

As of May 9, 2018, there are 82,968,338 common shares outstanding and 5 million Series A Preferred Shares outstanding. Each Series A Preferred Shares is convertible to 20 common shares upon conversion and until conversion allows the holder to 20 votes. Consequently, the chart below is based upon 182,968,338 eligible votes.

 

Name and Address   Position    

Shares

Owned (1)

   

Percentage

owned

 
Angelo Ponzetta Unit 1104, 11/F Crawford House 70 Queens Road Central, Hong Kong - Common Shares     CEO       45,057,976       24.63 %
Angelo Ponzetta Preferred Series A Shares- 4.5 million (Convertible at 1 Series A Preferred Share for 20 common shares)     CEO      

Votes:

90,000,000

      49.19 %
Angelo Ponzetta – Aggregate     CEO      

Votes:

135,057,976

      73.81 %
Daniele Monteverde Hanegi 2-41-1, Setagaya-ku, Tokyo 156-0042 - Common Shares     CFO       3,550,000       1.94 %
Daniele Monteverde Preferred Series A Shares- 500 000 (Convertible at 1 Series A Preferred share for 20 common shares)     CFO      

Votes:

10,000,000

      5.47 %
Daniele Monteverde – Aggregate     CFO      

Votes:

13,550,000

      7.41 %
All officers and directors as a group (2 persons)            

Votes:

148,607,976

      81.22 %

 

 

  (1) SEC Rule 13d-3 generally provides that beneficial owners of securities include any person who, directly or indirectly, has or shares voting power and/or investment power with respect to such securities, and any person who has the right to acquire beneficial ownership of such security within 60 days. Any securities not outstanding which are subject to such options, warrants or conversion privileges exercisable within 60 days are treated as outstanding for the purpose of computing the percentage of outstanding securities owned by that person. Such securities are not treated as outstanding for the purpose of computing the percentage of the class owned by any other person. As of May 9, 2018, there are no outstanding warrants and convertible notes payable are owned by investors who are not management, directors or beneficial owners of more than 10% of the outstanding shares.

 

TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS AND CORPORATE GOVERNANCE

 

There are certain conflicts of interest between the Company and our officers and directors. Mr. Angelo Ponzetta, our Chief Executive Officer and Chairman, was the principal owner and controlling officer of each of our first three acquisitions; 12 Hong Kong Ltd, 12 Japan Ltd and 12 Europe A.G. as such there were some intercompany transactions between the entities as well as transactions with officers that are considered related party transactions. Angelo Ponzetta’s brother Gianni was a shareholder and officer of 12 Europe A.G. and is now a less than 5% shareholder of the Company.

 

39
 

 

Daniele Monteverde our Chief Financial Officer and director was a both a principal and officer of both 12 Hong Kong Ltd. and 12 Japan. Mr. Monteverde has many business interests, including his ownership of Aquarium Inc. which in the past has been a supplier of content for the Company’s interactive Mirrors and marketing videos. These products were provided in the past to the Company at a 50% discount to the market price that Aquarium Inc. would charge other clients, saving the Company about $4,500. For certain periods of time Mr. Monteverde provided “free” office space to 12 Japan, Inc. in the offices of one of his other companies. Management believes that the rental savings were immaterial to the scope of the operation. Mr. Monteverde has many other business interests to which he currently devotes attention and may be expected to do so although management time should be devoted to our business. As a result, conflicts of interest may arise that can be resolved only through his exercise of judgment in a manner which is consistent with his fiduciary duties to the company.

 

Other than disclosed in herein. None of the directors or executive officers of the Company, nor any person who owned of record or was known to own beneficially more than 5% of the Company’s outstanding shares of its common stock, nor any associate or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction that has occurred during the past two fiscal years, or in any proposed transaction, which has materially affected or will affect the Company.

 

Due to stockholders at December 31, 2017 and 2016 consists of the following:

 

    December 31, 2017     December 31, 2016  
Daniel Monteverde     8,214       5,012  
Angelo Ponzetta     500,798       306,105  
Gianni Ponzetta     160,114       101,790  
    $ 669,126     $ 412,907  

 

On August 12, 2017, Gianni Ponzetta loaned CHF 60,000 ($61,584) to the Company, which is included in the December 31, 2017 total. The promissory note is unsecured and bears interest at 1% per annum and is due December 31, 2019.

 

The other amounts due to stockholders are non-interest bearing, unsecured and due on demand.

 

During the year ended December 31, 2017 and 2016, total advances and expenses paid directly by stockholders on behalf of the Company were $185,060 and $234,674, respectively, and the Company repaid $8,130 and $40,093, respectively. In addition, in 2016, the Company issued 25,000,000 shares of common stock in exchange for $256,000 of amounts due to stockholders.

 

With regard to any future related party transaction, we plan to fully disclose any and all related party transactions in the following manner:

 

Disclosing such transactions in reports where required;
Disclosing in any and all filings with the SEC, where required;
Obtaining disinterested directors consent; and
Obtaining shareholder consent where required.

 

40
 

 

WHERE YOU CAN FIND MORE INFORMATION

 

We file annual, quarterly and current reports and other information with the Securities and Exchange Commission. Such filings are available to the public over the Internet at the Securities and Exchange Commission’s website at http://www.sec.gov.

 

We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the securities offered under this prospectus. This prospectus, which forms a part of that registration statement, does not contain all information included in the registration statement. Certain information is omitted and you should refer to the registration statement and its exhibits.

 

You may review a copy of the registration statement, and the reports and other information that we file with the Securities and Exchange Commission, at the Securities and Exchange Commission’s public reference room at 100 F Street, N.E. Washington, D.C. 20549 on official business days during the hours of 10 a.m. to 3 p.m. You may obtain information on the operation of the public reference room by calling the Securities and Exchange Commission at 1-800-SEC-0330. You may also read and copy any materials we file with the Securities and Exchange Commission at the Securities and Exchange Commission’s public reference room. Our filings and the registration statement can also be reviewed by accessing the Securities and Exchange Commission’s website at http://www.sec.gov.

 

Statements contained in this prospectus as to the contents of any contract or other document that we have filed as an exhibit to the registration statement are qualified in their entirety by reference to the exhibits for a complete statement of their terms and conditions.

 

The representations, warranties and covenants made by us in any agreement that is filed as an exhibit to the registration statement of which this prospectus is a part were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were made as of an earlier date. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.

 

DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

Pursuant to our Amended and Restated Articles of Incorporation and Bylaws, we may indemnify an officer or director who is made a party to any proceeding, because of his position as such, to the fullest extent authorized by the corporation laws of the State of Nevada, as the same exists or may hereafter be amended. In certain cases, we may advance expenses incurred in defending any such proceeding.

 

To the extent that indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. If a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of our company in the successful defense of any action, suit or proceeding) is asserted by any of our directors, officers or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of that issue.

 

41
 

 

12 RETECH CORPORATION

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Annual Report for Fiscal Year Ended December 31, 2017 and 2016 Page
   
Report of Independent Registered Public Accounting Firm F-2
   
Consolidated Balance Sheets F-3
   
Consolidated Statements of Operations and Comprehensive Loss F-4
   
Consolidated Statements of Stockholders’ Deficit F-5
   
Consolidated Statements of Cash Flows F-6
   
Notes to Consolidated Financial Statements F-7

 

Quarterly Report for the three months Ended March 31, 2018 Page
   
Condensed Consolidated Balance Sheets (Unaudited) F-26
   
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) F-27
   
Condensed Consolidated Statements of Changes in Stockholders’ Deficit F-28
   
Condensed Consolidated Statements of Cash Flows (Unaudited) F-29
   
Notes to Condensed Consolidated Financial Statements F-30

 

F- 1
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

12 ReTech Corporation

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of 12 ReTech Corporation and subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities law and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in the financial statements, the Company has suffered substantial net losses, has not generated significant revenue from its operations, and will require additional funds to maintain operations, all of which raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are disclosed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Rotenberg Meril Solomon Bertiger & Guttilla, P.C.

We have served as the Company’s auditors since 2018.

 

New York, New York

April 16, 2018

 

F- 2
 

 

12 RETECH CORPORATION

CONSOLIDATED BALANCE SHEET

 

    December 31, 2017     December 31, 2016  
ASSETS                
Current Assets:                
Cash and cash equivalents   $ 100,264     $ 54,644  
Accounts receivable     2,884       12,074  
Inventory     -       46,444  
Prepaid expenses and other current assets     15,168       785  
Total Current Assets     118,316       113,947  
                 
Fixed assets, net     8,615       26,101  
Security deposit     5,555       2,332  
TOTAL ASSETS   $ 132,486     $ 142,380  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
Current Liabilities:                
Accounts payable and accrued liabilities   $ 105,904     $ 9,498  
Due to stockholders     669,126       412,907  
Convertible notes payable, net of discounts     408,247       -  
Total Current Liabilities     1,183,277       422,405  
                 
Total Liabilities     1,183,277       422,405  
Commitments and Contingencies                
Stockholders’ Deficit:                

Preferred stock: 50,000,000 and 100,000,000 authorized at December 31, 2017 and 2016, respectively; $0.00001 par value 5,000,000 and 0 shares issued and outstanding at December 31, 2017 and 2016, respectively

    50       -  

Common stock: 500,000,000 and 100,000,000 authorized at December 31, 2017 and 2016, respectively; $0.00001 par value 82,200,000 and 50,000,000 shares issued and outstanding at December 31, 2017 and 2016, respectively

    822       500  
Additional paid-in capital     1,267,916       694,340  
Common stock to be issued     92,646       -  
Accumulated other comprehensive income     1,514       20,119  
Accumulated deficit     (2,413,739 )     (994,984 )
Total Stockholders’ Deficit     (1,050,791 )     (280,025 )
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $ 132,486     $ 142,380  

 

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

 

F- 3
 

 

12 RETECH CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS

 

    Year Ended  
    December 31,  
    2017     2016  
             
Revenues   $ 60,787     $ 119,989  
Cost of revenue     49,586       13,130  
Gross Profit     11,201       106,859  
                 
Operating Expenses                
General and administrative     757,688       257,984  
Professional fees     596,927       8,940  
Depreciation     16,100       20,975  
Total Operating Expenses     1,370,715       287,899  
                 
Loss from operations     (1,359,514 )     (181,040 )
                 
Other Expense                
Interest expense     (59,241 )     -  
Net Other Expense     (59,241 )     -  
                 
Loss Before Provision for Income Taxes     (1,418,755 )     (181,040 )
                 
Provision for Income Taxes     -       -  
                 
Net Loss   $ (1,418,755 )   $ (181,040 )
                 
Foreign currency translation adjustments     (18,605 )     14,549  
Comprehensive Loss   $ (1,437,360 )   $ (166,491 )
                 
Net Loss Per Common Share: Basic and Diluted   $ (0.01 )   $ (0.00 )*
                 
Weighted Average Number of Common Shares Outstanding: Basic and Diluted     111,433,488       42,122,500  

 

* Represents an amount that is less than ($0.01)

 

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

 

F- 4
 

 

12 RETECH CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

 

                                                       
                                  Common     Accumulated              
    Preferred Stock     Common Stock     Additional     Stock     Other           Total  
    Number of Shares     Amount     Number of Shares     Amount     Paid-in
Capital
    to be
Issued
    Comprehensive
Income
    Accumulated
Deficit
    Stockholders’
Deficit
 
                                                       
Balance - January 1, 2016     -     $ -       25,000,000     $ 250     $ 438,590     $ -     $ 5,570     $ (813,944 )   $ (369,534 )
                                                                         
Common stock issued for stockholder debt     -       -       25,000,000       250       255,750       -       -       -       256,000  
Foreign currency translation adjustments     -       -       -       -       -               14,549       -       14,549  
Net loss     -       -       -       -       -       -       -       (181,040 )     (181,040 )
                                                                         
Balance - December 31, 2016     -     $ -       50,000,000     $ 500     $ 694,340     $ -     $ 20,119     $ (994,984 )   $ (280,025 )
Capital contribution in subsidiary before acquisition     -       -       -       -       97,752       -       -       -       97,752  
Recapitalization     5,000,000       50       28,692,024       287       1,859       -       -       -       2,196  
Stock issued for acquisition of 12 Japan     500,000       5       5,000,000       50       (55 )     -       -       -       -  
Common stock issued for acquisition of 12 Europe     -       -       3,807,976       38       (38 )     -       -       -       -  
Common stock issued for services     -       -       2,700,000       27       473,973       -       -       -       474,000  
Cancellation of common stock and preferred stock     (500,000 )     (5 )     (8,000,000 )     (80 )     85       -       -       -       -  
Common stock to be issued     -       -       -       -       -       92,646       -       -       92,646  
Foreign currency translation adjustments     -       -       -       -       -       -       (18,605 )     -       (18,605 )
Net loss     -       -       -       -       -       -       -       (1,418,755 )     (1,418,755 )
                                                                         
Balance - December 31, 2017     5,000,000     $ 50       82,200,000     $ 822     $ 1,267,916     $ 92,646     $ 1,514     $ (2,413,739 )   $ (1,050,791 )

 

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

 

F- 5
 

 

12 RETECH CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    Year Ended  
    December 31,  
    2017     2016  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net Loss   $ (1,418,755 )   $ (181,040 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Stock based compensation     474,000       -  
Depreciation     16,100       20,975  
Bad debt     25,600       -  
Amortization of debt discount     50,893       -  
Impairment of inventory     49,538       12,173  
Loss on sale of vehicle     610       -  
Changes in operating assets and liabilities:                
Accounts receivable     (15,988 )     (8,889 )
Inventory     (1,757 )     -  
Prepaid and other current assets     (14,355 )     10,463  
Security deposit     (3,143 )     (2,494 )
Accounts payable and accrued liabilities     76,031       (70,491 )
Due to stockholder     20,000       -  
Net Cash Used in Operating Activities     (741,226 )     (219,303 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchases of property and equipment     (6,729 )     (5,591 )
Sales of property and equipment     8,130       -  
Net Cash Provided by (Used in) Investing Activities     1,401       (5,591 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from due to stockholders     246,644       234,674  
Repayment of due to stockholders     (8,130 )     (40,093 )
Proceeds from convertible notes payable, net of discounts     450,000       -  
Capital contributions in subsidiary before acquisition     97,752       -  
Net Cash Provided By Financing Activities     786,266       194,581  
                 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS     (821 )     1,688  
                 
Net increase (decrease) in cash and cash equivalents     45,620       (28,625 )
Cash and cash equivalents, beginning of year     54,644       83,269  
Cash and cash equivalents, end of year   $ 100,264     $ 54,644  
                 
Supplemental cash flow information                
Cash paid for interest   $ -     $ -  
Cash paid for taxes   $ -     $ -  
                 
Non-cash transactions:                
Common stock to be issued recognized as debt discount   $ 92,646