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
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7371
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38-3954047
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(State
or Other Jurisdiction of
Incorporation)
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(Primary
Standard Industrial
Classification
Code Number)
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(I.R.S.
Employer
Identification
No.)
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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: [ ]
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Accelerated
filer: [ ]
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Non-accelerated
filer [ ]
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(Do
not check if a smaller reporting company)
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Smaller
reporting company [X]
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Emerging
growth company [ ]
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CALCULATION
OF REGISTRATION FEE
Title
of Each
Class of Securities
to be Registered
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Amount
to be
Registered (1)
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Proposed
Maximum
Offering
Price Per
Share (2)(3)
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Proposed
Maximum
Aggregate
Offering Price(2)
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Amount
of
Registration
Fee
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Common
Stock, $0.00001 value per share
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20,000,000
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$
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0.07
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$
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1
,400,000.00
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$
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174.30
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(1)
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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.
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(2)
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Estimated
solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(c) under the Securities
Act.
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(3)
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Based
on the average of the high and low sales prices for the registrant’s common stock
on June 28, 2018.
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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
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:
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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.
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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.
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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).
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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.
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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, 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.
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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.”
Offering
SUMMARY
Common
stock that may be offered by
selling stockholders
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20,000,000
shares
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Common
stock outstanding before this offering
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82,968,338
shares
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Common
stock to be outstanding after this offering
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102,968,338
shares (1)
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Use
of proceeds
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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).
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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.
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For
further information, see “The Offering” beginning on page 10.
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Plan
of Distribution
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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.
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For
further information, see “Plan of Distribution” beginning on page 12.
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Risk
factors
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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.
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(1)
Assumes the issuance of 20,000,000 shares offered hereby that are issuable under our Equity Purchase Agreement with Oasis
Capital.
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.
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.
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.
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.
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.
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.
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:
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our
ability to continue as a going concern;
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our
anticipated needs for working capital;
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our
ability to secure financing;
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actual
capital costs, operating costs, production and economic returns may differ significantly from those that we have anticipated;
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the
financial model for our proposed projects has been minimally tested and may not be successful;
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our
efforts to develop our retail technology are subject to many financial, managerial, and sales risks that may make us unsuccessful;
and
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technological
advances may render our technologies obsolete.
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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.
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.
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:
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Shares
beneficially
owned as of the
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Number
of shares to be beneficially owned and percentage of beneficial ownership after the offering (1)(2)
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Name
of selling
Stockholder
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date
of this prospectus (1)(2)
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Number
of shares
being
offered
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Number
of
shares
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Percentage
of
class
(3)
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Oasis
Capital LLC (4)
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4,140,120
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20
,000,000
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4,140,120
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4.99
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%
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(1)
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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.
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(2)
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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.
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(3)
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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.
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(4)
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Adam
Long possesses voting and investment control over shares owned by Oasis Capital.
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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:
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ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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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;
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purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
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an
exchange distribution in accordance with the rules of the applicable exchange;
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privately
negotiated transactions;
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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;
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through
the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
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a
combination of any such methods of sale; or
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any
other method permitted pursuant to applicable law.
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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.
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:
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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;
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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;
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Series
C Preferred Stock which consists of two (2) shares authorized none of which are issued and outstanding; and
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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.”
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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.
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.
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.
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.
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).
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:
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20%
or more but less than 33-1/3%;
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33-1/3%
or more but less than or equal to 50%; or
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more
than 50%.
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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:
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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
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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:
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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;
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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
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if
higher for the holders of preferred stock, the highest liquidation value of the preferred stock, if any.
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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:
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an
aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation;
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an
aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation; or
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representing
10% or more of the earning power or net income of the corporation.
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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.
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
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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.
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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.
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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).
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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.
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:
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●
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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
|
|
●
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12
Retech will be the first offering a real-time service to consumers wherever they are
located
|
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●
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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
|
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.
|
|
●
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Unqualified
shop staff cannot help effectively and can struggle to make consumers happy.
|
|
●
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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:
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●
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Wants
to evaluate products all the time, not only while shopping.
|
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●
|
Likes
to learn about a product and get a friend’s recommendation and suggestion through
any methodology available, especially social media.
|
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●
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Wants
flexible shopping anywhere, online, mobile or at the store.
|
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●
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Wants
flexible order and delivery or pick-up at the store.
|
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Wants
to receive customized offers and promotions before entering or when they are at the store.
|
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●
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Expects
seamless, personalized experience at every touch point-anytime, anywhere.
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●
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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.
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.
|
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●
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Consumers
can check products online, in the store, on the 12 Mirror, 12Kiosks or 12Mobile.
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Consumers
can get customized offers on specific products/brands.
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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.
|
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●
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Consumers
can get immediate offers and discounts on products, restaurants or services from business
that is in the vicinity (within 10 min walking distance).
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●
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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.
Intellectual
Property
The
Company has three pending patents covering its Intellectual Property:
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
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)
|
●
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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.
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:
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●
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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
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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.
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12HK
rents virtual office space on a yearly lease ending October 1, 2018 for an annual cost of $2,310.
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12
Retail rents office space where it has access to conference rooms on an as needed basis for a fee.
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●
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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.
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.
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.
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.
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.
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.
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.
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.
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
|
|
57
|
|
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.
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.
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.
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.
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.
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.
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.
|
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.
12
RETECH CORPORATION
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
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
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.
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.
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.
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
|
|
|
$
|
-
|
|
Common
stock issued for stockholder debt
|
|
$
|
-
|
|
|
$
|
256,000
|
|
The
accompanying notes are an integral part of these consolidated financial statements
12
RETECH CORPORATION AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – NATURE OF BUSINESS
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, the Company 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 providing shareholder value through immediate revenue and earnings growth. The Company operates through
our subsidiaries on three continents, Asia, North America and Europe.
Principal
subsidiaries
The
details of the principal subsidiaries of the Company are set out as follows:
Name
of Company
|
|
Place
of Incorporation
|
|
Date
of Incorporation
|
|
Acquisition
Date
|
|
Attributable
Equity Interest %
|
|
Business
|
12
Retail Corporation
(“12 Retail”)
|
|
Arizona,
USA
|
|
Sept.
18, 2017
|
|
Formed
by 12 Retech Corporation
|
|
100%
|
|
As
a holding Company 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.
|
|
|
|
|
|
|
|
|
|
|
|
12
Hong Kong Limited
(“12HK”)
|
|
Hong
Kong, China
|
|
Feb.
2, 2014
|
|
June
27 2017
|
|
100%
|
|
Development
of our technology and sales of our technology applications.
|
|
|
|
|
|
|
|
|
|
|
|
12
Japan Limited
(“12JP”)
|
|
Japan
|
|
Feb.
12, 2015
|
|
July
31, 2017
|
|
100%
|
|
Consultation
and sales of technology applications.
|
|
|
|
|
|
|
|
|
|
|
|
12
Europe AG
(“12EU”)
|
|
Switzerland
|
|
Aug.
22, 2013
|
|
Oct.
26,2017
|
|
100%
|
|
Consultation
and sales of technology applications.
|
|
|
|
|
|
|
|
|
|
|
|
E-motion
Apparel, Inc.
|
|
California,
USA
|
|
Sept.
9, 2010
|
|
March
12, 2018
|
|
100%
|
|
A
subsidiary of 12 Retail and is the first microbrand acquired under the microbrand acquisition roll up strategy. Operates its
own production facilities that can be utilized by all of the Company’s future microbrands.
|
Change
in Fiscal Year
On
September 13, 2017, our Board of Directors approved a change in our Fiscal Year End from November 30 to December 31. The Company
now operates on a fiscal year ending on December 31.
Stock
Split
Effective
June 21, 2017, we effected a 6 for 1 forward stock split of our issued and outstanding common stock (the “Forward Stock
Split”). All references to shares of our common stock in this report on Form 10-K refers to the number of shares of common
stock after giving effect to the Forward Stock Split (unless otherwise indicated).
Share
Exchange and Reorganization
As
of June 27, 2017, and pursuant to a Securities Purchase Agreement, the Company and 12 Hong Kong Limited (“12HK”),
have determined that all conditions necessary to close the Share Exchange Agreement have been satisfied and therefore as of the
date hereof, the Share Exchange Agreement was closed and as such 12HK has become a wholly-owned subsidiary of the Company. As
per 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”) and in exchange the Company issued
to the 12HK shareholders an aggregate of Fifty Five Million (55,000,000) shares of stock, consisting of: (i) Fifty Million (50,000,000)
shares of post forward split Company common stock; and, (ii) Five Million (5,000,000) shares of Series A Preferred Stock.
Recapitalization
For
financial accounting purposes, this transaction was treated as a reverse acquisition by 12HK and resulted in a recapitalization
with 12HK being the accounting acquirer and 12 ReTech as the acquired company. The consummation of this reverse acquisition resulted
in a change of control. Accordingly, the historical financial statements prior to the acquisition are those of the accounting
acquirer, 12HK and have been prepared to give retroactive effect to the reverse acquisition completed on June 27, 2017 and represent
the operations of 12HK. The consolidated financial statements after the acquisition date, June 27, 2017 include the balance sheets
of both companies at historical cost, the historical results of 12HK and the results of the Company from the acquisition date.
All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively
restated to reflect the recapitalization.
Acquisitions
12
Japan Limited
On
July 31, 2017, the Company entered into a Share Exchange Agreement with 12 Japan Limited, a corporation duly formed and validly
existing under the laws of Japan (“12JP”), and the Shareholders of 12JP (the “12JP Shareholders”). Pursuant
to the Share Exchange Agreement, the Company acquired 101,000 shares of 12JP, representing 100% of the issued and outstanding
equity of 12JP, from the 12JP shareholders and in exchange the Company issued to the 12JP Shareholders: (i) 5,000,000 shares of
RETC Common Stock; and, (ii) 500,000 shares of RETC Series A Preferred Stock. As a result of the Share Exchange Agreement, 12JP
became a wholly-owned subsidiary of the Company. The Share Exchange Agreement contains customary representations and warranties.
Additionally, the Share Exchange Agreement required that concurrently with closing the Company’s management facilitate:
(i) the cancellation of 5,000,000 shares of RETC Common Stock currently beneficially owned by the Company’s majority stockholder;
and, (ii) the cancellation of 500,000 of RETC Series A Preferred Stock currently beneficially owned by the Company’s majority
stockholder. Collectively, such shares were cancelled and returned to the Company’s treasury.
12
Europe AG
On
October 26, 2017, the Company entered into a Share Exchange Agreement with 12 Europe AG, a corporation duly formed and validly
existing under the laws of Switzerland (“12EU”), and the Shareholders of 12EU (the “12EU Shareholders”).
Pursuant to the Share Exchange Agreement, the Company acquired 1,000 shares of 12EU, representing 100% of the issued and outstanding
equity of 12EU, from the 12EU shareholders and in exchange the Company issued to the 12EU Shareholders, 3,807,976 shares of the
Company’s common stock. As a result of the Share Exchange Agreement, 12EU became a wholly-owned subsidiary of the Company.
As
a result of those share exchanges, the above companies became 100% owned subsidiaries of the Company. The above companies were
controlled by the same individuals immediately prior to the above exchanges. As such, these acquisitions were deemed to be transactions
between entities under common control.
E-motion
Apparel, Inc,
In a subsequent event,
on March 12, 2018, the Company completed the acquisition of E-motion Apparel, Inc. (“EAI”) a California corporation,
pursuant to a Share Exchange Agreement whereby the Company exchanged 1 million of its common shares for 100% of the equity of
EAI in a third-party transaction. EAI owns three microbrands which were included in this transaction which target specific
niche markets: Lexi-Luu Dancewear, Punkz Gear, Cleo VII, Skipjack Dive & Dance Wear and Emotion Apparel. See Note 13 for
additional information.
NOTE
2 – GOING CONCERN
The
Company accounts for going concern matters under the guidance of ASU 2014-15,
“Presentation of Financial Statements –
Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern
(“ASU
2014-15”). The guidance in ASU 2014-15 sets forth management’s responsibility to evaluate whether there is substantial
doubt about an entity’s ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that,
when preparing financial statements for interim and annual financial statements, management should evaluate whether conditions
or events, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern for one year
from the date the financial statements are issued or are available to be issued. This evaluation should include consideration
of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are
available to be issued, as well as whether it is probable that management’s plans to address the substantial doubt will
be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt.
These
financial statements have been prepared on a going concern basis which assumes the Company will continue to realize it assets
and discharge its liabilities in the normal course of business. As of December 31, 2017, the Company has incurred losses totaling
$2,413,739 since inception, has not yet generated significant revenue from its operations, and will require additional funds to
maintain our operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations
and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations
when they become due. The Company intends to finance operating costs over the next twelve months through continued financial support
from its shareholders, the issuance of debt securities and private placements of common stock. These financial statements do not
include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Consolidated Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting
in accordance with accounting principles generally accepted in the United States (“GAAP”) and presented in US dollars.
The fiscal year end is December 31.
Prior
year financial information has been retroactively adjusted for the acquisitions under common control. As the acquisitions of 12JP
and 12EU were deemed to be transactions between entities under common control, the assets and liabilities were transferred at
the historical costs, with prior periods retroactively adjusted to include the historical financial results of the acquired companies
for the period they were under common control, which is all periods presented.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its subsidiaries 12HK, 12JP, and 12EU and 12 Retail.
All inter-company accounts and transactions have been eliminated. We currently have no investments accounted for using the equity
or cost methods of accounting.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the
reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith
estimates and judgments.
Foreign
Currency Translation and Transactions
The
accompanying financial statements are presented in U.S. dollars (“USD”), the reporting currency. The functional currencies
of the Company’s foreign operations are the Hong Kong Dollar (“HKD”), Japanese Yen (“JPY”), and
Swiss Franc (“CHF”). In accordance with ASC 830,
“Foreign Currency Matters”,
the assets and liabilities
are translated into USD at current exchange rates. Revenue and expenses are translated at average exchange rates for the period.
Resulting translation adjustments are reflected as accumulated other comprehensive income in stockholders’ deficit. Transaction
gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional
currency are charged to operations as incurred. There were no material transaction gains or losses in the periods presented.
Concentrations
During
the year ended December 31, 2017, two customers accounted for 94% of revenues. During the year ended December 31, 2016, three
customers accounted for 100% of revenues. One customer represented 100% of the accounts receivable as of December 31, 2017 and
2016.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than
three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are
subject to an insignificant risk of loss in value. The Company had $100,264 and $54,644 in cash and cash equivalents as at December
31, 2017 and 2016, respectively. Government deposit insurance on bank balances range from approximately $5,600 to $250,000. As
at December 31, 2017, the Company had approximately $19,000 not covered by government deposit insurance schemes.
Accounts
receivable
The
Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts
receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and
changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific
identification basis. During the years ended December 31, 2017 and 2016, the Company recognized bad debt of $25,600 and $0, respectively.
Inventory
Inventories,
consisting of a computer application, a mirror with a computer screen and touch monitor, are primarily accounted for using the
first-in-first-out (“FIFO”) method and are valued at the lower of cost or market value. Inventories on hand are evaluated
on an on-going basis to determine if any items are obsolete or in excess of future market needs. Items determined to be obsolete
are reserved for. During the years ended December 31, 2017 and 2016, the Company recognized impairment expenses of $49,538 and
$12,173, respectively.
Financial
Instruments
The
Company’s financial instruments consist primarily of cash, accounts receivable, inventory, prepaid expenses and other current
assets, accounts payable and accrued liabilities, convertible notes payable and due to stockholders. The carrying amounts of such
financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market
interest rates of these instruments.
Fixed
Assets
Fixed
assets are recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized over the shorter of the term of the related lease or the estimated useful life of
the asset. The useful lives are as follows:
Office
equipment
|
|
|
3
years
|
|
Furniture
and equipment
|
|
|
6
years
|
|
Computer
|
|
|
4
years
|
|
Technical
equipment
|
|
|
3.3
years
|
|
Maintenance
and repairs are charged to operations as incurred. Expenditures that substantially increase the useful lives of the related assets
are capitalized. When properties are disposed of, the related costs and accumulated depreciation are removed from the accounts
and any gain or loss is reported in the period the transaction takes place.
Accounting
for the impairment of long-lived assets
The
long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as
a result of technology or other industry changes. Determination of recoverability of assets to be held and used is by comparing
the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to
sell. During the years ended December 31, 2017 and 2016, the Company did not impair any long-lived assets.
Stock-Based
Compensation
ASC
718, “Compensation - Stock Compensation,” prescribes accounting and reporting standards for all share-based payment
transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue
shares, options and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based
payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements
based on their fair values. That expense is recognized over the period during which an employee is required to provide services
in exchange for the award, known as the requisite service period (usually the vesting period).
The
Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC
505-50, “Equity - Based Payments to Non-Employees.” Measurement of share-based payment transactions with non-employees
is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments
issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance
completion date.
Stock-based
compensation of $474,000 and $0 were incurred for the years ended December 31, 2017 and 2016, respectively, and is included in
professional fees.
Revenue
Recognition
The
Company recognizes revenue from the sale of products and services in accordance with ASC 605, “Revenue Recognition.”
Revenue is recognized only when all of the following criteria are met: persuasive evidence for an agreement exists, delivery has
occurred, or services have been provided, the price or fee is fixed or determinable, and collection is reasonably assured. However,
contracts subject to percentage-of-completion accounting are subject to specific accounting guidance that may require significant
estimates.
Percentage-of-completion
method
Certain
software development projects and all long-term construction-type contracts require the use of estimates at completion in the
application of the percentage-of-completion accounting method, whereby the determination of revenues and costs on a contract through
its completion can require significant judgment and estimation. Under this method, and subject to the effects of changes in estimates,
we recognize revenue using an estimated margin at completion as contract milestones or other input or output-based measures are
achieved. This can result in costs being deferred as work in process until contractual billing milestones are achieved. Alternatively,
this can result in revenue recognized in advance of billing milestones if output-based or input-based measures are achieved.
The
percentage-of-completion method requires estimates of revenues, costs and profits over the entire term of the contract, including
estimates of resources and costs necessary to complete performance. The cost estimation process is based upon the professional
knowledge and experience of our software and systems engineers, program managers and financial professionals. The Company follows
this method because reasonably dependable estimates of the revenue and costs applicable to various elements of a contract can
be made; however, some estimates are particularly difficult for activities involving state-of-the-art technologies such as system
development projects. Key factors that are considered in estimating the work to be completed and ultimate contract profitability
include the availability and productivity of labor, the nature and complexity of the work to be performed, results of testing
procedures, and progress toward completion. Management regularly reviews project profitability and the underlying estimates. A
significant change in an estimate on one or more contracts could have a material effect on our results of operations. Revisions
in profit estimates are reflected in the period in which the facts that give rise to the revision become evident. We periodically
negotiate modifications to the scope, schedule, and price of contracts accounted for on a percentage-of-completion basis. Accounting
for such changes prior to formal contract modification requires evaluation of the characteristics and circumstances of the effort
completed and assessment of probability of recovery. If recovery is deemed probable, we may, as appropriate, either defer the
costs until the parties have agreed on the contract change or recognize the costs and related revenue as current period contract
performance.
Deferred
Income Taxes and Valuation Allowance
The
Company accounts for income taxes under ASC 740, “Income Taxes”. Under the asset and liability method of ASC 740,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more
likely than not that the Company will not realize tax assets through future operations. At December 31, 2017 and 2016, the Company
recognized a full valuation allowance against the recorded deferred tax assets.
Net
Loss Per Share of Common Stock
The
Company follows ASC 260, “Earnings per Share” (“EPS”), which requires presentation of basic EPS on the
face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation. In the accompanying financial statements, basic earnings (loss) per share are computed
by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
Diluted
earnings per share reflects the potential dilution that could occur if securities were exercised or converted into common stock
or other contracts to issue common stock resulting in the issuance of common stock that would then share in the Company’s
earnings subject to anti-dilution limitations. In a period in which the Company has a net loss, all potentially dilutive securities
are excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact. For the years ended
December 31, 2017 and 2016, potentially dilutive common shares consist of common stock issuable upon the conversion of Series
A Preferred Stock (using the if converted method). All potentially dilutive securities were excluded from the computation of diluted
weighted average number of shares of common stock outstanding as they would have had an anti-dilutive impact.
Contingencies
The
Company follows ASC 450-20, “Loss Contingencies” to report accounting for contingencies. Liabilities for loss contingencies
arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability
has been incurred and the amount of the assessment can be reasonably estimated. There were no loss contingencies as of December
31, 2017 and 2016.
Recent Accounting Pronouncements
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 will adopt the new guidance
as of January 1, 2018. The Company has 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
will not be necessary. There will be no change to the Company’s accounting policies.
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.
In January 2017, the FASB issued ASU No.
2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” This new standard clarifies
the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business.
The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated
in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This new standard will be
effective for the Company on January 1, 2018. The Company will evaluate the effects of adopting the standard if and when it is
deemed to be applicable.
Management has considered all recent accounting
pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect
on the Company’s financial statements.
NOTE
4 – PREPAID EXPENSE AND OTHER CURRENT ASSETS
Prepaid
expense and other current assets at December 31, 2017 and 2016 consist of the following:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
Prepaid
expense
|
|
$
|
1,290
|
|
|
$
|
785
|
|
Short-term
deposit
|
|
|
13,878
|
|
|
|
-
|
|
|
|
$
|
15,168
|
|
|
$
|
785
|
|
NOTE
5 – FIXED ASSETS, NET
Fixed
assets, net at December 31, 2017 and 2016 consist of the following
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
Office
equipment
|
|
$
|
7,371
|
|
|
$
|
7,276
|
|
Furniture
and equipment
|
|
|
607
|
|
|
|
607
|
|
Computer
|
|
|
12,998
|
|
|
|
6,249
|
|
Technical
equipment
|
|
|
23,435
|
|
|
|
23,435
|
|
Vehicles
|
|
|
-
|
|
|
|
23,527
|
|
|
|
|
44,411
|
|
|
|
61,094
|
|
Less:
accumulated depreciation
|
|
|
(35,796
|
)
|
|
|
(34,993
|
)
|
Equipment
|
|
$
|
8,615
|
|
|
$
|
26,101
|
|
Depreciation
expense for the year ended December 31, 2017 and 2016 amounted to $16,100 and $20,975, respectively.
NOTE
6 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts
payable and accrued liabilities at December 31, 2017 and 2016 consists of the following:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
30,625
|
|
|
$
|
502
|
|
Accrued
expenses
|
|
|
66,931
|
|
|
|
8,996
|
|
Accrued
interest
|
|
|
8,348
|
|
|
|
-
|
|
|
|
$
|
105,904
|
|
|
$
|
9,498
|
|
NOTE
7 – STOCKHOLDER TRANSACTIONS
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.
NOTE
8 – CONVERTIBLE NOTES PAYABLE
Convertible
notes payable at December 31, 2017 and 2016 consists of the following:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
Dated
September 15, 2017
|
|
$
|
387,500
|
|
|
$
|
-
|
|
Dated
December 8, 2017
|
|
|
92,646
|
|
|
|
-
|
|
Dated
December 12, 2017
|
|
|
92,646
|
|
|
|
-
|
|
Total
convertible notes payable, gross
|
|
|
572,792
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Less:
Unamortized debt discount
|
|
|
(164,545
|
)
|
|
|
-
|
|
Total
convertible notes
|
|
|
408,247
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Less:
current portion of convertible notes payable, net
|
|
|
408,247
|
|
|
|
-
|
|
Long-term
convertible notes payable
|
|
$
|
-
|
|
|
$
|
-
|
|
For
the years ended December 31, 2017 and 2016, the Company recognized interest expense of $8,348 and $0 and amortization of discount,
included in interest expense, of $50,893 and $0, respectively.
September
2017 Note
On
September 15, 2017, the Company entered into the promissory note agreement with SBI Investments LLC (“SBI”) for loans
up to a maximum of $1,250,000, together with interest at the rate of 8% per annum. The consideration to the Company for this promissory
note is up to $1,000,000, resulting in a potential original issuance discount (“OID”) of up to $250,000. The maturity
date for each tranche funded shall be six months from the effective date of the respective payment date. The promissory note may
be converted into shares of the Company’s common stock at any time on or after the occurrence of an event of default. The
conversion price shall be the 60% multiplied by the lowest trading price during the 30 trading days 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.
An
initial promissory note of $200,000 was issued on September 15, 2017 and the Company received cash of $150,000 and recognized
OID of $40,000 and financing cost of $10,000 as debt discount.
On
November 14, 2017, the Company issued an additional promissory note of $187,500 and received cash of $150,000 and recognized OID
of $37,500 as debt discount.
December
8, 2017 Note
On
December 8, 2017, the Company entered into the promissory note agreement with LG Capital Funding, LLC (“LG”) for loans
totaling $185,292. The consideration to the Company is $158,824 resulting in a 15% OID. The maturity date for each note is six
months from the date of issuance. The Company shall pay a one-time interest charge of 9% of the principal amount for each note.
The notes may be converted at any time after the maturity date. The conversion price shall be 75% multiplied by the lowest trading
price during the 10 prior trading days period ending. As additional consideration for the purchase of the notes, the Company shall
issue to LG shares of our common stock on January 13, 2018 and February 1, 2018, with a value equal to $23,162, based on the previous
day closing price.
The
first note of $92,646 was issued on December 8, 2017. The Company received cash of $75,000 and recognized OID of $13,234 and financing
cost of $4,412 as debt discount. The one-time interest charge of 9% of the principal amount of the note was due on January 1,
2018. In addition, the Company recorded $46,323 as debt discount and common stock to be issued for the shares of common stock
to be issued in 2018. As of the date of the filing of this report, the shares have not been issued.
December
8, 2017 Note
On
December 8, 2017, the Company entered into the promissory note agreement with Cerberus Finance Group Ltd. (“Cerberus”)
for loans totaling $185,292. The consideration to the Company is $158,824 resulting in a 15% OID. The maturity date for each note
is six months from the date of issuance. The Company shall pay a one-time interest charge of 9% of the principal amount for each
note. The notes may be converted at any time after the Maturity Date. The conversion price shall be the 75% multiplied by the
lowest trading price during the 10 prior trading days period ending. As additional consideration for the purchase of the Notes,
the Company shall issue to Cerberus shares of our common stock on January 13, 2018 and February 1, 2018, with a value equal to
$23,162, based on the previous day closing price.
The
first note of $92,646 was issued on December 8, 2017. The Company received cash of $75,000 and recognized OID of $13,234 and financing
cost of $4,412 as debt discount. The one-time interest charge of 9% of the amount of the Note was due on January 1, 2018. In addition,
the Company recorded $46,323 as debt discount and as common stock to be issued for the common stock to be issued in 2018. As of
the date of the filing of this report, the shares have not been issued.
NOTE
9—STOCKHOLDERS’ EQUITY
Amendments
to Articles of Incorporation
The
Company was authorized to issue 100,000,000 shares of common stock at par value of $0.00001 and 100,000,000 shares of preferred
stock at par value of $0.00001.
Effective
June 7, 2017, the Company filed a Certificate of Amendment to its Articles of Incorporation with the state of Nevada to increase
the number of authorized shares of capital stock to 550,000,000 shares. The Company increased the number of authorized common
shares to 500,000,000 and decreased the number of authorized preferred shares to 50,000,000.
On
January 29, 2018, the Company amended its Articles of Incorporation giving its Board of Directors the power to issue up to 50,000,000
shares of Preferred Stock, and to fix the rights, preferences and privileges of each class of preferred stock so created. No shareholder
approval is required in connection with the creation of classes of preferred stock under this authority and the setting of the
rights, preferences and privileges of such shares. The Board of Directors acted to create new series of preferred stock, entitled
Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock.
Effective
March 14, 2018, the Company filed a Certificate of Amendment to its Articles of Incorporation with the state of Nevada to increase
the number of authorized shares of capital stock to 1,050,000,000 shares. The Company increased the number of authorized shares
of common stock to 1,000,000,000. There was no change to the number of shares of authorized preferred stock.
PREFERRED
STOCK
The
Preferred Stock may be divided into such number of series as the Board of Directors may determine. The Board of Directors is authorized
to determine and alter the rights, preferences, privileges and restrictions granted to and imposed upon any wholly unissued series
of Preferred Stock, and to fix the number of shares of any series of Preferred Stock and the designation of any such series of
Preferred Stock. The Board of Directors, within the limits and restrictions stated in any resolution or resolutions of the Board
of Directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number
of shares such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series.
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. Fractional votes shall not, however,
be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares
of Series A Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half
being rounded upward).
During the year ended
December 31, 2017, the Company issued Series A Preferred Shares as follows;
● 5,000,000 shares of preferred stock as partial
consideration for the acquisition of 100% of issued and outstanding equity of 12HK (Note 1)
● 500,000 shares of 100% of issued and outstanding
of 12JP (Note 1).
During
the year ended December 31, 2017, under the terms of the agreement of 12JP, 500,000 shares of preferred stock beneficially owned
by the Company’s majority stockholder were cancelled (Note 1).
As
of December 31, 2017, 5,000,000 shares of Series A Preferred Stock were issued and outstanding.
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.
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.
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.
No
shares of Series B Preferred Stock were issued and outstanding as of December 31, 2017.
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 Conpany.
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.
Dividends
Series
C Preferred Stock shall not accrue dividends.
Redemption
The
Series C Preferred Stock shall not be redeemable by the Company.
No
shares of Series C Preferred Stock were issued and outstanding as of December 31, 2017.
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 Corporation 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.
No
shares of Series D Preferred Stock were issued and outstanding as of December 31, 2017.
Common
Stock
The
Company is authorized to issue 1,000,000,000 shares of common stock at a par value of $0.00001. Subsequent to year end, on March
14, 2018 the Company increased the authorized Common Shares to 1,000,000,000 (see Note 9).
On
June 27, 2017, pursuant to the Share Exchange Agreement (See Note 1), the Company issued 50,000,000 shares of common stock to
the stockholders of 12HK in exchange for the 12HK Shares. As a result of the reverse acquisition accounting, these shares issued
to the former 12HK stockholders are treated as being outstanding from the date of issuance of the 12HK Shares.
The
50,000,000 shares of common stock consisted of the following;
●
|
25,000,000
shares of common stock were outstanding as of December 31, 2015 (12HK)
|
|
|
●
|
During
the year ended December 31, 2016, the Company issued another 25,000,000 shares of common stock in settlement of amounts due
to stockholders totaling $256,000 (Note 7) (12HK)
|
These
50,000,000 12HK shares were exchanged for 50,000,000 12 ReTech shares on June 27, 2017, but are accounted for as if issued by
the Company due to the reverse merger accounting rules.
Subsequent
to June 27, 2017 and during the year ended December 31, 2017, the Company issued common shares as follows;
|
●
|
5,000,000
shares of common stock in connection with the acquisition of 12JP (Note 1)
|
|
|
|
|
●
|
3,807,976
shares of common stock with the acquisition of 12EU (Note 1)
|
|
|
|
|
●
|
2,700,000
shares of commons stock to unrelated parties for services valued at $474,000
|
During
the year ended December 31, 2017, under the terms for the acquisition of 12JP, 5,000,000 shares of common stock beneficially owned
by the Company’s majority stockholder were cancelled (Note 1).
On
July 13, 2017, the Company reached an agreement with a vendor shareholder to return 3,000,000 shares of its common stock to treasury
for cancellation.
As
of December 31, 2017 and 2016, 82,200,000 and 50,000,000 shares of common stock were issued and outstanding, respectively.
NOTE
10 - 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:
|
|
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”).
The
following table sets forth the significant components of the aggregate deferred tax assets of the Company as of December 31, 2017
and 2016:
|
|
December
31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
NOL
carryforwards
|
|
|
|
|
|
|
|
|
United
States – current rate
|
|
$
|
266,934
|
|
|
$
|
-
|
|
United
States – effect of change in statutory rate
|
|
|
(102,062
|
)
|
|
|
-
|
|
-Foreign
|
|
|
337,278
|
|
|
|
210,821
|
|
Total
|
|
|
502,150
|
|
|
|
210,821
|
|
Less:
valuation allowance
|
|
|
(502,150
|
)
|
|
|
(210,821
|
)
|
Net
deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
On
December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications
to existing law including lowering the corporate tax rate from 34% to 21%. In addition to applying the new lower corporate tax
rate in 2018 and thereafter to any taxable income we may have, the legislation affects the way we can use and carry forward net
operating losses previously accumulated and results in a revaluation of deferred tax assets and liabilities recorded on our balance
sheet. The Company has completed the accounting for the effects of the Act during the quarter ended December 31, 2017. Given that
current deferred tax assets are offset by a full valuation allowance, these changes will have no impact on the balance sheet.
The
Company applies the authoritative accounting guidance under ASC 740 for the recognition, measurement, classification and disclosure
of uncertain tax positions taken or expected to be taken in a tax return. The Company provided a full valuation allowance against
its deferred tax assets as of December 31, 2017 and 2016. This valuation allowance reflects the estimate that it is more likely
than not that the net deferred tax assets may not be realized.
The
Company has approximately $2,480,000 of U.S. and foreign carryforwards, the tax effect of which is approximately $502,000. These
carryforwards begin to expire in 2024.
The
U. S. NOL carryforwards are subject to certain limitations due to the change in control of the Company pursuant to Internal Revenue
Code Section 382. The Company has not performed a study to determine if the NOL carryforwards are subject to these Section 382
limitations. In addition, the Company has foreign NOLs. The Company is still evaluating the impact of a change in stock ownership
and the potential limitation of foreign NOLs.
A
valuation allowance is recorded on certain deferred tax assets if it has been determined it is more likely than not that all or
a portion of these assets will not be realized. The Company has recorded a full valuation allowance of $502,150 and $210,821 for
deferred tax assets existing as of December 31, 2017 and 2016, respectively. The valuation allowance as of December 31, 2017 and
2016 is attributable to NOL carryforwards in the United States and foreign jurisdictions. There was an increase in the valuation
allowance in the year ended December 31, 2017 of $291,329.
The
Company’s tax returns are subject to examination by tax authorities in the U.S., various state and foreign jurisdictions.
The Company is generally no longer subject to examinations for years prior to 2013.
NOTE
11—COMMITMENTS
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.
|
Future
minimum annual lease payments as of December 31, 2017 are $30,488 for 2018.
NOTE
12 - SEGMENTS
The
Company does business on three continents (Asia, North America and Europe) in four different jurisdictions (Hong Kong-special
economic zone of the People’s Republic of China, Japan, United States of America, and The European common market through
Switzerland). These segments are components of the Company about which separate financial information is available and regularly
evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The accounting
policies of the segments are the same as those described in Note 3, Summary of Significant Accounting Policies.
|
|
North
America
|
|
|
Asia
|
|
|
Europe
|
|
|
Total
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
60,787
|
|
|
$
|
-
|
|
|
$
|
60,787
|
|
Depreciation
|
|
$
|
-
|
|
|
$
|
9,351
|
|
|
$
|
6,749
|
|
|
$
|
16,100
|
|
Operating
loss
|
|
$
|
(732,965
|
)
|
|
$
|
(574,878
|
)
|
|
$
|
(51,671
|
)
|
|
$
|
(1,359,514
|
)
|
Interest
expense
|
|
$
|
59,241
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
59,241
|
|
Net
loss
|
|
$
|
(792,206
|
)
|
|
$
|
(574,878
|
)
|
|
$
|
(51,671
|
)
|
|
$
|
(1,418,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets, net
|
|
$
|
-
|
|
|
$
|
7,383
|
|
|
$
|
1,232
|
|
|
$
|
8,615
|
|
Total
assets
|
|
$
|
20,394
|
|
|
$
|
84,206
|
|
|
$
|
27,886
|
|
|
$
|
132,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
99,683
|
|
|
$
|
20,306
|
|
|
$
|
119,989
|
|
Depreciation
|
|
$
|
-
|
|
|
$
|
11,228
|
|
|
$
|
9,747
|
|
|
$
|
20,975
|
|
Operating
income (loss)
|
|
$
|
-
|
|
|
$
|
(187,743
|
)
|
|
$
|
6,703
|
|
|
$
|
(181,040
|
)
|
Interest
expense
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Net
loss
|
|
$
|
-
|
|
|
$
|
(187,743
|
)
|
|
$
|
6,703
|
|
|
$
|
(181,040
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets, net
|
|
$
|
-
|
|
|
$
|
11,985
|
|
|
$
|
14,116
|
|
|
$
|
26,101
|
|
Total
assets
|
|
$
|
-
|
|
|
$
|
127,730
|
|
|
$
|
14,650
|
|
|
$
|
142,380
|
|
NOTE
13—SUBSEQUENT EVENTS
The
Company evaluated all events and transactions that occurred after December 31, 2017 and through the date of this filing in accordance
with FASB ASC 855, “Subsequent Events”. The Company determined that it does have a material subsequent events to disclose
as follows;
Subsequent
Events:
On
January 10, 2018, LG funded their “back end note” which is the second half commitment from the agreements that the
Company executed with LG on December 8, 2017. Therefore, the Company received net funds of $75,000.
On
January 11, 2018, Cerberus funded their “back end note” which is the second half commitment from the agreements that
the Company executed with Cerberus on December 8, 2017. Therefore, the Company received net funds of $ 75,000.
On
January 31, 2018, the Company sold 203,000 shares of Series B Preferred Stock to Geneva Roth Remark Holdings, Inc. (“Geneva”)
in exchange for $203,000 before fees.
On
March 16, 2018, the Company entered into a $50,000 Funding Agreement with Eagle Equities, LLC. This is the first portion of the
agreement, which provides for a ‘back end note” of equal amount.
On
March 19, 2018, the Company entered into a $50,000 Funding Agreement with Adar Bays Capital, LLC. This is the first portion of
the agreement, which provides for a “back end note” of equal amount.
On
March 20, 2018, Geneva agreed to purchase an additional 63,000 Series B Preferred shares for $63,000 under the same terms as the
initial purchase on January 31, 2018.
12
ReTech Corporation Debt Schedule as of March 31, 2018
Lender
or Lessor
|
|
Date
of Issuance
|
|
|
Initial
Principal Amount
|
|
|
Funds
Advanced (Received by Company)
|
|
|
Expenses
Associated with Debt (excludes OID)
|
|
|
Balance
Amount @ 20180331
|
|
|
Interest
Rate
|
|
|
Conversion
Date (if applicable)
|
|
|
Maturity
Date
|
|
|
Monthly
Payment, if applicable
|
|
Secured?
If so,
describe security interests (for leases list leased item)
|
|
Convertible?
If so, describe the structure
|
|
Contingencies?
If so, describe the terms
|
|
|
Partially
or Fully Guaranteed by Another Entity? If so, specify
|
|
Other
Relevant Information
|
LG
Capital
|
|
|
20180108
|
|
|
$
|
92,646.00
|
|
|
$
|
75,000.00
|
|
|
$
|
4,411.75
|
|
|
$
|
100,984.14
|
|
|
|
9%
/ 24%
default
|
|
|
|
On
Default
|
|
|
|
20180708
|
|
|
None
Required
|
|
No
|
|
On
Default/
25%
|
|
|
|
|
|
No
|
|
Convertible
Upon
Default
|
Cerberus
|
|
|
20180108
|
|
|
$
|
92,646.00
|
|
|
$
|
75,000.00
|
|
|
$
|
4,411.75
|
|
|
$
|
100,984.14
|
|
|
|
9%
/ 24%
default
|
|
|
|
On
Default
|
|
|
|
20180708
|
|
|
None
Required
|
|
No
|
|
On
Default /
25%
|
|
|
|
|
|
No
|
|
Convertible
Upon Default
|
Geneva
Roth Remark Holdings
|
|
|
20180129
|
|
|
|
N/A
|
|
|
$
|
200,000.00
|
|
|
$
|
3,000.00
|
|
|
|
N/A
|
|
|
|
12%
/ 22% default
|
|
|
|
20180728
|
|
|
|
None
|
|
|
None
Required
|
|
No
|
|
Lesser
of 35% or
$0.20
|
|
|
|
|
|
No
|
|
Preferred
Equity - Series B Preferred - 203,000
|
Eagle
Equities
|
|
|
20180315
|
|
|
$
|
50,000.00
|
|
|
$
|
47,500.00
|
|
|
$
|
2,500.00
|
|
|
$
|
52,776.16
|
|
|
|
12
|
%
|
|
|
20180911
|
|
|
|
None
|
|
|
None
Required
|
|
No
|
|
40%
discount
|
|
|
|
|
|
No
|
|
Convertible
Promissory Note
|
Adar
Bay
|
|
|
20180315
|
|
|
$
|
50,000.00
|
|
|
$
|
47,500.00
|
|
|
$
|
2,500.00
|
|
|
$
|
52,776.16
|
|
|
|
12
|
%
|
|
|
20180911
|
|
|
|
None
|
|
|
None
Required
|
|
No
|
|
40%
discount
|
|
|
|
|
|
No
|
|
Convertible
Promissory Note
|
Geneva
Roth Remark Holdings
|
|
|
20180315
|
|
|
|
N/A
|
|
|
$
|
60,000.00
|
|
|
$
|
3,000.00
|
|
|
|
N/A
|
|
|
|
12%
/ 22% default
|
|
|
|
20180911
|
|
|
|
None
|
|
|
None
Required
|
|
No
|
|
Lesser
of 35% or
$0.20
|
|
|
|
|
|
No
|
|
Preferred
Equity - Series B Preferred - 63,000
|
On
March 14, 2018 the company entered into a Securities Purchase Agreement with EMA Financial whereby the Company issued to a 9%
Convertible Note (“Note”) to EMA Financial, LLC (“EMA”) in the principal amount of $100,000. The Company
shall net $89,000. The conversion price of the Note is $0.05 provided however, if certain conditions are triggered the conversion
price shall equal the lower of: (i) the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately
preceding the Closing Date, and (ii) 60% of either the lowest sale price for the Common Stock on the Principal Market during the
twenty (20) consecutive Trading Days including and immediately preceding the Conversion Date, or the closing bid price, whichever
is lower. The Note shall be redeemed at 150% of outstanding principal and interest.
On
March 30, 2018, the Company entered into an amendment to the note with SBI Investments affecting the September 15, 2017 $200,000
tranche that was now eligible for conversion at a discount to market. The Company agreed to pay $25,000 to SBI for each 30-day
extension. The extension amount is automatically added to the face value of the note after each 30-day period. Management determined
that this extension was in the best interest of shareholders allowing the Company to defer cash payment until more substantial
funds were available and/or to delay conversion. SBI has agreed to a minimum of a 3-month extension under these same terms and
has indicated a willingness to extend even beyond that due date.
On
April 12, 2018 and subsequent to the year ended December 31, 2017, the Company entered into an engagement agreement with Tellson
Securities, Inc. F/K/A 41 North Securities (“Tellson”) whereby Tellson was hired to raise $5 million in preferred
equity for the Company to make acquisitions and expand operations and at the appropriate time to assist the Company for up-listings
to a recognized exchange like the NASDAQ Market.
12
RETECH CORPORATION
Condensed
Consolidated Balance Sheets
(Unaudited)
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
47,085
|
|
|
$
|
100,264
|
|
Accounts
receivable
|
|
|
3,046
|
|
|
|
2,884
|
|
Prepaid
expenses
|
|
|
1,177
|
|
|
|
1,290
|
|
Other
current assets
|
|
|
52,239
|
|
|
|
13,878
|
|
Total
Current Assets
|
|
|
103,547
|
|
|
|
118,316
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets, net
|
|
|
7,978
|
|
|
|
8,615
|
|
Software
development costs
|
|
|
53,944
|
|
|
|
-
|
|
Security
deposit
|
|
|
3,970
|
|
|
|
5,555
|
|
TOTAL
ASSETS
|
|
$
|
169,439
|
|
|
$
|
132,486
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
348,908
|
|
|
$
|
105,904
|
|
Due
to stockholders
|
|
|
694,850
|
|
|
|
669,126
|
|
Convertible
notes payable, net of discounts
|
|
|
776,366
|
|
|
|
408,247
|
|
Total
Current Liabilities
|
|
|
1,820,124
|
|
|
|
1,183,277
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
1,820,124
|
|
|
|
1,183,277
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Deficit:
|
|
|
|
|
|
|
|
|
Preferred
stock: 50,000,000 authorized; $0.00001 par value:
|
|
|
|
|
|
|
|
|
Series
A Preferred Stock, 10,000,000 shares designated; $0.00001 par value; 5,000,000 shares issued and outstanding at March 31,
2018 and December 31, 2017
|
|
|
50
|
|
|
|
50
|
|
Series
B Preferred Stock, 1,000,000 shares designated; $0.00001 par value $1.00 stated value; 266,000 and 0 shares issued and outstanding
at March 31, 2018 and December 31, 2017, respectively
|
|
|
3
|
|
|
|
-
|
|
Common
stock: 1,000,000,000 and 500,000,000 authorized at March 31, 2018 and December 31, 2017, respectively; $0.00001 par value;
82,962,338 and 82,200,000 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively
|
|
|
830
|
|
|
|
822
|
|
Additional
paid-in capital
|
|
|
1,645,551
|
|
|
|
1,267,916
|
|
Common
stock to be issued
|
|
|
-
|
|
|
|
92,646
|
|
Accumulated
other comprehensive income (loss)
|
|
|
(13,150
|
)
|
|
|
1,514
|
|
Accumulated
deficit
|
|
|
(3,283,969
|
)
|
|
|
(2,413,739
|
)
|
Total
Stockholders’ Deficit
|
|
|
(1,650,685
|
)
|
|
|
(1,050,791
|
)
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
169,439
|
|
|
$
|
132,486
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
12
RETECH CORPORATION
Condensed
Consolidated Statement of Operations and Comprehensive Loss
(Unaudited)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
8,942
|
|
|
$
|
34,379
|
|
Cost
of revenue
|
|
|
-
|
|
|
|
451
|
|
Gross
Profit
|
|
|
8,942
|
|
|
|
33,928
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
473,444
|
|
|
|
72,128
|
|
Professional
fees
|
|
|
231,629
|
|
|
|
5,734
|
|
Depreciation
|
|
|
1,149
|
|
|
|
3,192
|
|
Total
Operating Expenses
|
|
|
706,222
|
|
|
|
81,054
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(697,280
|
)
|
|
|
(47,126
|
)
|
|
|
|
|
|
|
|
|
|
Other
Expense
|
|
|
|
|
|
|
|
|
Loss
on debt extinguishment
|
|
|
(25,000
|
)
|
|
|
-
|
|
Interest
expense
|
|
|
(147,950
|
)
|
|
|
-
|
|
Net
Other Expense
|
|
|
(172,950
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loss
Before Provision for Income Taxes
|
|
|
(870,230
|
)
|
|
|
(47,126
|
)
|
|
|
|
|
|
|
|
|
|
Provision
for Income Taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(870,230
|
)
|
|
$
|
(47,126
|
)
|
|
|
|
|
|
|
|
|
|
Other
comprehensive loss
|
|
|
(14,664
|
)
|
|
|
(6,166
|
)
|
Comprehensive
Loss
|
|
$
|
(884,894
|
)
|
|
$
|
(53,292
|
)
|
|
|
|
|
|
|
|
|
|
Net
Loss Per Common Share: Basic and Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)*
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of Common Shares Outstanding: Basic and Diluted
|
|
|
82,623,020
|
|
|
|
50,000,000
|
|
*Represents an amount that is less than ($0.01)
The accompanying notes are an integral part of these consolidated
financial statements
12
RETECH CORPORATION
Condensed
Consolidated Statements of Changes in Stockholders’ Deficit
(Unaudited)
|
|
Preferred
Stock
|
|
|
Series
B Preferred Stock
|
|
|
Common
Stock
|
|
|
|
|
|
Common
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Additional
Paid-in
Capital
|
|
|
Stock
to be issued
|
|
|
Other
Comprehensive
Income
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- January 1, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
B Preferers stock issued for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
266,000
|
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
259,997
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
260,000
|
|
Common
stock issued as part of funds raised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
768,338
|
|
|
|
8
|
|
|
|
117,638
|
|
|
|
(92,646
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
25,000
|
|
Foreign
currency translation adjustments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(14,664
|
)
|
|
|
-
|
|
|
|
(14,664
|
)
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(870,230
|
)
|
|
|
(870,230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- March 31, 2018
|
|
|
5,000,000
|
|
|
$
|
50
|
|
|
|
266,000
|
|
|
$
|
3
|
|
|
|
82,968,338
|
|
|
$
|
830
|
|
|
$
|
1,645,551
|
|
|
$
|
-
|
|
|
$
|
(13,150
|
)
|
|
$
|
(3,283,969
|
)
|
|
$
|
(1,650,685
|
)
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
12
RETECH CORPORATION
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2018
|
|
|
2017
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(870,230
|
)
|
|
$
|
(47,126
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,149
|
|
|
|
3,192
|
|
Amortization
of debt discount
|
|
|
123,119
|
|
|
|
-
|
|
Loss
on debt extinguishment
|
|
|
25,000
|
|
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
-
|
|
|
|
(25,600
|
)
|
Inventory
|
|
|
-
|
|
|
|
(1,286
|
)
|
Prepaid
and other current assets
|
|
|
(38,203
|
)
|
|
|
-
|
|
Security
deposit
|
|
|
1,684
|
|
|
|
-
|
|
Accounts
payable and accrued liabilities
|
|
|
242,475
|
|
|
|
(1,217
|
)
|
Net
Cash Used in Operating Activities
|
|
|
(515,006
|
)
|
|
|
(72,037
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Software
development costs
|
|
|
(53,944
|
)
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(381
|
)
|
|
|
(3,116
|
)
|
Net
Cash Used in Investing Activities
|
|
|
(54,325
|
)
|
|
|
(3,116
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from due to stockholders
|
|
|
29,722
|
|
|
|
40,766
|
|
Repayment
of due to stockholders
|
|
|
(16,931
|
)
|
|
|
-
|
|
Proceeds
from convertible notes payable
|
|
|
245,000
|
|
|
|
-
|
|
Issuance
of Series B Preferred stock
|
|
|
266,000
|
|
|
|
-
|
|
Cash
paid for capital raise
|
|
|
(6,000
|
)
|
|
|
-
|
|
Net
Cash Provided by Financing Activities
|
|
|
517,791
|
|
|
|
40,766
|
|
|
|
|
|
|
|
|
|
|
Effect
of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
(1,639
|
)
|
|
|
348
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(53,179
|
)
|
|
|
(34,039
|
)
|
Cash
and cash equivalents, beginning of period
|
|
|
100,264
|
|
|
|
54,644
|
|
Cash
and cash equivalents, end of period
|
|
$
|
47,085
|
|
|
$
|
20,605
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash
paid for taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash
transactions:
|
|
|
|
|
|
|
|
|
Common
stock issued recognized as debt discount
|
|
$
|
25,000
|
|
|
$
|
-
|
|
Common
stock issued in conjunction with convertible notes
|
|
$
|
92,646
|
|
|
$
|
-
|
|
12
RETECH CORPORATION
Notes
to Condensed Consolidated Financial Statements
March 31, 2018
(Unaudited)
NOTE
1 – NATURE OF BUSINESS
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, the Company 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 providing shareholder value through immediate revenue and earnings growth. The Company operates through
our subsidiaries on three continents, Asia, North America and Europe.
Principal
subsidiaries
The
details of the principal subsidiaries of the Company are set out as follows:
Name
of Company
|
|
Place
of Incorporation
|
|
Date
of Incorporation
|
|
Acquisition
Date
|
|
Attributable
Equity Interest %
|
|
Business
|
12
Retail Corporation (“12 Retail”)
|
|
Arizona,
USA
|
|
Sept.
18, 2017
|
|
Formed
by 12 Retech Corporation
|
|
100%
|
|
As
a holding Company 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.
|
|
|
|
|
|
|
|
|
|
|
|
12
Hong Kong Limited (“12HK”)
|
|
Hong
Kong, China
|
|
Feb.
2, 2014
|
|
June
27 2017
|
|
100%
|
|
Development
of our technology and sales of our technology applications.
|
|
|
|
|
|
|
|
|
|
|
|
12
Japan Limited (“12JP”)
|
|
Japan
|
|
Feb.
12, 2015
|
|
July
31, 2017
|
|
100%
|
|
Consultation
and sales of technology applications.
|
|
|
|
|
|
|
|
|
|
|
|
12
Europe AG (“12EU”)
|
|
Switzerland
|
|
Aug.
22, 2013
|
|
Oct.
26,2017
|
|
100%
|
|
Consultation
and sales of technology applications.
|
|
|
|
|
|
|
|
|
|
|
|
E-motion
Apparel, Inc.
|
|
California,
USA
|
|
Sept.
9, 2010
|
|
May
1, 2018
|
|
100%
|
|
A
subsidiary of 12 Retail and is the first microbrand acquired under the microbrand acquisition roll up strategy. Operates its
own production facilities that can be utilized by all of the Company’s future microbrands.
|
NOTE
2 – GOING CONCERN
The
Company accounts for going concern matters under the guidance of ASU 2014-15,
“Presentation of Financial Statements –
Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern
”
(“ASU 2014-15”). The guidance in ASU 2014-15 sets forth management’s responsibility to evaluate whether there
is substantial doubt about an entity’s ability to continue as a going concern as well as required disclosures. ASU 2014-15
indicates that, when preparing financial statements for interim and annual financial statements, management should evaluate whether
conditions or events, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern
for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration
of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are
available to be issued, as well as whether it is probable that management’s plans to address the substantial doubt will
be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt.
These
interim financial statements have been prepared on a going concern basis which assumes the Company will continue to realize it
assets and discharge its liabilities in the normal course of business. As of March 31, 2018, the Company has incurred losses totaling
$3,283,969 since inception, has not yet generated significant revenue from its operations, and will require additional funds to
maintain our operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations
and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations
when they become due. The Company intends to finance operating costs over the next twelve months through continued financial support
from its shareholders, the issuance of debt securities and private placements of common stock. These interim financial statements
do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going concern.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of
Regulation S-X. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2018. Notes to the unaudited interim condensed consolidated financial statements
that would substantially duplicate the disclosures contained in the audited consolidated financial statements for fiscal year
2017 have been omitted. This report should be read in conjunction with the audited consolidated financial statements and the footnotes
thereto for the fiscal year ended December 31, 2017 included in the Company’s Form 10-K as filed with the Securities and
Exchange Commission on April 16, 2018.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its subsidiaries 12HK, 12JP, and 12EU and 12 Retail.
All inter-company accounts and transactions have been eliminated. We currently have no investments accounted for using the equity
or cost methods of accounting.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the
reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith
estimates and judgments.
Reclassifications
Certain
prior period amounts have been reclassified to conform with the current period presentation.
Software
Development Costs
At
March 31, 2018 and December 31, 2017, software development costs totaled $53,944 and $0, respectively. Capitalized costs related
to the software under development are treated as an asset until the development is completed and the software is available for
sale. The Company will amortize the software costs on a straight-line basis over the estimated life of the software product’s
expected life cycle, commencing when the software is first available for general release to customers.
Concentrations
During
the three months ended March 31, 2018, one customer accounted for 100% of revenues. During the three months ended March 31, 2017,
two customers accounted for 99% of revenues. One customer represented 100% of the accounts receivable as of March 31, 2018 and
December 31, 2017.
Revenue
Recognition
Effective
January 1, 2018, the Company adopted ASC 606, “Revenue from Contracts with Customers.” The Company has evaluated the
new guidance and its adoption did not have a significant impact on the Company’s financial statements and a cumulative effect
adjustment under the modified retrospective method of adoption will not be necessary. The will be no change to the Company’s
accounting policies.
Net
Loss Per Share of Common Stock
The
Company follows ASC 260,
“Earnings per Share”
(“EPS”), which requires presentation of basic EPS
on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation. In the accompanying financial statements, basic earnings (loss) per share are computed
by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
Diluted
earnings per share reflects the potential dilution that could occur if securities were exercised or converted into common stock
or other contracts to issue common stock resulting in the issuance of common stock that would then share in the Company’s
earnings subject to anti-dilution limitations. In a period in which the Company has a net loss, all potentially dilutive securities
are excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact. For the three months
ended March 31, 2018 and 2017, potentially dilutive common shares consist of common stock issuable upon the conversion of Series
A Preferred Stock (using the if converted method). All potentially dilutive securities were excluded from the computation of diluted
weighted average number of shares of common stock outstanding as they would have had an anti-dilutive impact.
Financial
Instruments
The
Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, prepaid expenses and
other current assets, accounts payable and accrued liabilities and due to stockholders. The carrying amounts of such financial
instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest
rates of these instruments.
Convertible
notes payable with characteristics of both liabilities and equity are classified as either debt or equity based on the characteristics
of its monetary value, with convertible notes classified as debt being measured at fair value, in accordance with ASC 480-10,
“Accounting for Certain Financial instruments with Characteristics of both Liabilities and Equity.”
Recent
Accounting Pronouncements
Management
has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements
will not have a material effect on the Company’s financial statements.
NOTE
4 – OTHER CURRENT ASSETS
Other
current assets at March 31, 2018 and December 31, 2017 consist of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
Reimbursable
advance payments for acquisitions
|
|
$
|
36,364
|
|
|
$
|
-
|
|
Other
current assets
|
|
|
15,875
|
|
|
|
13,878
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
52,239
|
|
|
$
|
13,878
|
|
NOTE
5 – FIXED ASSETS, NET
Fixed
assets, net at March 31, 2018 and December 31, 2017 consist of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
Office
equipment
|
|
$
|
9,019
|
|
|
$
|
7,371
|
|
Furniture
and equipment
|
|
|
607
|
|
|
|
607
|
|
Computer
|
|
|
11,937
|
|
|
|
12,998
|
|
Technical
equipment
|
|
|
23,435
|
|
|
|
23,435
|
|
|
|
|
44,998
|
|
|
|
44,411
|
|
Less:
accumulated depreciation
|
|
|
(37,020
|
)
|
|
|
(35,796
|
)
|
Equipment
|
|
$
|
7,978
|
|
|
$
|
8,615
|
|
Depreciation
expense for the three months ended March 31, 2018 and 2017 amounted to $1,149 and $3,192, respectively.
NOTE
6 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts
payable and accrued liabilities at March 31, 2018 and December 31, 2017 consists of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
155,260
|
|
|
$
|
30,625
|
|
Accrued
expenses
|
|
|
160,469
|
|
|
|
66,931
|
|
Accrued
interest
|
|
|
33,179
|
|
|
|
8,348
|
|
|
|
$
|
348,908
|
|
|
$
|
105,904
|
|
NOTE
7 – STOCKHOLDER TRANSACTIONS
Due
to stockholders at March 31, 2018 and December 31, 2017 consists of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Daniel
Monteverde
|
|
|
4,324
|
|
|
|
8,214
|
|
Angelo
Ponzetta
|
|
|
526,774
|
|
|
|
500,798
|
|
Gianni
Ponzetta
|
|
|
163,752
|
|
|
|
160,114
|
|
|
|
$
|
694,850
|
|
|
$
|
669,126
|
|
On
August 12, 2017, Gianni Ponzetta loaned CHF 60,000 ($62,946 at March 31, 2018 and $61,584 at December 31, 2017) to the Company,
which is included in the March 31, 2018 and December 31, 2017 totals. The promissory note is unsecured, 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 three months ended March 31, 2018 and 2017, total advances and expenses paid directly by stockholders on behalf of the Company
were $29,722 and $40,766, respectively, and the Company repaid $16,931 and $0, respectively.
NOTE
8 – CONVERTIBLE NOTES PAYABLE
Convertible
notes payable at March 31, 2018 and December 31, 2017 consists of the following:
|
|
March
31, 018
|
|
|
December
31, 2017
|
|
Dated
September 15, 2017
|
|
$
|
412,500
|
|
|
$
|
387,500
|
|
Dated December
8, 2017
|
|
|
185,292
|
|
|
|
92,646
|
|
Dated December
8, 2017
|
|
|
185,292
|
|
|
|
92,646
|
|
Dated
March 15, 2018
|
|
|
100,000
|
|
|
|
-
|
|
Total
convertible notes payable
|
|
|
883,084
|
|
|
|
572,792
|
|
|
|
|
|
|
|
|
|
|
Less:
Unamortized debt discount
|
|
|
(106,718
|
)
|
|
|
(164,545
|
)
|
Total
convertible notes
|
|
|
776,366
|
|
|
|
408,247
|
|
|
|
|
|
|
|
|
|
|
Less:
current portion of convertible notes
|
|
|
776,366
|
|
|
|
408,247
|
|
Long-term
convertible notes
|
|
$
|
-
|
|
|
$
|
-
|
|
For
the three months ended March 31, 2018 and 2017, the Company recognized interest expense of $24,831 and $0 and amortization of
discount, included in interest expense, of $123,119 and $0, respectively.
September
15, 2017 Note
On
September 15, 2017, the Company entered into the promissory note agreement with SBI Investments LLC (“SBI”) for loans
up to a maximum of $1,250,000, together with interest at the rate of 8% per annum. The consideration to the Company for this promissory
note is up to $1,000,000, resulting in a potential original issuance discount (“OID”) of up to $250,000. The maturity
date for each tranche funded shall be six months from the effective date of the respective payment date. The promissory note may
be converted into shares of the Company’s common stock at any time on or after the occurrence of an event of default. The
conversion price shall be the 60% multiplied by the lowest trading price during the 30 trading days 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. All terms of the note, including but not limited to interest rate, prepayment terms, conversion discount or look-back period
will be adjusted downward if the Company offers more favorable terms to another party, while this note is in effect.
An
initial promissory note of $200,000 was issued on September 15, 2017 and the Company received cash of $150,000 and recognized
OID of $40,000 and financing cost of $10,000 as debt discount.
On
November 14, 2017, the Company issued an additional promissory note of $187,500 and received cash of $150,000 and recognized OID
of $37,500 as debt discount.
On
March 30, 2018, the Company entered into an amendment of this note as it was originally due March 15, 2018, which indicates that
a $200,000 tranche is now eligible for conversion at a discount to market. The Company agreed to pay $25,000 to SBI for each 30-day
extension as consideration. The extension amount is automatically added to the face value of the note after each 30-day period.
SBI has agreed to a minimum of a 3-month extension under these same terms. The Company determined this amendment was a debt extinguishment
and recognized $25,000 as a loss on debt extinguishment.
As
at March 31, 2018, the Company has determined that there is no reset for the conversion terms of the note.
December
8, 2017 Note
On
December 8, 2017, the Company entered into the promissory note agreement with LG Capital Funding, LLC (“LG”) for loans
totaling $185,292. The consideration to the Company is $158,824 resulting in a 15% OID. The maturity date for each note is six
months from the date of issuance. The Company shall pay a one-time interest charge of 9% of the principal amount for each note.
The notes may be converted at any time after the maturity date. The conversion price shall be 75% multiplied by the lowest trading
price during the 10 prior trading days period ending on either (i) the last complete trading day prior to conversion date or (ii)
the conversion date. All terms of the note, including but not limited to interest rate, prepayment terms, conversion discount
or look-back period will be adjusted downward if the Company offers more favorable terms to another party, while this note is
in effect. As additional consideration for the purchase of the notes, the Company issued to LG 121,903 shares of our common stock
each on January 13, 2018 and February 1, 2018, for a total of 243,806 shares, with a value equal to $46,323, based on the previous
day closing price.
The
first note of $92,646 was issued on December 8, 2017. The Company received cash of $75,000 and recognized OID of $13,234 and financing
cost of $4,412 as debt discount. The one-time interest charge of 9% of the principal amount of the note was due on January 1,
2018. In addition, the Company recorded $46,323 as debt discount for the issuance of the common shares.
On
January 10, 2018, LG funded their “back end note” which is the second half commitment from the agreements. The Company
received cash of $75,000 and recognized OID of $13,234 and financing cost of $4,412 as debt discount. The one-time interest charge
of 9% of principal amount of the note was due on February 1, 2018.
As
of March 31, 2018, as a result of reset features the conversion price shall be 60% multiplied by the lowest traded price during
the 10 prior trading day period ending on either (i) the last complete trading day prior to the conversion date or (ii) the conversion
date.
December
8, 2017 Note
On
December 8, 2017, the Company entered into the promissory note agreement with Cerberus Finance Group Ltd. (“Cerberus”)
for loans totaling $185,292. The consideration to the Company is $158,824 resulting in a 15% OID. The maturity date for each note
is six months from the date of issuance. The Company shall pay a one-time interest charge of 9% of the principal amount for each
note. The notes may be converted at any time after the Maturity Date. The conversion price shall be the 75% multiplied by the
lowest trading price during the 10 prior trading days period ending on either (i) the last complete trading day prior to conversion
date or (ii) the conversion date. All terms of the note, including but not limited to interest rate, prepayment terms, conversion
discount or look-back period will be adjusted downward if the Company offers more favorable terms to another party, while this
note is in effect. As additional consideration for the purchase of the notes, the Company issued to Cerberus 121,903 shares of
our common stock each on January 13, 2018 and February 1, 2018, for a total of 243,806 shares, with a value equal to $46,323,
based on the previous day closing price.
The
first note of $92,646 was issued on December 8, 2017. The Company received cash of $75,000 and recognized OID of $13,234 and financing
cost of $4,412 as debt discount. The one-time interest charge of 9% of the amount of the Note was due on January 1, 2018. In addition,
the Company recorded $46,323 as debt discount for the issuance of the common shares.
On
January 11, 2018, Cerberus funded their “back end note” which is the second half commitment from the agreements. The
Company received cash of $75,000 and recognized OID of $13,234 and financing cost of $4,412 as debt discount. The one-time interest
charge of 9% of the principal amount of the note was due on February 1, 2018.
As
of March 31, 2018, as a result of reset features the conversion price shall be 60% multiplied by the lowest traded price during
the 10 prior trading day period ending on either (i) the last complete trading day prior to the conversion date or (ii) the conversion
date.
March
15, 2018 Note
On
March 14, 2018, the Company entered into a into the promissory note agreement with Eagle Equities, LLC (“Eagle”) for
loans totaling totaling $100,000. The consideration to the Company is $95,000 resulting in a 5% OID. The maturity date of each
note is one year from the date of issuance. The notes carry an interest rate of 12% per annum and interest payments are to be
made in common shares of the Company. The conversion price of the note is 60% multiplied by the lowest trading price of the Common
Stock for the ten prior trading days and the holder can convert the note at the earlier of an uncured default or 181 days from
issuance. The note may be redeemed by the Company at rates ranging from 105% to 130% depending on the redemption date provided
that no redemption is allowed after the 180
th
day. All terms of the note, including but not limited to interest rate,
prepayments terms, conversion discount or look-back period will be adjusted downward if the Company offers more favorable terms
to another part, while this note is in effect. As additional consideration, the Company is to issue to Eagles Equities, LLC shares
of common stock with a value equal to 25% of each note, determined at the time of signing of each note.
The
first note of $50,000 was issued on March 15, 2018. The Company received cash of $47,500 and recognized financing cost of $2,500
as debt discount. The Company issued to Eagle Equities, LLC 137,363 shares of common stock with a value equal to $12,500. Eagle
Equities has LLC has not yet funded the back end note for the remaining $50,000 at this time.
March
15, 2018 Note
On
March 14, 2018, the Company entered into a into the promissory note agreement with with Adar Bays Capital, LLC (“Adar Bays
Capital”) for loans totaling totaling $100,000. The consideration to the Company is $95,000 resulting in a 5% OID. The maturity
date of each note is one year from the date of issuance. The notes carry an interest rate of 12% per annum and interest payments
are to be made in common shares of the Company. The conversion price of the note is 60% multiplied by the lowest trading price
of the Common Stock for the ten prior trading days and the holder can convert the note at the earlier of an uncured default or
181 days from issuance. The note may be redeemed by the Company at rates ranging from 105% to 130% depending on the redemption
date provided that no redemption is allowed after the 180
th
day. All terms of the note, including but not limited to
interest rate, prepayment terms, conversion discount or look-back period will be adjusted downward in the Company offers more
favorable terms to another party, while this note is in effect. As additional consideration, the Company is to issue to Adar Bays
Capital shares of common stock with a value equal to 25% of each note, determine at the time of signing of each note.
The
first note of $50,000 was issued on March 15, 2018. The Company received cash of $47,500 and recognized financing cost of $2,500
as debt discount. The Company issued to Adar Bays Capital 137,363 shares of our common stock with a value equal to $12,500. Adar
Bays Capital, LLC has not yet funded the back end note for the remaining $50,000 at this time
NOTE
9 – STOCKHOLDERS EQUITY
Amendments
to Articles of Incorporation
On
January 29, 2018, the Company amended its Articles of Incorporation giving its Board of Directors the power to issue up
to 50,000,000 shares of Preferred Stock, and to fix the rights, preferences and privileges of each class of preferred stock so
created. No shareholder approval is required in connection with the creation of classes of preferred stock under this authority
and the setting of the rights, preferences and privileges of such shares. The Board of Directors acted to create new series of
preferred stock, entitled Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock.
Effective
March 14, 2018, the Company filed a Certificate of Amendment to its Articles of Incorporation with the state of Nevada to increase
the number of authorized shares of capital stock to 1,050,000,000 shares. The Company increased the number of authorized shares
of common stock to 1,000,000,000. There was no change to the number of shares of authorized preferred stock.
PREFERRED
STOCK
The
Preferred Stock may be divided into such number of series as the Board of Directors may determine. The Board of Directors is authorized
to determine and alter the rights, preferences, privileges and restrictions granted to and imposed upon any wholly unissued series
of Preferred Stock, and to fix the number of shares of any series of Preferred Stock and the designation of any such series of
Preferred Stock. The Board of Directors, within the limits and restrictions stated in any resolution or resolutions of the Board
of Directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number
of shares such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series.
Series
A Preferred Stock
There
were no issuances of the Series A Preferred Stock during the three months ended March 31, 2018
As
of March 31, 2018, and December 31, 2017, 5,000,000 shares of Series A Preferred Stock were issued and outstanding.
Series
B Preferred Stock
During
the three months ended March 31, 2018, the Company issued Series B Preferred Stock as follows,
|
●
|
On
January 31, 2018, the Company sold 203,000 shares of Series B Preferred Stock to Geneva Roth Remark Holdings, Inc. (“Geneva”)
in exchange for $203,000 before fees.
|
|
|
|
|
●
|
On
March 20, 2018, Geneva agreed to purchase an additional 63,000 Series B Preferred shares for $63,000 under the same terms
as the initial purchase on January 31, 2018.
|
As
of March 31, 2018 and December 31, 2017, 266,000 and 0 shares of Series B Preferred Stock were issued and outstanding, respectively.
Series
C Preferred Stock
There
were no issuances of the Series C Preferred Stock during the three months ended March 31, 2018.
No
shares of Series C Preferred Stock were issued and outstanding as of March 31, 2018.
Series
D Preferred Stock
There
were no issuances of the Series D Preferred Stock during the three months ended March 31, 2018.
No
shares of Series D Preferred Stock were issued and outstanding as of March 31, 2018.
Common
Stock
The
Company is authorized to issue 1,000,000,000 shares of common stock at a par value of $0.00001.
During
the three months ended March 31, 2018, the Company issued 762,338 shares of common stock, with a value of $117,646, as additional
consideration for the issuance of convertible notes (see Note 8).
As
of March 31, 2018, and December 31, 2017, 82,962,338 and 82,200,000 shares of common stock were issued and outstanding, respectively.
NOTE
10 – SEGMENTS
The
Company does business on three continents (Asia, North America and Europe) in four different jurisdictions (Hong Kong-special
economic zone of the People’s Republic of China, Japan, United States of America, and The European common market through
Switzerland). These segments are components of the Company about which separate financial information is available and regularly
evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The accounting
policies of the segments are the same as those described in Note 3, Summary of Significant Accounting Policies.
The
following table shows operating activities information by geographic segment for the three months ended March 31, 2018 and 2017.
March 31, 2018
|
|
North America
|
|
|
Asia
|
|
|
Europe
|
|
|
Total
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
8,942
|
|
|
$
|
-
|
|
|
$
|
8,942
|
|
Cost of revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Operating expense excluding depreciation
|
|
$
|
451,563
|
|
|
$
|
184,962
|
|
|
$
|
68,548
|
|
|
$
|
705,073
|
|
Depreciation
|
|
$
|
-
|
|
|
$
|
1,022
|
|
|
$
|
127
|
|
|
$
|
1,149
|
|
Operating loss
|
|
$
|
(451,563
|
)
|
|
$
|
(177,042
|
)
|
|
$
|
(68,675
|
)
|
|
$
|
(697,280
|
)
|
Interest expense
|
|
$
|
(147,950
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(147,950
|
)
|
Loss on debt extinguishment
|
|
$
|
(25,000
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(25,000
|
)
|
Net loss
|
|
$
|
(623,778
|
)
|
|
$
|
(177,777
|
)
|
|
$
|
(68,675
|
)
|
|
$
|
(870,230
|
)
|
March 31, 2017
|
|
North America
|
|
|
Asia
|
|
|
Europe
|
|
|
Total
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
34,379
|
|
|
$
|
-
|
|
|
$
|
34,379
|
|
Cost of revenue
|
|
$
|
-
|
|
|
$
|
451
|
|
|
$
|
-
|
|
|
$
|
451
|
|
Operating expenses excluding depreciation
|
|
$
|
-
|
|
|
$
|
77,961
|
|
|
$
|
171
|
|
|
$
|
77,862
|
|
Depreciation
|
|
$
|
-
|
|
|
$
|
3,192
|
|
|
$
|
-
|
|
|
$
|
3,192
|
|
Operating loss
|
|
$
|
-
|
|
|
$
|
(46,955
|
)
|
|
$
|
(171
|
)
|
|
$
|
(47,126
|
)
|
Interest expense
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Net loss
|
|
$
|
-
|
|
|
$
|
(46,955
|
)
|
|
$
|
(171
|
)
|
|
$
|
(47,126
|
)
|
The
following table shows assets information by geographic segment at March 31, 2018 and December 31, 2017.
March 31, 2018
|
|
North America
|
|
|
Asia
|
|
|
Europe
|
|
|
Total
|
|
Fixed assets, net
|
|
$
|
-
|
|
|
$
|
6,845
|
|
|
$
|
1,133
|
|
|
$
|
7,978
|
|
Total assets
|
|
$
|
55,308
|
|
|
$
|
112,533
|
|
|
$
|
1,598
|
|
|
$
|
169,439
|
|
December 31, 2017
|
|
North America
|
|
|
Asia
|
|
|
Europe
|
|
|
Total
|
|
Fixed assets, net
|
|
$
|
-
|
|
|
$
|
7,383
|
|
|
$
|
1,232
|
|
|
$
|
8,615
|
|
Total assets
|
|
$
|
20,394
|
|
|
$
|
84,206
|
|
|
$
|
27,886
|
|
|
$
|
132,486
|
|
NOTE
11 – SUBSEQUENT EVENTS
On
April 12, 2018, the Company entered into an engagement agreement with Tellson Securities, Inc. F/K/A 41 North Securities (“Tellson”)
whereby Tellson was hired to raise $5 million in preferred equity for the Company to make acquisitions and expand operations and
at the appropriate time to assist the Company for up-listings to a recognized exchange like the NASDAQ Market.
On
April 27, 2018 the Company entered into a Securities Purchase Agreement with Auctus Fund, LLC (“Auctus”) whereby the
Company issued to a 9% Convertible Note (“Note”) to Auctus n the principal amount of $100,000 and a maturity date
of April 25, 2019. The conversion price of the Note is $.05 per share, provided, however, that on or after the earlier of an event
of default or 181 days after issuance date, the conversion price shall equal the lesser of (i) $0.05 per share, (ii) the lowest
trading price during the previous twenty days ending on the last trading day prior to the date of the note, and (iii) 60% of the
lowest trading price of the Common stock for the twenty prior trading days prior to the conversion date. The holder can convert
the Note, at any time, after issuance until the maturity date or the date payment of the default amount. The Company was to issue
700,000 of its common shares as a commitment/collateral fee. As of the date of the filing this report, the shares have not been
issued.
On
May 1, 2018, the Company completed the acquisition of E-motion Apparel, Inc. (“EAI”) a California corporation, pursuant
to a Share Exchange Agreement whereby the Company exchanged 1 million of its common shares for 100% of the equity of EAI in a
third-party transaction. EAI owns five microbrands which were included in this transaction which target specific niche markets:
Lexi-Luu Dancewear, Punkz Gear, Cleo VII, Skipjack Dive & Dance Wear and Emotion Apparel.
Subject
to Completion, Dated July 2, 2018
Prospectus
20,000,000
Shares
Common
Stock
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The
following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities
being registered hereunder. The selling stockholders will bear no expenses associated with this offering except for any broker
discounts and commissions or equivalent expenses and expenses of the selling stockholders’ legal counsel applicable to the
sale of its shares. All of the amounts shown are estimates, except for the Securities and Exchange Commission registration fees.
Item
|
|
Amount
to be paid
|
|
SEC
registration fee
|
|
$
|
174.30
|
|
Legal
fees and expenses
|
|
|
7,500
|
|
Accounting
fees and expenses
|
|
|
10,000
|
|
Miscellaneous
fees and expenses
|
|
|
3,132.50
|
|
Total
|
|
$
|
20,806.80
|
|
ITEM
14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Nevada
law permits a company to indemnify its directors and officers, except for any act of dishonesty. The Company has provided in its
Bylaws for the indemnification of its officers and directors against expenses actually and necessarily incurred in connection
with the defense of any action, suit or proceeding in which they are a party by reason of their status as an officer or director,
except in cases of negligence or misconduct in the performance of duty.
The
Company’s Amended and Restated Articles of Incorporation limit or eliminate the personal liability of its officers and directors
for damages resulting from breaches of their fiduciary duty for acts or omissions, except for damages resulting from acts or omissions
which involve intentional misconduct, fraud, a knowing violation of law, or the inappropriate payment of dividends in violation
of Nevada Revised Statutes.
The
above discussion of our Bylaws and Nevada law is not intended to be exhaustive and is respectively qualified in its entirety by
such Bylaws and applicable Nevada law.
To
the extent that our directors and officers are indemnified under the provisions contained in our Bylaws, Nevada law or contractual
arrangements against liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”), we have
been advised 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.
ITEM
15. RECENT SALES OF UNREGISTERED SECURITIES
On
September 8, 2014, we issued 20,000,000 shares of our common stock to our officer and director at $0.001 for $20,000.
On
October 17, 2016, 500,000 shares of common stock were issued to settle outstanding debt of $15,000.
On
June 7, 2017, the Company entered into a Share Exchange Agreement with 12 Hong Kong Limited, a Hong Kong Special Administrative
Region corporation (“12RT”), and the Shareholders of 12RT (the “12RT Shareholders”). Pursuant to the Share
Exchange Agreement, the Company acquired Four Million (4,000,000) shares of 12RT, representing 100% of the issued and outstanding
equity of 12RT, from the 12RT shareholders (the “12RT Shares”) and in exchange the Company issued to 12RT an aggregate
of Fifty Five Million (55,000,000) shares of Company stock, consisting of: (i) Fifty Million (50,000,000) shares of post-forward
split Company common stock; and, (ii) Five Million (5,000,000) shares of Series A Preferred Stock.
On
July 31, 2017, the Company entered into a Share Exchange Agreement with 12 Japan Limited, a corporation duly formed and validly
existing under the laws of Japan (“12 Japan”), and the Shareholders of 12 Japan (the “12 Japan Shareholders”).
Pursuant to the Share Exchange Agreement, the Company acquired One Hundred One Thousand (101,000) shares of 12 Japan, representing
100% of the issued and outstanding equity of 12 Japan, from the 12 Japan shareholders and in exchange the Company issued to 12
Japan: (i) Five Million (5,000,000) shares of RETC Common Stock; and, (ii) Five Hundred Thousand (500,000) shares of RETC Series
A Preferred Stock. As a result of the Share Exchange Agreement, 12 Japan became a wholly-owned subsidiary of the Company.
On
October 26, 2016, the Company acquired all of the outstanding equity of 12 Europe. 12 Europe and the Shareholders of 12 Europe.
Pursuant to the Share Exchange Agreement, the Company acquired Three Million Eight Hundred Seven Thousand Nine Hundred Seventy-Six
(3,807,976) shares of 12 Europe, representing 100% of the issued and outstanding equity of 12 Europe, from the 12 Europe shareholders
and in exchange the Company issued to 12 Europe’s shareholders Three Million Eight Hundred Seven Thousand Nine Hundred Seventy-Six
(3,807,976). As a result of the Share Exchange Agreement, 12 Europe became a wholly-owned subsidiary of the Company.
Subsequent
to June 27, 2017 and during the year ended December 31, 2017, the Company issued 2,700,000 shares of common stock to unrelated
parties for services valued at $474,000.
On
September 15, 2017, the Company entered into the promissory note agreement with SBI Investments LLC (“SBI”) for loans
up to a maximum of $1,250,000, together with interest at the rate of 8% per annum. The consideration to the Company for this promissory
note is up to $1,000,000, resulting in a potential original issuance discount (“OID”) of up to $250,000. The maturity
date for each tranche funded shall be six months from the effective date of the respective payment date. The promissory note may
be converted into shares of the Company’s common stock at any time on or after the occurrence of an event of default. The
conversion price shall be the 60% multiplied by the lowest trading price during the 30 trading days 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. An initial promissory note of $200,000 was issued on September 15, 2017 and the Company received cash of $150,000 and recognized
OID of $40,000 and financing cost of $10,000 as debt discount. On November 14, 2017, the Company issued an additional promissory
note of $187,500 and received cash of $150,000 and recognized OID of $37,500 as debt discount.
On
December 8, 2017, the Company entered into the promissory note agreement with LG Capital Funding, LLC (“LG”) for loans
totaling $185,292. The consideration to the Company is $158,824 resulting in a 15% OID. The maturity date for each note is six
months from the date of issuance. The Company shall pay a one-time interest charge of 9% of the principal amount for each note.
The notes may be converted at any time after the maturity date. The conversion price shall be 75% multiplied by the lowest trading
price during the 10 prior trading days period ending. As additional consideration for the purchase of the notes, the Company shall
issue to LG shares of our common stock on January 13, 2018 and February 1, 2018, with a value equal to $23,162, based on the previous
day closing price. The first note of $92,646 was issued on December 8, 2017. The Company received cash of $75,000 and recognized
OID of $13,234 and financing cost of $4,412 as debt discount. The one-time interest charge of 9% of the principal amount of the
note was due on January 1, 2018. In addition, the Company recorded $46,323 as debt discount and common stock to be issued for
the shares of common stock to be issued in 2018. As additional consideration for the purchase of the notes, the Company issued
to LG 121,903 shares of our common stock each on January 13, 2018 and February 1, 2018, for a total of 243,806 shares, with a
value equal to $46,323, based on the previous day closing price.
On
December 8, 2017, the Company entered into the promissory note agreement with Cerberus Finance Group Ltd. (“Cerberus”)
for loans totaling $185,292. The consideration to the Company is $158,824 resulting in a 15% OID. The maturity date for each note
is six months from the date of issuance. The Company shall pay a one-time interest charge of 9% of the principal amount for each
note. The notes may be converted at any time after the Maturity Date. The conversion price shall be the 75% multiplied by the
lowest trading price during the 10 prior trading days period ending. As additional consideration for the purchase of the Notes,
the Company shall issue to Cerberus shares of our common stock on January 13, 2018 and February 1, 2018, with a value equal to
$23,162, based on the previous day closing price. The first note of $92,646 was issued on December 8, 2017. The Company received
cash of $75,000 and recognized OID of $13,234 and financing cost of $4,412 as debt discount. The one-time interest charge of 9%
of the amount of the Note was due on January 1, 2018. In addition, the Company recorded $46,323 as debt discount and as common
stock to be issued for the shares of common stock to be issued in 2018. As additional consideration for the purchase of the notes,
the Company issued to Cerberus 121,903 shares of our common stock each on January 13, 2018 and February 1, 2018, for a total of
243,806 shares, with a value equal to $46,323, based on the previous day closing price.
On
January 10, 2018, LG funded their “back end note” which is the second half commitment from the agreements that the
Company executed with LG on December 8, 2017. Therefore, the Company received net funds of $75,000.
On
January 11, 2018, Cerberus funded their “back end note” which is the second half commitment from the agreements that
the Company executed with Cerberus on December 8, 2017. Therefore, the Company received net funds of $ 75,000.
On
January 29, 2018, the Company entered into a Share Purchase Agreement with Geneva Roth Remark Holdings, Inc., a New York corporation
(“GRRH”). Pursuant to the Share Purchase Agreement, the Company sold 203,000 shares of its newly created Preferred
Series B shares to GRRH for the total sum of $203,000 US dollars before fees.
On
March 12, 2018, the Company entered into a Share Exchange Agreement with E-motion Apparel, Inc., a corporation duly formed and
validly existing under the laws of California and its subsidiaries (“E-motion”), and the Shareholders of E-motion
(the “E-motion Shareholders”). Pursuant to the Share Exchange Agreement, the Company will acquire Ten Million (10,000,000)
shares of E-motion, representing 100% of the issued and outstanding equity of E-motion from the E-motion Shareholders and in exchange
the Company shall issue to E-motion Shareholders, One Million (1,000,000) common shares of RETC under an Escrow Agreement whose
release is tied to certain financial results. On May 1, 2018, the Company completed the acquisition of E-motion Apparel, Inc.
(“EAI”) a California corporation, pursuant to a Share Exchange Agreement whereby the Company exchanged 1 million of
its common shares for 100% of the equity of EAI in a third-party transaction. EAI owns five microbrands which were included in
this transaction which target specific niche markets: Lexi-Luu Dancewear, Punkz Gear, Cleo VII, Skipjack Dive & Dance Wear
and Emotion Apparel.
On
March 14, 2018, the Company entered into a promissory note agreement with Eagle Equities, LLC (“Eagle”) for
loans totaling totaling $100,000. The consideration to the Company is $95,000 resulting in a 5% OID. The maturity date of each
note is one year from the date of issuance. The notes carry an interest rate of 12% per annum and interest payments are to be
made in common shares of the Company. The conversion price of the note is 60% multiplied by the lowest trading price of the Common
Stock for the ten prior trading days and the holder can convert the note at the earlier of an uncured default or 181 days from
issuance. The note may be redeemed by the Company at rates ranging from 105% to 130% depending on the redemption date provided
that no redemption is allowed after the 180th day. All terms of the note, including but not limited to interest rate, prepayments
terms, conversion discount or look-back period will be adjusted downward if the Company offers more favorable terms to another
part, while this note is in effect. As additional consideration, the Company is to issue to Eagles Equities, LLC shares of common
stock with a value equal to 25% of each note, determined at the time of signing of each note. The first note of $50,000 was issued
on March 15, 2018. The Company received cash of $47,500 and recognized financing cost of $2,500 as debt discount. The Company
issued to Eagle Equities, LLC 137,363 shares of common stock with a value equal to $12,500.
On
March 14, 2018, the Company entered into a promissory note agreement with with Adar Bays Capital, LLC (“Adar Bays
Capital”) for loans totaling totaling $100,000. The consideration to the Company is $95,000 resulting in a 5% OID. The maturity
date of each note is one year from the date of issuance. The notes carry an interest rate of 12% per annum and interest payments
are to be made in common shares of the Company. The conversion price of the note is 60% multiplied by the lowest trading price
of the Common Stock for the ten prior trading days and the holder can convert the note at the earlier of an uncured default or
181 days from issuance. The note may be redeemed by the Company at rates ranging from 105% to 130% depending on the redemption
date provided that no redemption is allowed after the 180th day. All terms of the note, including but not limited to interest
rate, prepayment terms, conversion discount or look-back period will be adjusted downward in the Company offers more favorable
terms to another party, while this note is in effect. As additional consideration, the Company is to issue to Adar Bays Capital
shares of common stock with a value equal to 25% of each note, determine at the time of signing of each note. The first note of
$50,000 was issued on March 15, 2018. The Company received cash of $47,500 and recognized financing cost of $2,500 as debt discount.
The Company issued to Adar Bays Capital 137,363 shares of our common stock with a value equal to $12,500.
On
March 20, 2018, Geneva agreed to purchase an additional 63,000 Series B Preferred shares for $63,000 under the same terms as the
initial purchase on January 31, 2018.
On
April 27, 2018, the Company entered into a Securities Purchase Agreement with Auctus Fund, LLC (“Auctus”) whereby
the Company issued to a 9% Convertible Note (“Note”) to Auctus in the principal amount of $100,000 and a maturity
date of April 25, 2019. The conversion price of the Note is $0.05 per share, provided, however, that on or after the earlier of
an event of default or 181 days after issuance date, the conversion price shall equal the lesser of (i) $0.05 per share, (ii)
the lowest trading price during the previous twenty days ending on the last trading day prior to the date of the note, and (iii)
60% of the lowest trading price of the Common stock for the twenty prior trading days prior to the conversion date. The holder
can convert the Note, at any time, after issuance until the maturity date or the date payment of the default amount. The Company
was to issue 700,000 of its common shares as a commitment/collateral fee. As of the date of the filing this report, the shares
have not been issued.
On
May 17, 2018, the Company entered into an Agreement with a private accredited investor whereby the investor agreed to purchase
in the aggregate 3,125,000 shares of the Company’s common stock at $0.16 per share on the following schedule:
|
●
|
May
18, 2018 - 625,000 common shares by tendering to the Company $100,000
|
|
|
|
|
|
●
|
*This
payment has been received by the Company
|
|
|
|
|
|
●
|
June
18, 2018 - 500,000 common shares by tendering to the Company $80,000
|
|
|
|
|
●
|
July
18, 2018 - 500,000 common shares by tendering to the Company $80,000
|
|
|
|
|
●
|
August
18, 2018 - 500,000 common shares by tendering to the Company $80,000
|
|
|
|
|
●
|
September
18, 2018 - 500,000 common shares by tendering to the Company $80,000
|
|
|
|
|
●
|
October
18, 2018 - 500,000 common shares by tendering to the Company $80,000
|
On
May 23, 2018, the Company consummated a funding agreement with Bellridge Capital Partners, LLC (“Bellridge”) whereby
Bellridge provided the Company with net funds of $50,000 on a convertible promissory note with a face amount of $60,000 which
carries an annual interest of 10%, has a term of 12 months, may be convertible at the option of the holder after 6 months at a
10% discount to market and is redeemable by the Company according to the following schedule: (i) if the redemption is prior to
the 90th day this Note is in effect (including the 90th day), then for an amount equal to 120% of the unpaid principal amount
of this Note along with any interest that has accrued during that period; (ii) if the redemption is on the 91st day this Note
is in effect, up to and including the 180th day this Note is in effect, then for an amount equal to 140% of the unpaid principal
amount of this Note along with any accrued interest; (iii) This Note may be redeemed after the 180th day this Note is in effect
then for an amount equal to 150% of the unpaid principal amount of this Note along with any accrued interest.
Effective
as of June 22, 2018, the Company entered into an Equity Purchase Agreement and related Registration Rights Agreement with
Oasis Capital, LLC (“Oasis Capital”) pursuant to which Oasis Capital committed to purchase up to $12,000,000 of the
Company’s common stock (the “Financing”) pursuant to an “Equity Line” financing. In connection with
the Equity Line financing, the Company is obligated to issue 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 as commitment shares.
Except
as otherwise noted, the securities in these transactions were sold in reliance on the exemption from registration provided in
Section 4(a)(2) of the Securities Act for transactions not involving any public offering. Each of the persons acquiring the foregoing
securities was an accredited investor (as defined in Rule 501(a) of Regulation D) and confirmed the foregoing and acknowledged,
in writing, that the securities must be acquired and held for investment. All certificates evidencing the shares sold bore a restrictive
legend. No underwriter participated in the offer and sale of these securities, and no commission or other remuneration was paid
or given directly or indirectly in connection therewith.
The
proceeds from these sales were used for general corporate purposes.
Item
16. Exhibits and Financial Statement Schedules.
(a)
Exhibits.
The
Registrant has filed the exhibits listed on the accompanying Exhibit Index of this Registration Statement.
(b)
Financial Statement Schedules.
All
financial statement schedules are omitted because the information called for is not required or is shown either in the financial
statements or in the notes thereto.
ITEM
17. UNDERTAKINGS.
(a)
The undersigned registrant hereby undertakes:
(1.)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i.)
To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii.)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii.)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
(2.)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof;
(3.)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering; and
(5.)
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant
to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on 430B
or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into
the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that
was part of the registration statement or made in any such document immediately prior to such date of first use.
(6.)
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser in the initial distribution of
the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i.)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424;
(ii.)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
(iii.)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv.)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
EXHIBIT
INDEX
Exhibit
Number
|
|
Exhibit
Description
|
|
|
|
3.1
|
|
Articles
of Incorporation filed with the SEC on Form S-1 on December 30, 2014
|
|
|
|
3.2
|
|
Amended
and Restated Articles of Incorporation filed with the SEC on Form 8-K on June 14, 2017
|
|
|
|
3.3
|
|
Articles
of Amendment filed with the SEC on Form 8-K on February 02, 2018
|
|
|
|
3.4
|
|
Certificate
of Designation filed with the SEC on Form 8-K on February 02, 2018
|
|
|
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3.5
|
|
Certificate of Designation filed with the SEC on Form 8-K on June 28, 2018
|
|
|
|
3.6
|
|
By-Laws
filed with the SEC on Form S-1 on December 30, 2014
|
|
|
|
5.1*
|
|
Legal
Opinion of Procopio, Cory, Hargreaves & Savitch, LLP
|
|
|
|
10.1
|
|
Share
Exchange Agreement between Devago, Inc (12 ReTech Corporation) and 12 Hong Kong, Ltd filed with the Sec on Form 8-K on June
7, 2017
|
|
|
|
10.2
|
|
Share
Exchange Agreement between 12 ReTech Corporation and 12 Japan, Ltd filed with the SEC on Form 8-K on August 2, 2017
|
|
|
|
10.3
|
|
Share
Exchange Agreement between 12 Retech Corporation and 12 Europe A.G. and the shareholder of 12 Europe A.G. filed with the SEC
on Form 8-K on October 30, 2017
|
|
|
|
10.4
|
|
Share
Exchange Agreement between 12 ReTech Corporation and E-motion Apparel, Inc, and the shareholder filed with the SEC on Form
10-K on April 16, 2018
|
|
|
|
10.5
|
|
Stock
Purchase Agreement between 12 ReTech Corporation and Geneva Roth Remark Holdings, Inc. filed with the SEC on Form 8-K on January
29, 2018
|
|
|
|
10.6
|
|
Securities
Purchase Agreement between 12 ReTech Corporation and EMA Financial, LLC filed with the SEC on Form 10-K on April 16, 2018
|
|
|
|
10.7
|
|
Equity Purchase Agreement between 12ReTech Corporation and Oasis Capital, LLC filed with the SEC on Form 8-K on June 28, 2018
|
|
|
|
10.8
|
|
Registration Rights Agreement between 12ReTech Corporation and Oasis Capital, LLC filed with the SEC on Form 8-K on June 28, 2018
|
|
|
|
21.1
|
|
List
of Subsidiaries filed with the SEC on Form 10-Q on November 14, 2017
|
|
|
|
23.1*
|
|
Consent of Rotenberg Meril Solomon Bertiger & Guttilla, P.C.
|
|
|
|
23.2*
|
|
Consent of Procopio, Cory, Hargreaves & Savitch, LLP (included in Exhibit 5.1)
|
|
|
|
24.1*
|
|
Power
of Attorney (included on signature page hereto)
|
|
|
|
101.INS*
|
|
XBRL
Instance Document**
|
|
|
|
101.SCH*
|
|
XBRL
Extension Schema Document**
|
|
|
|
101.CAL*
|
|
XBRL
Extension Calculation Linkbase Document**
|
|
|
|
101.DEF*
|
|
XBRL
Extension Definition Linkbase Document**
|
|
|
|
101.LAB*
|
|
XBRL
Extension Labels Linkbase Document**
|
|
|
|
101.PRE*
|
|
XBRL
Extension Presentation Linkbase Document**
|
*
Filed herewith.
**
In accordance with Rule 406T of Regulation S-T, this information is deemed not “filed” for purposes of Section 18
of the Securities Exchange Act of 1934, as amended.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Carson City, State of Nevada, on July 2, 2018
|
12
RETECH CORPORATION
|
|
|
|
By:
|
/s/
Angelo Ponzetta
|
|
|
Angelo
Ponzetta
Chief
Executive Officer and Chief Financial Officer (Principal Executive and Financial Officer)
|
POWER
OF ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Angelo Ponzetta,
as his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her in any and all capacities,
to sign any and all amendments to this registration statement (including post-effective amendments or any abbreviated registration
statement and any amendments thereto filed pursuant to Rule 462(b) under the Securities Act of 1933 increasing the number of securities
for which registration is sought), and to file the same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact, proxy, and agent full power and authority to
do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents
and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact, proxy and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Angelo Ponzetta
|
|
Chief
Executive Officer, Chief Financial Officer and Chairman
|
|
July
2, 2018
|
Angelo
Ponzetta
|
|
(Principal
Executive and Financial Officer)
|
|
|
|
|
|
|
|
/s/
Daniel Monteverde
|
|
Director
|
|
July
2, 2018
|
Daniel
Monteverde
|
|
|
|
|