Company Quick10K Filing
Quick10K
Colorstars Group
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2018-11-29 Officers
8-K 2018-11-10 Officers
8-K 2018-02-14 Officers
8-K 2018-02-05 Sale of Shares
8-K 2018-01-02 Accountant
DDG Diverse Development Group 177
GFNL Genesis Financial 146
NWBO Northwest Biotherapeutics 109
PSTL Postal Realty Trust 80
MBCQ Madison Bank 33
ASDN Astro Aerospace 11
SCND Scientific Industries 10
QMCI Quotemedia 9
RGUS REGI 5
JFKKU 8i Enterprises Acquisition Corp 0
CSTU 2019-06-30
Note 1 - Nature of Business and Basis of Presentation
Note 2 - Going Concern
Note 3 - Concentration of Risk
Note 4 - Long Term Investments
Note 5- Inventory
Note 6 - Income Taxes
Note 7 - Geographic Information
Note 8 - Related Party Transactions
Note 9 - Commitments
Note 10 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part Ii&Mdash;Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Colorstars Group Earnings 2019-06-30

CSTU 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10-q.htm

 

 

 

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

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

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2019

 

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

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission File Number: 000-54107

 

COLORSTARS GROUP

(Exact name of registrant as specified in its charter)

 

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

 

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

(Address of principal executive offices)

 

(949) 336-6161

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

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

 

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

 

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

 

As of August 10, 2019, there were 102,274,515 shares of common stock, par value $0.001, issued and outstanding.

 

 

 

   
 

 

COLORSTARS GROUP

FORM 10-Q

INDEX

 

  Page
PART I – FINANCIAL INFORMATION  
   
Item 1 Financial Statements 3
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
Item 3 Quantitative and Qualitative Disclosures About Market Risk 16
Item 4 Controls and Procedures 16
   
PART II – OTHER INFORMATION  
   
Item 1 Legal Proceedings 17
Item 1A Risk Factors 17
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3 Defaults Upon Senior Securities 18
Item 4 Mine Safety Disclosures 18
Item 5 Other Information 18
Item 6 Exhibits 18
SIGNATURES 19

 

2
 

 

COLORSTARS GROUP

CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

TABLE OF CONTENTS

 

  PAGE NO.
   
Consolidated Balance Sheets As of June 30, 2019 (Unaudited) and December 31, 2018 (Audited) 4
   
Consolidated Statements of Comprehensive Loss (Unaudited) for the three months ended June 30, 2019 and 2018 5
   

Consolidated Statements of Comprehensive Loss (Unaudited) for the six months ended June 30, 2019 and 2018

6
   
Consolidated Statement of Cash Flows (Unaudited) for the six months ended June 30, 2019 and 2018 7
   
Consolidated Statements of Stockholders (Deficit) Equity (Unaudited) for the six months ended June 30, 2019 and 2018 8
   
Notes to Consolidated Financial Statements (Unaudited) 9-13

 

3
 

 

COLORSTARS GROUP

CONSOLIDATED BALANCE SHEETS

June 30, 2019(Unaudited) and December 31, 2018(Audited)

(in USD)

 

   June 30, 2019   December 31, 2018 
Assets          
Current assets:          
Cash and equivalents  $14,893   $18,054 
Accounts receivable, net of allowance for doubtful accounts of $146,325 at June 30, 2019 and $148,336 at December 31, 2018   -    - 
Prepaid expenses and other current assets   2,779    3,025 
           
Total current assets   17,672    21,079 
           
Equipment, net of accumulated depreciation   40,211    41,554 
Right-of-use lease asset   61,965      
Other assets   -    982 
           
Total assets  $119,848   $63,615 
           
Liabilities and stockholders equity          
Current liabilities:          
Accounts payable   88    20,537 
Advance from shareholder   358,174    269,198 
Accrued expenses- related party   5,571    5,614 
Lease liabilities, current   46,474    0 
Other current liabilities   149    159 
           
Total current liabilities   410,456    295,508 
Lease liability   15,491    - 
           
Total liabilities  $425,947   $295,508 
           
Commitments & Contingencies   -    - 
Stockholders equity          
Common Stock –Par Value $0.001 102,274,515 shares issued and outstanding, 450,000,000 shares are authorized at June 30, 2019 and December 31, 2018   102,275    102,275 
Additional paid in capital   4,157,518    4,157,518 
Accumulated other comprehensive income   150,480    147,185 
Accumulated deficit   (4,716,372)   (4,638,871)
           
Total stockholders’ equity   (306,099)   (231,893)
           
Total liabilities and stockholders’ equity  $119,848   $63,615 

 

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

 

4
 

 

COLORSTARS GROUP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(in USD)

 

   Three months ended June 30, 
   2019   2018 
         
Net sales  $-   $- 
Cost of goods sold   -    - 
           
Gross profit   -    - 
Operating expenses          
Selling, general and administrative   16,799    41,097 
Professional fees   37,439    36,620 
Rent   11,572    1,548 
Depreciation & Amortization   388    448 
           
Total operating expenses   66,198    79,713 
           
Loss from operations   (66,198)   (79,713)
           
Other expenses          
Interest expense (net)   4    25 
Loss on foreign exchange, net   (147)   (5)
           
Loss before income tax   (66,341)   (79,693)
Income tax provision   (800)   (800)
           
Net loss   (67,141)   (80,493)
           
Other comprehensive gain/(loss):          
Foreign currency translation gain/(loss)   1,009    9,519 
           
Comprehensive loss  $(66,132)  $(70,974)
           
Earnings per share attributable to common stockholders:          
Basic and diluted per share  $0.00   $0.00 
           
Weighted average shares outstanding:          
Basic and diluted   102,274,515    102,274,515 

 

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

 

5
 

 

COLORSTARS GROUP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(in USD)

 

   Six months ended June 30, 
   2019   2018 
         
Net sales  $6,723   $1,182 
Cost of goods sold   -    595 
           
Gross profit   6,723    587 
Operating expenses          
Selling, general and administrative   34,188    62,190 
Professional fees   40,039    52,175 
Rent   23,303    17,077 
Depreciation & Amortization   782    918 
           
Total operating expenses   98,312    132,360 
           
Loss from operations   (91,589)   (131,773)
           
Other expenses          
Interest expense (net)   4    (11,308)
Loss on foreign exchange, net   (1)   (3,986)
Gain on forgiveness of debt   14,885    - 
           
Loss before income tax   (76,701)   (147,067)
Income tax provision   (800)   (800)
           
Net loss   (77,501)   (147,867)
           
Other comprehensive gain/(loss):          
Foreign currency translation gain/(loss)   3,295    7,375 
           
Comprehensive loss  $(74,206)  $(140,492)
           
Earnings per share attributable to common stockholders:          
Basic and diluted per share  $0.00   $0.00 
           
Weighted average shares outstanding:          
Basic and diluted   102,274,515    100,274,515 

 

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

 

6
 

 

COLORSTARS GROUP

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

in USD

 

   For six months ended June 30, 
   2019   2018 
         
Cash flows from operating activities          
Net (loss)  $(77,501)  $(147,867)
Depreciation   782    918 
Gain on forgiveness of debt   (14,885)   - 
Changes in operating assets and liabilities:          
Prepaid expenses and other current assets   1,229    26,149 
Accounts payable   (5,566)   608 
Accrued expenses   (42)   1,248 
Receipts in advance and other current liabilities   (10)   (199,799)
           
Cash flows provided by (used for) operating activities   (95,993)   (318,743)
           
Cash flows from financing activities          
Advance from shareholder   92,625    91,919 
Repay advance from shareholder   -    (267,678)
Increase (decrease) in long-term loans   -    (87,538)
Increase (decrease) in capital   -    410,258 
           
Cash flows provided by financing activities   92,625    146,961 
           
Effect of exchange rate changes on cash and cash equivalents   207    8,297 
           
Net increase (decrease) in cash and cash equivalents   (3,161)   (163,485)
Beginning cash and cash equivalents   18,054    359,403 
           
Ending cash and cash equivalents  $14,893   $195,918 
           
Supplemental disclosure of cash flow information          
Cash paid during the period for:          
Interest  $-   $- 
Tax paid  $800   $800 

 

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

 

7
 

 

COLORSTARS GROUP

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(IN US$)

 

   Shares   Value   Additional
Paid in
capital
   Accumulated
deficit
   Accumulated
other
comprehensive
income
   Total
Stockholder’s
equity
 
                         
Balance, March 31, 2018   102,274,515   $102,275   $4,157,518   $(4,371,259)  $137,681   $26,215 
Foreign currency translation   -    -    -    -    9,519    9,519 
Net loss   -    -    -    (80,493)   -    (80,493)
Balance, June 30, 2018   102,274,515   $102,275   $4,157,518   $(4,451,752)  $147,200   $(44,759)
                               
Balance, December 31, 2017   90,274,515   $90,275   $3,759,260   $(4,303,885)  $139,825   $(314,525)
Capital increase   12,000,000    12,000    398,258    -    -    410,258 
Foreign currency translation   -    -    -    -    7,375    7,375 
Net loss   -    -    -    (147,867)   -    (147,867)
Balance, June 30, 2018   102,274,515   $102,275   $4,157,518   $(4,451,752)  $147,200   $(44,759)

 

   Shares   Value   Additional
Paid in
capital
   Accumulated
deficit
   Accumulated
other
comprehensive
income
   Total
Stockholder’s
equity
 
                         
Balance, March 31, 2019   102,274,515   $102,275   $4,157,518   $(4,649,231)  $149,471   $(239,967)
Foreign currency translation   -    -    -    -    1,009    1,009 
Net loss   -    -    -    (67,141)   -    (67,141)
Balance, June 30, 2019   102,274,515   $102,275   $4,157,518   $(4,716,372)  $150,480   $(306,099)
                               
Balance, December 31, 2018   102,274,515   $102,275   $4,157,518   $(4,638,871)  $147,185   $(231,893)
Foreign currency translation   -    -    -    -    3,295    3,295 
Net loss   -    -    -    (77,501)   -    (77,501)
                               
Balance, June 30, 2019   102,274,515   $102,275   $4,157,518   $(4,716,372)  $150,480   $(306,099)

 

The accompanying notes are an integral part of the financial statements

 

8
 

 

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 – Nature of Business and Basis of Presentation

 

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

 

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

 

The company signed a joint venture agreement with an entity in the Kingdom of Saudi Arabia in February of 2019. According to this joint venture agreement the company will transfer its IPs, trademarks, and technologies in LED lighting to this new joint venture company. The company will stop the LED lighting business line and pursue other business opportunities, including solar power projects, waste-tire-to-oil systems, and LNG trading projects. There are certain conditions to be met before the company can start the execution of this joint venture agreement. As of to date, the parties have not closed the agreement and it is expected that the company shall break the ground of this joint venture project in the next reporting period.

 

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

 

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair statement of the financial position, results of operations and cash flows for the six months ended June 30, 2019 and 2018 have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for any subsequent interim period or for the year ending December 31, 2019.

 

The balance sheet at December 31, 2018 included herein was derived from the consolidated financial statements included in the Company’s Annual Report on Form 10-K as of that date. Accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission (“SEC”) on April 12, 2019.

 

Certain previously reported amounts have been adjusted to conform to current-period presentation, however there is no net effect to the previously-reported financial information.

 

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

 

9
 

 

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 2 - Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has negative working capital of $392,784 and an accumulated deficit of $4,716,372 as of June 30, 2019, and it reported net losses for past two years. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

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

 

Note 3 - Concentration of Risk

 

For the six months ended June 30, 2019, products sold to largest customers accounted for approximately 54% of total revenue. No purchases occurred in this period

 

For the six months ended June 30, 2018, products sold to largest customers accounted for approximately 100% of total revenue. Products purchased from largest suppliers accounted for approximately 100% of the total purchases during the six months ended June 30, 2018.

 

On Feb. 26, 2019, the company signed a joint venture agreement (JVA) with an entity in the Kingdom of Saudi Arabia (KSA). According to this JVA, the company shall make transfer of its patents, trademarks, and customer list to the new joint company to be formed. The company will also help to build an electronic manufacturing plant in the KSA, and to provide training of its staff and operators for the engineering, manufacturing, and selling of LED lighting products. For the patents and trademarks granted in the JVA, the company shall be compensated with US$1.5 million dollars in cash payment. In addition, for the technology and training support, the company shall be awarded with US$2.65 million dollars in the form of shares in the new joint venture company, calculated based on fair price. The closing conditions for the cash payment and the shares granted for the joint venture company are mainly (1) government approvals for the investment in the joint venture company for both parties, (2) formation of the joint company, and (3) board approval of the joint venture company to undertake activities in the JVA. We are not sure when the Company will start the execution of the JVA and will receive the cash payment and share grants of the joint venture company. There is no consideration exchanged between the parties as of to date.

 

Note 4 - Long Term Investments

 

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

 

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

 

10
 

 

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

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

 

Anteya Technology Corp (Anteya) is a private company incorporated in Taiwan. The equity interest held by the Company is 13.68% on June 30, 2019.

 

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

 

Note 5- Inventory

 

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

 

   June 30, 2019   December 31, 2018 
         
Finished goods  $765,916   $776,441 
Allowance for Inventory Valuation and Obsolescence Losses   (765,916)   (776,441)
Total  $-   $- 

 

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

 

Note 6 - Income Taxes

 

The Company is subject to U.S. federal income tax as well as income tax in states and foreign jurisdictions(Taiwan). For the major taxing jurisdictions, the tax years 2017 through 2019 remain open for state and federal examination. The Company believes assessments, if any, would be immaterial to its consolidated financial statements. With respect to the foreign jurisdiction, the Company is no longer subject to income tax audits for the years prior to 2018 (inclusive).

 

11
 

 

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The income tax provision information is provided as follows:

 

   Three months ended June 30,   Six months ended June 30, 
   2019   2018   2019   2018 
Component of income (loss) before income taxes:                    
United States  $(28,710)  $(41,956)  $(31,343)  $(57,601)
Foreign   (37,631)   (37,737)   (45,358)   (89,466)
                     
Net loss before taxes  $(66,341)  $(79,693)  $(76,701)  $(147,067)
Provision for income taxes                    
Current                    
U.S. federal   -    -    -    - 
State and local   (800)   (800)   (800)   (800)
Foreign   -    -   -    -
Income tax benefit(loss)  $(800)  $(800)  $(800)  $(800)

 

Given the Company’s history of operating losses, a full valuation of the deferred tax assets related to the Company’s net operating losses has been recorded, resulting in no material impact on the financial statements.

 

Note 7 - Geographic Information

 

Product revenues for the six months ended June 30, 2019 and 2018 are as follows:

 

   Three months ended June 30,   Six months ended June 30, 
   2019   2018   2019   2018 
                 
Customers based in:                    
Europe  $-   $-   $-   $- 
Asia   -    -    -    - 
United States   -    -    2,192    1,182 
Others   -    -    4,531    - 
                     
   $-   $-   $6,723   $1,182 

 

Note 8 - Related Party Transactions

 

The Company has recorded expenses for the following related party transactions for six months ended June 30, 2019 and 2018:

 

   Six months ended June 30, 
   2019   2018 
         
Purchase from Anteya Technology Corp  $-   $- 
Rent paid to Mr. Wei-Rur Chen   23,303    - 

 

12
 

 

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

   June 30, 2019   June 30, 2018 
Anteya Technology Corp          
Due to affiliate (liabilities)  $-   $13,410 
Mr. Wei-Rur Chen          
Payable to Shareholder  $(358,174)  $(265,844)
Accrued expenses (wages paid to Mr. Chen)  $4,642   $3,754 

 

The Company conducted business with a related party company Anteya Technology Corp. The Company owns 13.68% of the outstanding common stock of Anteya Technology Corp as of December 31, 2018. All transactions were at market-based prices. No (or very little) business activity took place between the Company and Anteya in the 2 years presented

 

Mr. Wei-Rur Chen made various advances to the Company as personal loan. This personal loan carried no interest and was payable upon request. For the year ended June 30, 2019, advances from Mr. Chen was $92,626. The balance of advance from Mr. Chen was $358,174 as of June 30, 2019.

 

Note 9 - Commitments

 

The Company has adopted ASC 842 during the current period, as required by GAAP, utilizing the practical expedients package resulting in a “run off” of its accounting for leases that existed prior to the effective date, given no change in lease classification.

 

The company leases offices in Taiwan. The main office is relocated in New Taipei City with monthly rent of NTD$120,000, and the term is from 11-7-2015 to 10-6-2020. The company rented a branch office located in Taipei City with a monthly rental of NTD$160,000 on 11-11-2017, and the term is from 12-1-2017 to 11-30-2019. However, this branch office is closed on April 10, 2018 and the lease is cancelled. The lease of the main office remains in effect. Total rent paid for 6 months ended June 30, 2019 and 2018 are as listed below:

 

   Six months ended June 30, 
   2019   2018 
         
Rent expenses  $23,303   $17,077 

 

The following table presents our contractual obligations and commitments as of June 30, 2019:

 

Contractual Obligation  Less than 1
Year (US$)
   1-3 years
(US$)
   3-5 years
(US$)
  

After 5

years
(US$)

 
Operating Leases   46,474    15,491    0    0 
Total contractual cash obligations   46,474    15,491    0    0 

 

Note 10 - Subsequent Events

 

The Company evaluated all events subsequent to June 30, 2019 through the date of the issuance of the financial statements, there are no other significant or material transactions to be reported.

 

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

 

Forward Looking Statements

 

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

 

Overview

 

(a) Business Overview.

 

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

 

(b) Material Transactions During the Reporting Period.

 

None.

 

Results of Operations

 

Comparison of Three Months Ended June 30, 2019 to Three Months Ended June 30, 2018

 

Net Sales. Net sales were $0 for the three months ended June 30, 2019 and $0 for the three months ended June 30, 2018.

 

Cost of Goods Sold. Cost of goods sold was $0 for the three months ended June 30, 2019 and $0 for the three months ended June 30, 2018. The lack of cost of goods sold was due to the lack of net sales during such period.

 

Gross Profit. Gross profit was for the three months ended June 30, 2019 and $0 for the three months ended June 30, 2018. The lack of gross profit was due to the lack of net sales during such period.

 

Gross Profit Percentage. Gross profit percentage was 0% for the three months ended June 30, 2019 and 0% for or the three months ended June 30, 2018. This was due to the lack of net sales or gross profit during such period.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased to $16,799 for the three months ended June 30, 2019 from $41,097 for the three months ended June 30, 2018. The decrease in selling, general and administrative expenses due to the lack of sales and reduced sales and marketing activities.

 

Research and Development Expenses. Research and development (R&D) expenses were $0 for the three months ended June 30, 2019 and $0 for the three months ended June 30, 2018. The lack of research and development expenditure was due to overall lack of sales and lack of development of any new products.

 

Depreciation and Amortization. Depreciation and amortization decreased to $389 for the three months ended June 30, 2019 from $448 for the three months ended June 30, 2018. The decrease in depreciation and amortization was mainly due to the decrease of asset value over time.

 

Interest Expense. Interest expense decreased to $4 for the three months ended June 30, 2019 from $25 for the three months ended June 30, 2018. The decrease in interest expense was due to overall repayment of long term loan.

 

Net Income (loss). For the three months ended June 30, 2019, we incurred a net loss of $(67,141) as compared to a net loss of $(80,493) for the three months ended June 30, 2018. The decrease in net loss was primarily a result of decrease in selling, general and administrative and rent expenses.

 

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Comparison of Six Months Ended June 30, 2019 to Six Months Ended June 30, 2018

 

Net Sales. Net sales increased to $6,723 for the six months ended June 30, 2019 from $1,182 for the six months ended June 30, 2018. The increase in sales was due to in increase in sale during the first quarter of 2019 over the first quarter of 2018.

 

Cost of Goods Sold. Cost of goods sold decreased to $0 for the six months ended June 30, 2019 from $595 for the six months ended June 30, 2018. The decrease in cost of goods sold was primarily due to items sold were from the kept inventory that has been written-off in prior financial period which does not have any value on the books.

 

Gross Profit. Gross profit increased to $6,723 for the six months ended June 30, 2019 from $587 for the six months ended June 30, 2018. The increase in gross profit was primarily due to the increase in overall sales for the six month period of 2019 over 2018.

 

Gross Profit Percentage. Gross profit percentage increased to 100% for the six months ended June 30, 2019 from 49.66% for the six months ended June 30, 2018. The increase in gross profit percentage was primarily due to higher margin products were sold for the period in 2019.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased to 34,188 or the six months ended June 30, 2019 from $62,190 for the six months ended June 30, 2018. The decrease in selling, general and administrative expenses is primarily due to decrease in sales and marketing activities expenses.

 

Research and Development Expenses. Research and development (R&D) expenses were $0 for the six months ended June 30, 2019 and $0 for the six months ended June 30, 2018. The lack of research and development expenditure was due to overall lack of profitability and lack of development of any new products.

 

Depreciation and Amortization. Depreciation and amortization decreased to $782 for the six months ended June 30, 2019 from $918 for the six months ended June 30, 2018. The decrease in depreciation and amortization was mainly due to some assets were of end of life value for the period.

 

Interest Expense. Interest expense increased to $4 for the six months ended June 30, 2019 from ($11,308) for the six months ended June 30, 2018. The increase in interest expense was due to accelerated repayment of the long-term loan.

 

Net Income (loss). For the six months ended June 30, 2019, we incurred a net loss of $(77,501) as compared to a net loss of $(147,867) for the six months ended June 30, 2018. The decrease in net loss is mainly due to an increase in net sales and decrease in sales and marketing expenses.

 

Financial Condition, Liquidity and Capital Resources

 

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

 

Net cash provided by (used in) operating activities. During the six months ended June 30, 2019, net cash used in operating activities was ($95,993) compared with $(318,743) used in operating activities for the six months ended June 30, 2018. The cash flow used in operating activities in the six months ended June 30, 2019 was primarily the result of net loss in operations and a gain on the forgiveness of debt. The cash flow used in operating activities in the six months ended June 30, 2018 was primarily the result of the Company’s operating net loss.

 

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Net cash provided by (used in) financing activities. During the six months ended June 30, 2019, net cash provided by financing activities was $92,625 which was mainly provided by advance from shareholders, compared with $146,961 provided by the net of increase in capital and repaymnet of long-term loans and advance from shareholders for the six months ended June 30, 2018.

 

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

 

Recent Developments

 

There are no recent developments to report.

 

Inflation

 

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

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Related Party Transactions

 

The Company leases office space from Mr. Wei-Rur Chen. The Company leases office space from Mr. Wei-Rur Chen which the term for the agreement is from November 2015 to November 2020 with amount rent of $46,606. Rent payments were $23,303 and $0 for the six months ended June 30, 2019 and 2018, respectively. Mr. Wei-Rur Chen owns one hundred percent (100%) interest in the lease agreement. Mr. Wei-Rur Chen is the President, Chief Executive Officer, Chief Financial Officer, and Chairman of the Board of the Company, as well as beneficial owner of more than five percent (5%) of the Company’s common stock.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

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

 

Item 4. Controls and Procedures.

 

Evaluation of disclosure controls and procedures.

 

We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) that are designed to assure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. As required by exchange Act Rule 13a-15(b), as of the end of the period covered by this report, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of that date.

 

Changes in internal control over financial reporting.

 

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

 

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PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

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

 

On September 17, 2018, the U.S. Securities and Exchange Commission (“Commission”) announced the temporary suspension of trading in the securities of the Company, commencing at 9:30 a.m. EDT on September 18, 2018 and terminating at 11:59 p.m. EDT on October 1, 2018. The Commission temporarily suspended trading in the securities of the Company due to a lack of current and accurate information about the Company because it has not filed certain periodic reports with the Commission. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (“Exchange Act”) and was accompanied by an Order Instituting Administrative Proceedings and Notice of Hearing (the “Proceeding”) pursuant to Section 12(j) of the Exchange Act. The stated purpose of the order and hearing is for the Commission to determine whether it is necessary and appropriate to continue the suspension in the trading of the securities of the Company for a period not exceeding twelve months, or to revoke the registration of the Company’s securities pursuant to Section 12 of the Exchange Act. The Company filed an Answer in the Proceeding on September 26, 2018.

 

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

 

Item 1A. Risk Factors.

 

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

 

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

 

(a) Unregistered Sales of Equity Securities.

 

None.

 

(b) Use of Proceeds.

 

Not applicable.

 

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

 

None.

 

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Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

INDEX TO EXHIBITS

 

Exhibit   Description
     
31.1   Certification of our Chief Executive Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
     
31.2   Certification of our Chief Financial Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
     
32.1   Certification of our Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
     
32.2   Certification of our Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
     
**101.INS   XBRL Instance Document
     
**101.SCH   XBRL Taxonomy Extension Schema Document
     
**101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
     
**101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
     
**101.LAB   XBRL Taxonomy Extension Label Linkbase Document
     
**101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

*   Included in previously filed reporting documents.
     
**   Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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SIGNATURES

 

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

 

Dated: August 14, 2019 By: /s/ Wei-Rur Chen
    Wei-Rur Chen
   

President, Chief Executive Officer (Principal

Executive Officer), Chief Financial Officer

(Principal Financial Officer),

Chairman of the Board of Directors

 

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