12 Retech Corp - Annual Report: 2019 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-55915

12 ReTech Corporation

(Exact name of registrant as specified in its charter)

Registrant’s telephone number: 530-539-4329

Securities registered under Section 12(b) of the Act:

none

Securities registered under Section 12(g) of the Act:

Common Stock, par value $.00001 per share

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes [  ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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. [X] Yes [  ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 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 [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [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, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” smaller reporting company and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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. [  ]

Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

The number of shares of common stock ($0.00001 par value) outstanding as of June 18, 2020 was 599,003,958.

DOCUMENTS INCORPORATED BY REFERENCE: None.

12 RETECH CORPORATION

FOR THE YEAR ENDED

DECEMBER 31, 2019

Index to Report

FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not intend, and undertake no obligation, to update any forward-looking statement. You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:

For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Item 1A. Risk Factors” in this document.

Throughout this Annual Report references to “we”, “our”, “us”, “12 ReTech”, “RETC”, “the Company”, and similar terms refer to 12 ReTech Corporation.

PART I

ITEM 1. BUSINESS

12 ReTech Corporation is a holding company with subsidiaries that develop, sell, and install software that we believe will REINVENT RETAIL for shoppers and retailers. As a holding company we also acquire synergistic operating companies that manufacture and sell fashion and other products to other retailers as well as selling these products online. In October 2019, we acquired twelve retail stores in airport terminals and casinos solidifying us as a true Omni-Channel retailer. Owning our own brick and mortar stores will allow us to deploy our cutting-edge software in the United States, to demonstrate its effectiveness at attracting shoppers and inducing them to purchase. In our own stores, we plan to test in real time, new software products which should delight consumers and generate incremental revenues and profits for our stores. If we can show incremental revenues and profits for ourselves, we believe that other retailers may follow our example and deploy our software solutions themselves.

During the 4th quarter 2019 and continuing in the first quarter 2020 (as subsequent events), amid the effects of the pandemic created by COVID-19, the Company chose to consolidate its operations around two operating entities; 12 Tech, Inc., formed in Arizona on December 26, 2019 (“12 Tech”) and 12 Retail Corporation, formed on September 17th, 2017 (“12 Retail”).

12 Retail is itself divided into two operating units; Bluwire Group, LLC (“Bluwire”) that operates our retail stores in airports and casinos, and 12 Fashion Group, a division of 12 Retail, that operates our fashion wholesale and direct to consumer brands including Rune NYC, Social Sunday, Red Wire Design and Emotion Fashion Group. 12 Retail will serve to demonstrate the effectiveness of the software technology created by 12 Tech in improving revenues and profits for retailers as well as providing access to other retailers through our wholesale fashion business relationships.

Today, 12 Tech provides technology solutions both online and inside retail brick and mortar that helps retailers acquire customers, reduce overhead expenses, streamline operations, gain incremental revenues and profits. Existing 12 Tech solutions are deployed mainly in Asia. We are planning to deploy our solutions in the United States retail markets, which serve the world’s largest consumer economy. While we continue to operate in Asia, we have consolidated our international units, which were focused on our technology deployment (“12 Japan” and “12 Europe”), and consolidated our software development company 12 Hong Kong, Ltd (“12 HK”), under 12 Tech to further streamline our own operations.

As the retail environment continues to evolve, we as both retailers and technologists, will evolve with it. We believe our developed software both current and in development, will delight consumers, provide contactless experiential shopping, and assist retailers with the recapture of their revenues as they combat the dual threats of Amazon and Walmart. Our software, once fully deployed and implemented, may provide retailers with another effective online and mobile sales channel besides their current options of Google, Amazon, and/or Facebook/Instagram.

As an innovative retail technology company that has been built through acquisitions and ideas, we will continue to search for additional synergistic acquisitions that bring incremental revenues and profitability and/or provide innovative software solutions.

The Opportunity:

Brick and mortar retailers continue to struggle against online competition and the largest big box retailers. This struggle was not made any easier with the advent of the COVID-19 pandemic in 2020. We believe the enforced lock-down and social distancing restrictions will change consumer behaviors, maybe permanently, in ways that no one could have predicted in 2019.

Throughout history, great change also provides great opportunity. 12 ReTech believes that our software solutions for business will provide effective tools that businesses can and will use to entice consumers back to their businesses to purchase products and services in new ways. As restrictions become more and more a part of the new normal, consumers will be anxious to get out of their homes to enjoy life again. We believe that each business must provide information and resources to allow consumers to feel safe shopping in stores, dining in restaurants and traveling.

Management believes that consumers will want assurances that the business has taken steps to ensure their safety and protect them from COVID-19, the flu and the next virus that may come along, but they will want to be engaged and find their shopping, dining and travel to also be experiential, entertaining, fun and safe.

Businesses will need to be able to contact and engage with consumers from a distance whether at their homes, offices (to a lesser extent), online and through mobile apps as well as in their physical stores. We believe that our technology solutions allow consumers to get product or service information, share their choices with their social network and purchase or reserve products and services in physical locations and online which consumers can choose to be contactless.

World-wide retailing represents approximately $28 trillion in revenues, while in 2018 in the U.S. alone, all forms of retailing represented $5.35 trillion in annual revenues (according to Statista March 2019). While management believes that the Company’s software and technologies can benefit almost all retailers, the Company will initially focus on the Electronics, Apparel and Cosmetics sectors where they believe we can have the biggest impact and which market generated over $346 billion in 2018 revenues in just the U.S. (Statista March 2019).

Management believes that the fallout from COVID-19 will provide a tremendous opportunity for those developers, like our Company that quickly adapt their software and create new applications to provide solutions that consumers and business need. While businesses were reluctant to change before this pandemic, they are all now forced to look for new solutions which we intend to provide. Many of our applications with, some additional development, as well as new software solutions will quickly solve these problems. For example:

We were contactless before it was cool!™ In 2018, we launched our 12 Sconti App in Europe which, among other things, allowed the consumers to receive offers from participating nearby retailers that the consumer could purchase right from their smart phone, walk into the retailer and pick up their goods just by showing their QR code.

This App is being adapted and enhanced for the US market so that it will work seamlessly with all our other software technologies including the 12 Mirror™, 12 Ad Screen™ and much more. The App will of course feature all of our own brands and stores so that other businesses can experience our touchless magic! The consumer will be able to shop for, pick up, make reservations, order for delivery, and book a variety of goods and services.

The Company continues to improve and enhance our proprietary USXS technology as well develop new products to benefit our clients in a post COVID-19 world.

Our Acquisition Strategy:

The Company targets for acquisition those synergistic companies that provide immediate revenue, and the potential for growth in revenue and earnings and/or may provide entries to license or sell our software and technology to other businesses and consumer brands, and/or will provide support services to our existing operations. Therefore, we target acquisitions that can benefit from our technology platform and expertise to grow their operations, brands that can give us entry into other businesses, and support companies for our brands and technologies.

We now target for acquisition those companies with at least $3 million in annual sales, that have existing management teams which complement our own. We will also acquire smaller companies that when added to our own allows us to leverage our existing operations without significantly increasing our costs. Other candidates would be companies with existing software for our technology subsidiary or companies where we can demonstrate the effectiveness of our technology. We are, of course, always looking to acquire larger companies or brands. We in fact have been and are still in talks with larger entities, but these are our minimum requirements.

Our Technology Rollout Strategy:

Our subsidiary 12 Tech has, through 12 Japan and 12 Hong Kong, already deployed and tested our existing USXS software applications at ITOYA LTD in Japan. Using the knowledge that we gained from that real-world experience and adapting it to the post COVID-19 reality, we will begin to rollout our solution in the United States of America.

During 2020, when allowed to re-open, we plan to deploy our technology in our Bluwire retail stores. By demonstrating the lift that our technology achieves, we will then use our relationships that have been developed from our fashion brands to approach other businesses with this information to license the software to them.

In the third or fourth quarter of 2020, we plan to announce and launch our new consumer-based mobile App that any consumer-based business can subscribe to in order to reach and interact with consumers easily in fun and innovative ways, and especially contactless.

Throughout the year, we plan to introduce or re-introduce certain elements of our software to U.S. merchants that management believes will provide tools for physical and online merchants to combat the threats posed by Amazon, Walmart, Google, Facebook, and others.

For more information about our individual software technology offerings visit our website for the most up-to date information at www.12retech.com

Our intellectual property:

The Company’s intellectual property consists of the logos, trademarks, Universal Resource Locator(s) (URLs), software applications, signage, proprietary processes and procedures, hundreds of fashion patterns of the parent as well as its subsidiaries.

In addition, the Company’s Bluwire Group subsidiary licenses its name, trademark, and proprietary store processes to two external licensees who each operate two stores in airport terminals (Minneapolis-St. Paul and John F. Kennedy airports).

As of the date of this report, the Company owns many Universal Resource Locator(s) (URLs) including but not limited to:

-www.12retech.com

-www.12japan.jp

-www.12hongkong.com

-www.12europe.com

-www.12retail.com

-www.12sconti.com

-www.12fgrp.com

-www.lexiludancewear.com

-www.lexiluudancewear.com

-www.emotionfashiongroup.com

-www.emotionfashions.com

-www.redwire.design

-www.runenyc.com

-www.bluwireonline.com

-www.bluwire.shop

-www.socialsunday.com

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, the United States, and Japan. Following product development, each product, based on the technologies, will be further protected individually by new patent filings worldwide.

History & Significant Events:

- 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 “App(s)”.

- 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 decrease 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 55,000,000 shares of Company stock, consisting of: (i) 50,000,000 shares of common stock; and, (ii) 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 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) of the Company’s Series A preferred stock beneficially owned by the Company’s majority stockholder, which were returned to the Company’s treasury.

- On September 13, 2017, the Company changed its fiscal year from November 30 to December 31.

- On September 17, 2017, the Company formed 12 Retail Corporation an Arizona corporation, to be a holding company for its operating companies in retail and fashion.

- On September 27, 2017, the Company appointed Daniele Monteverde as the Chief Financial Officer (“CFO”) and director.

- On October 26, 2017, pursuant to a 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 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.

- 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 March 12, 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 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.

- On March 14, 2018, 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.

- On March 20, 2018, Geneva agreed to purchase an additional 68,000 Series B Preferred shares for $68,000 under the same terms as their initial purchase on January 31, 2018.

- In June, 2018, Dominic D’Alleva joined the advisory board. In conjunction with his advisory board position, 12 ReTech issued 3,125,000 shares to him in July 19, 2018.

- On July 2, 2018, the Company entered in an Equity Line of Credit agreement with Oasis Capital, LLC (“Oasis Agreement”), and as a part of that Agreement the Company was obligated to create a subset Series D-1 Preferred Stock from the authorized Series D Preferred Stock having special rights and privileges. The total number of shares of Series D-1 Preferred Stock issued was 311,250 shares, with a par value of $0.00001 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

- On July 2, 2018, the Company reserved 100,000,000 shares of our common stock for Oasis Capital under the Equity Purchase Agreement. 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. Other than these 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.

- On July 5, 2018, the Company filed a certificate of designation to create a subset of the Series D Preferred Stock, designated Series D-1.

-On July 13, 2018, the Company increased its authorized Series D Preferred Stock from one million to ten million (10,000,000) authorized shares of stock from the 50 million total authorized preferred shares. These shares 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.

- On July 19, 2018, 1,500,000 shares of Series A Preferred Stock were issued as compensation for services.

- On August 6, 2018, the Board of Directors of 12 ReTech Corporation authorized the issuance of one (1) share of our Series C Preferred Shares to the founder, Angelo Ponzetta, effective August 14, 2018. The Series C Preferred Shares have no equity value, no preference in liquidation, and are not convertible into common shares, but authorizes the holder to vote one billion (1,000,000,000) votes on any matter that shareholders are entitled to vote for under our Bylaws at a face value of $1.00 per share. The Board believes that this was necessary so that the Company maintains a consistent vision going forward that can only be achieved if the Founder’s vision is maintained. This vision is the same vision that all current shareholders bought into as evidenced by their investment into the Company. To ensure that the founder’s vision is maintained, it is necessary that no outsider person or group can gain voting control from the founder as the Company.

-On January 9, 2019, the Company filed a Certificate of Designation to create One Million (1,000,000) Series D-5 Convertible Preferred Stock with par value $0.00001 and stated value of $4.00 per share.

-On January 9, 2019, the Company filed a Certificate of Designation to create One Million (1,000,000) Series D-6 Convertible Preferred Stock with par value $0.00001 and stated value of $5.00 per share.

-On January 11, 2019, the Company filed an amendment to Series C Preferred shares where each issued and outstanding shares of Series C Preferred Stock shall be entitled to Eight Billion (8,000,000,000) 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.

-On January 14, 2019, the Company acquired Red Wire Group, LLC a Utah limited liability Company (“Red Wire”) pursuant to an Exchange of Equity Agreement (the “Exchange Agreement”) with the members of Red Wire (the “Members) in exchange for (i) 75% of the membership interests of Red Wire in exchange for 54,000 shares of the Corporation’s Series D-6 Preferred Stock and (ii) the remaining 25% of the membership interests of Red Wire in exchange for 37,500 shares of the Corporation’s Series D-5 Preferred Stock.

-On February 19, 2019, the Company acquired 92.5% of the membership interest Rune NYC, LLC, a New York limited liability Company (“Rune”) in exchange for 82,588 shares of the Corporation’s Series D-5 Preferred Stock pursuant to an Exchange of Equity Agreement.

- On March 8, 2019, the Company increased its authorized shares of common stock from 1 billion (1,000,000,000) shares to 8 billion (8,000,000,000) shares pursuant to the effectiveness of its filed Form 14C.

- On March 14, 2019, the Company entered into a PIPE Equity Purchase Agreement whereby an institutional investor agreed to purchase up to $500,000 worth of the Company’s D-2 Preferred Shares with a $2.00 face value and purchase at a discount to face value. In the first tranche, the Company sold 103,500 D-2 Preferred Shares and received net proceeds after expenses of $100,000. The D-2 Preferred Shares are convertible to common shares after a 6 month or longer holding period at market price. (See Form 8-K filed on March 20, 2019). Concurrent with the execution of the PIPE Equity Purchase Agreement, the Company executed an Exchange Agreement with the same institution investor allowing that investor to exchange all its Series D-1 Preferred Shares for newly issued Series D-2 Preferred Shares. (See Form 8-K filed on March 20, 2019). The Company then filed with the State of Nevada a new Certificate of Designation authorizing 2.5 million Series D-2 Preferred Shares from their blank check Preferred Shares. (See Form 8-K filed on March 20, 2019).

- On June 27, 2019, the Company’s Rune subsidiary entered into another future receivable purchase agreement with Vox Funding and received $19,400. This agreement provides for payment over 7 months and carried a fee of $7,600. This obligation is not convertible under any terms into Company stock.

- On August 20, 2019, the Company had successfully discharged all of its debts associated with 12 Europe A.G., as part of the completion of the 12 Europe A.G., bankruptcy filing except for certain social benefit payments still owed of approximately $35K by the Company.

- On September 24, 2019, the Company’s Rune subsidiary entered into another future receivable purchase agreement with Vox Funding and received $14,550. This agreement provides for payment over 3.5 months and carried a fee of $4,800. This obligation is not convertible under any terms into Company stock.

- On September 24, 2019, the Company’s Rune subsidiary entered into another future receivable purchase agreement with Vox Funding and received $17,666.60. This agreement provides for payment over 9 months and carried a fee of $12,900 and retired a prior obligation of $15,353.40. This obligation is not convertible under any terms into Company stock.

- On September 29, 2018, the Company issued a total of (54,840) shares of our Series D-3 Preferred Shares to a related party at a price of $5 par value in exchange for various considerations as discussed in the Notes section of this filing.

- Beginning in the third quarter 2019 continuing in 2020, the Company began to consolidate and streamline its operations. The first step, on September 30, 2019, the Company foreclosed on its liens on Emotion Apparel Inc., taking possession of assets and brands and returning Emotion Apparel, Inc. equity to the Seller. This action resulted in the Company recognized other income of $511,489 which is discussed in further detail in the Notes of this filing.

- On October 1, 2019, the Company acquired 51% of Bluwire Group, LLC a Florida limited liability company, a retailer with 11 airport terminal locations and one casino location under an equity exchange agreement. The Company issued 500,000 of its Series A Preferred Shares to the sellers, who retained 30% of Bluwire. Nineteen percent (19%) is reserved for 12 months for potential equity investors into Bluwire. Any of the equity not used to raise capital for Bluwire over that period would be divided equally between the Company and the Sellers. The Sellers will continue with Bluwire under consulting agreements.

-On October 3, 2019, the Company received $5,000 from Adar Alef from a $6,850 back end convertible promissory note agreement including fees and legal expenses of $1,850.

- On October 3, 2019 one of the Sellers of Bluwire provided $300,000 to the Company’s Bluwire subsidiary as a capital contribution, the details of which and/or its final repayments terms are not yet determined between the parties.

- On October 8, 2019, the Company received $5,000 from LG Capital Funding, LLC (“LG”) from a $6,850 convertible promissory note agreement including fees and legal expenses of $1,850.

- On October 11, 2019, the Company’s Bluwire subsidiary entered into a future receivable purchase agreement with Libertas Funding and received $343,000. This agreement provides for payment over 8 months and caries a fee of $7,000. This obligation is not convertible under any terms into Company stock.

- On October 18, 2019, the Company successfully completed its reverse stock split and reduced its common stock outstanding by a ratio of one hundred for one. While the board of directors and a majority of the voting interests of the Company had also approved an increase in the authorized common shares in an amount up to 20 billion common shares within 12 months of July 18, 2019, at this time management has elected to keep the authorized stock at 8 billion common shares.

- As part of the Company’s efforts to streamline operations during the fourth quarter, the Company has cut all fixed costs and of 12 Japan, Ltd and will service its Japanese customer(s) through 12 Hong Kong, Ltd. The Company believes that it will now generate a profit from the licensing and maintenance revenues generated from 12 Japan.

- As part of the Company’s efforts to streamline operations during the fourth quarter, on November 1, 2019 the Company closed two of its Bluwire Kiosks in the Denver International Airport based on a mutual decision with the concessionaire at the airport who would not reduce the retail rent to an amount that would make those locations profitable and they decided instead to rent those locations to another vendor

- On November 4, 2019, the Company’s Bluwire subsidiary entered into a second future receivable purchase agreement with Libertas Funding and received $145,500. This agreement provides for payment over 6 months and carried a fee of $4,500. This obligation is not convertible under any terms into Company stock.

- On November 20, 2019, the Company acquired 100% of equity of Social Decay, LLC dba Social Sunday (“Social Sunday”), a New York limited liability company for 30,000 of the Company’s Series D-6 Preferred Shares. An additional 12,000 Series D-6 Preferred Shares were issued to the Seller (but held in escrow for performance-based award) on same day.

- On of November 27, 2019, the Company issued 68,000 Series B Preferred Stock in exchange for $60,000.

- Beginning December 15, 2019 and continuing in 2020, Libertas has granted Bluwire a number of payment moratoriums. The most recent coincided with the subsequent event listed below related to COVID-19. These deferrals will result in these obligations being satisfied over a longer indeterminate repayment schedule.

- On December 18, 2019, the Company’s Rune subsidiary entered into another future receivable purchase agreement with Vox Funding and received $24,279.49. This agreement provides for payment over 8.5 months and carried a fee of $24,759.91 and retired prior obligation of $29,020.60. This obligation is not convertible under any terms into Company stock.

- On December 19, 2019, the company issued 53,000 Series B Preferred Stock in exchange for $50,000.

- On December 23, 2019, the Company’s Red Wire Group subsidiary entered into a future receivable purchase agreement with Vox Funding and received $24,200. This agreement provides for payment over 5.5 months and carried a fee of $12,050. This obligation is not convertible under any terms into Company stock.

- As a subsequent event, on January 4, 2020, the Company’s Rune subsidiary entered into another future receivable purchase agreement with Vox Funding and received $14,500. This agreement provides for payment over 70 business days and carried a fee of $4,850. This obligation is not convertible under any terms into Company stock.

- As a subsequent event, on January 16, 2020, Geneva agreed to purchase an additional 53,000 Series B Preferred shares for $53,000 under the same terms as their prior purchases.

- As a subsequent event on January 24, 2020, the Company’s Social Sunday subsidiary entered into a first future receivable purchase agreement with Vox Funding and received $14,500. This agreement provides for payment over 3.5 months and carried a fee of $4,850. This obligation is not convertible under any terms into Company stock.

- As a subsequent event on March 3, 2020, the Company’s Social Sunday subsidiary entered into a second future receivable purchase agreement with Vox Funding and received $5,605. This agreement provides for payment over 2 months and carried a fee of $1,895. This obligation is not convertible under any terms into Company stock.

- As a subsequent event, on March 5, 2020, the Company’s Bluwire subsidiary entered into a third future receivable purchase agreement with Reliant Funding and received $83,000. This agreement provides for payment over 6 months and caries a fee of $3,000. This obligation is not convertible under any terms into Company stock.

- In March 2020, as a subsequent event and as part of the Company’s streamlining operations and partially because of COVID-19, the Company filed a Chapter 11 Reorganization of Red Wire Group, LLC. The Company’s 12 Fashion Group, a division 12 Retail, continues to service Red Wire Group customers under the trade name Red Wire Design.

- As a subsequent event, on March 16, 2020, the President of the United States of America issued a stay-at-home instructions and business closure directive in response to COVID-19 pandemic. Management took steps to promptly close all its Bluwire stores and Fashion Group operations, laying off the vast majority of its employees. The Company’s landlords and Libertas, Vox and Reliant have all agreed to collections deferment of an indeterminant duration. The Fashion Group continues limited operations in creating and producing PPE materials.

- As a subsequent event, on March 18, 2020, the Company received $30,000 from Adar Alef, LLC (“Adar”) from a $33,600 convertible promissory note agreement including fees and legal expenses of $3,600. The note is convertible after 181 days at a (i) $0.0075 ceiling or (ii) 60% of the lowest trading price over the past twenty trading days prior to the conversion date.

- As a subsequent event, on March 25, 2020, the Company received $30,000 from LG Capital, LLC (“LG”) from a $33,600 convertible promissory note agreement including fees and legal expenses of $3,600. The note is convertible after 181 days at a (i) $0.0075 ceiling or (ii) 60% of the lowest trading price over the past twenty trading days prior to the conversion date.

- As a subsequent event, the Federal Government of the United States of America on March 27, 2020, passed the Cares Act allowing companies to quality SBA Payroll Protection Loans (PPP). These loans provide for certain funding based on previous employment which in part may be forgivable under certain conditions. The remaining portion needs to be repaid over 2 years with a 6-month moratorium on payments and carry a 1% annual interest rate. These loans require no collateral nor personal guarantees. During the period from May 5, 2020 to May 22, 2020, the Company’s subsidiaries quality and received an aggregate of $294,806.78 in PPP loans.

ITEM 1A. 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 brands, 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 and was subsequently closed on August 20, 2019. Throughout 2019, we made four acquisitions including Red Wire Group, Rune, Bluwire, and Social Sunday, which together brought significant revenue but not enough profit to offset the costs of being public and developing and launching our core technology initiative. 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, 2019, 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 brand 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, 2019 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 brand acquisitions. 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 marketplace 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 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 uncompetitive 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 effectiveness of our disclosure controls and procedures and internal control over financial reporting

The Company has a limited number of personnel which may lead to the risk of limited controls and procedures. For the aforementioned reason, there is a limit on the quantity of internal controls during our financial reporting process.

The Company’s CFO is currently the CEO of another Company

The Company CFO is also the CEO of another business and therefore may have limited time to work on the business and may experience time conflicts.

Our directors may lack of an independent director on our Board of Directors

Our CEO and CFO are also on our Board of Directors and as a result the Board of Directors may lack some independence

The stock ownership of our chief executive officer and the ability to control the Company

The Company’s Chief Executive Officer is also one of the most significant shareholders of the Company and as a result exercises significant control over the Company.

There are a large number of shares of common stock underlying the outstanding preferred stock and convertible notes

The Company has outstanding preferred stock and convertible notes which are potentially convertible into common stock. Should all these convertible instruments convert into common stock, the number of common shares issued would lead to substantial dilution of the current common shareholders.

Although we have attempted to discuss meaningful factors, our investors need to be aware that other factors and risks may become important in the future. New risks may emerge at any time. We cannot predict such risks or estimate the extent to which they may affect our operations and financial performance. Investors should carefully consider the discussion of risks and the other information included in this Quarterly Report on Form 10-Q, including the Cautionary Information Regarding Forward-Looking Information provided above in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The effects of this worldwide pandemic on our business have not been determined at this time. Subsequent to December 31, 2019, the world was affected by a pandemic virus called COVID-19, and all our businesses were affected by closures and/or reductions in volume. Businesses around the world were closed, as well as airports and casinos, and consumers were told to shelter at home. The long-term effect of this on the psyche of consumers and the worldwide economy are unknown. Their short- and long-term effects on our business is undetermined at the time of this report.

Risks to our businesses related to COVID-19

The ongoing systemic challenges of the retail and restaurant industries due to changes in consumer habits, online and with mobile Apps, have been further exacerbated and accelerated due to 2020’s COVID-19 pandemic. The business closures mandated by government agencies around the world, coupled by governmental stay at home orders and consumer fears of infection, may forever significantly change consumer behavior in unforeseen ways. While these challenges provide significant opportunity to market and sell our new technologies as well as our fashion products, at this stage it may be difficult to predict the trend of overall consumer behavior.

Due to COVID-19, the solvency of our potential customers for our technology and products may be in doubt and their ability to make payments to us may be at risk. For example, see recent post COVID-19 bankruptcies such as J. C. Penney Company, Inc, J.Crew, Pier 1 Imports, Modell’s Sporting Goods, Food First Global Restaurants, Neiman Marcus, and Garden Fresh Restaurants, to name a few.

Also due to COVID-19, there may be an extreme reduction in travel, thereby significantly affecting the number of customers in our Company owned stores, thereby further potentially reducing revenue for those stores. This reduction in traffic through retail stores and restaurants in airports and casinos may also further reduce our ability to gain additional subscribers for our technologies.

Another potential impact of COVID-19 on our operations, may be that our vendors are operating at reduced capacity or have closed, which could impact our flow of inventory or raw materials for an indeterminate amount of time until such time as those vendors can be replaced or resume operations at full capacity.

We may face challenges rehiring some or all of the workforce that was laid off due to COVID-19 and may have to recruit and hire replacement employees in the future for our businesses. As a result, management expects to face additional costs to get back our operations at full capacity.

For more information about our response to COVID-19, see our specific COVID-19 disclosures.

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.

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.

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 regards 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.

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 brands acquired or to be acquired by our subsidiary, 12 Retail Corporation.

Our current and planned brand 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.

Risks Related To the Retail Industry

The retail industry has been reeling ever since 2008 related to less shoppers and more purchases being done online. This has led to such venerable names as Sears Roebuck and Co, and J.C. Penney and many others filing bankruptcy, and some disappearing forever, such as BCBGMAXAZRIA, which no longer has any brick and mortar retail locations. With COVID-19, we believe this trend will accelerate. Our Management believes that only those retailers that are able to find new ways to attract consumers to the stores and learn how to sell through new channels, such as mobile apps and online, will survive.

Our business is dependent on the ability of our fashion brands to sell to brick and mortar retailers, as well as to sell products to online retailers and to successfully market our products on mobile apps and online. The seismic transition occurring in the retail industry may impair our ability to be successful in these efforts.

Our technology division intends to sell and license our technology solutions to brick and mortar retailers and restaurants whose financial health and ability to raise capital will determine if they will even be able to afford our solutions. We face collection risks and client retention risks in selling to retailers and restaurants who may not remain in business.

Extending credit in this environment where our technology or fashion group will be difficult, and we may suffer losses because of it. These risks may impede our ability to prosper.

Risks of Acquiring Operations.

We face risks of successfully integrating acquired businesses into our operations.

An acquired business may require additional capital infusions to survive. Capital raising is difficult in any environment especially in a post COVID-19 world. Failing to successfully raise a sufficient amount of capital is a risk to the continuation of the acquired businesses operations.

We will need to integrate the acquired businesses back office accounting into our own systems in order to successfully continue to execute our SEC mandated reporting duties. Failing to do so is a risk to our ongoing SEC fully reporting status.

We will need to integrate the acquired businesses personnel into our own teams whether they be operational or back office. Failing to do so is a risk to the ongoing operations of an acquired operation. Sellers or existing management that may be retained after the acquisitions may not perform well in the new environment. This may impede our ability to rapidly grow or even maintain of the acquisitions. In consolidating our acquisitions, we may find difficulties merging different teams that have different cultures, and therefore we may not fully realize the benefits anticipates.

We may experience unforeseen challenges in realizing the cost-saving synergies and business expansion benefits of any or all acquisitions.

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

Our Board of Directors has the authority to issue up to 8,000,000,000 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 foreseeable 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 is a very limited trading market for our shares.

Our common stock is deemed to be “penny stock” as that term is defined in Rule 3a511 of the SEC. 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 the NASDAQ automated quotation system (NASDAQ listed stocks must still meet requirement (i) above); or (iv) in issuers with 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 15g2 of the SEC 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 15g9 of the SEC 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 stock’s 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.

There are a large number of shares of common stock underlying our outstanding preferred stock and convertible notes.

The Company has outstanding Preferred Stock and Convertible Notes with possibility of conversion into a number of common shares. Although we have attempted to discuss meaningful factors, our investors need to be aware that other factors and risks may become important in the future. New risks may emerge at any time. We cannot predict such risks or estimate the extent to which they may affect our operations and financial performance. Investors should carefully consider the discussion of risks and the other information included in this Annual Report on Form 10-K, including the Cautionary Information Regarding Forward-Looking Information provided above in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.

ITEM 2. PROPERTIES

As of the date of the filing of this report, the Company leases numerous stores, facilities, and offices for itself and its subsidiaries, which in total is 7,206 square feet for a Base monthly rent of $79,882, as detailed below:

-12 ReTech Corporate - Leases under 200 square feet of office space at 420 Lexington Avenue Suite 300 New York City, N.Y. 10170 USA for a monthly fee of $2,095. The Lease provides conference room space on an hourly fee basis and is month to month. In addition, 12 ReTech has access to office and conference room space on an at needed basis at 515 E. Grant Street #150 Phoenix, Arizona 85004.

-12HK- Rented a virtual office space on a yearly lease which ended October 9, 2018. The annual cost was $795 and was located at Unit 1104, 11/F Crawford House 70 Queens Road Central, Hong Kong.

-12 Retail Corporation- has access to office space and conference facilities at 515 E. Grant Street, Suite 150 Phoenix, Arizona 85004 that it shares with its parent 12 ReTech Corporation for a use fee as needed. 12 Retail Corporation also operates a variety of facilities through its two divisions of approximately 7,006 square feet for a base monthly rental costs of $76,992, which is detailed below:

During the year ended December 31, 2019, the Company shuttered the following facilities to consolidate revenue and decrease expenses (not counted above):

In December 2019, the Company closed its Red Wire Group facility located at 85 W. Louise Avenue, Salt Lake City Utah eliminating 5,000 square feet and monthly rent of $2,884.

In July 2019 the Company moved out of its Emotion Fashion Group Facilities eliminating the operation and the lease expense for the leased location that was Executed by a former company of a similar name which was used by Emotion Fashion Group in Salt Lake City, Utah USA. This eliminated 6,450 square feet and $4,000 per month in rent expense.

ITEM 3. LEGAL PROCEEDINGS

We are subject to litigation, claims, investigations, and audits arising from time to time in the ordinary course of our business. However, at this time, we are not aware of any material pending, threatened or unasserted claims, other than as follows:

Claims and Litigation:

PART II

Item 5. Market Information

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 8, 2017 the Company changed its name to 12 RETECH CORPORATION and effective on or around June 8, 2017 the quotation symbol was changed to “RETC” where our stock traded on OTC Markets’ 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 OTC Markets over-the-counter pink market from January 1, 2019 to December 31, 2019. 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.

Holders of Common Stock

As of May 22, 2020, the closing price for the Company’s common stock on OTC Markets was $0.0001 per share. We had 1,330 stockholders of record of the 599,003,958 shares outstanding.

Dividends

The payment of dividends on the Company’s Common Stock is subject to the discretion of the Company’s Board of Directors and will depend, among other things, upon our earnings, our capital requirements, our financial condition, and other relevant factors. We have not paid nor declared any dividends on our common stock since our inception and, by reason of our present financial status and our contemplated financial requirements do not anticipate paying any dividends in the foreseeable future.

We intend to reinvest any earnings in the development and expansion of our business. Any cash dividends in the future to common stockholders will be payable when, as and if declared by our Board of Directors, based upon the Board’s assessment of:

Therefore, there can be no assurance that any dividends on the common stock will ever be paid.

ITEM 6. SELECT FINANCIAL DATA

As a “smaller reporting” as defined in Item 10(f)(1) of SEC Regulation S-K, we are not required to provide the information required by this item. The reader is cautioned to carefully read the “Management’s Discussion & Analysis” below, as well as the financial statements included in this report.

ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT 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 quarterly report. References in the following discussion and throughout this annual report to “we”, “our”, “us”, “12 ReTech Corporation”, “12 ReTech”, “RETC”, “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.

Company

12 ReTech Corporation is a holding company with subsidiaries that develop, sell and install software that we believe will REINVENT RETAIL for shoppers and retailers. As a holding company we also acquire synergistic operating companies that manufacture and sell Fashion products to other retailers as well as selling products online. In October 2019 we also acquired 12 retail stores in airport terminals and casinos creating a true Omni-Channel retailer. This will allow us to deploy our cutting-edge software in the United States to demonstrate its effectiveness as well as to test, real time new software products to continue to delight consumers and generate additional revenue and profits for retailers.

During the 4th quarter 2019 and continuing in the first quarter 2020 (as subsequent events) and with the effects of the pandemic created by COVID-19, the Company consolidated operations around two operating entities; 12 Tech, Inc., formed in Arizona in December 26, 2019 (“12 Tech”) and 12 Retail Corporation, formed on June 27th, 2017 (“12 Retail”).

12 Retail is itself divided into two operating units; Bluwire Group, LLC (“Bluwire”) that operates our 12 retail stores in airports and casinos and 12 Fashion Group, an unincorporated division of 12 Retail that operates our fashion wholesale and direct to consumer brands, including Rune NYC, Social Sunday, Red Wire Design, Emotion Fashion Group. 12 Retail will serve to demonstrate the effectiveness of the software technology created by 12 Tech in improving revenues and profits for emailers as well as providing access to other retailers through our whole fashion business relationships.

12 Tech, Inc, provides technology solutions to physical retailers currently mainly in Asia and is now positioned in the United States market, the world’s largest. We have consolidated or shuttered our international units focused on our technology deployment (“12 Japan” and “12 Europe”), and consolidated our software company 12 Hong Kong, Ltd (“12 HK”) under 12 Tech to further streamline operations.

As the retail environment continues to evolve, we as retailers and as primarily a technology company will evolve with it. We believe our developed software and those products in development will delight consumers, provide contactless experiential shopping, and bring revenue back to retailers as they combat the dual threat of Amazon and Walmart. Our software, once fully deployed and implemented, may provide retailers with another electronic and effective sales channel other than Google, Amazon, and/or Facebook/Instagram.

As an innovative holding company that has been built through acquisitions and ideas, we will continue to search for other synergistic acquisitions that bring additional revenues, and/or provide innovative software solutions.

Throughout 2019, the Company made a number of acquisitions for its 12 Retail subsidiary. The criteria management used in selecting and completing these acquisitions was; 1) Each acquisition had significant revenue, 2) management identified that the acquisition could at some point assist in the deployment of our retail software technology, 3) the business could benefit from expense consolidation and better management controls and 4) be able to be acquired and managed within the resources available to the Company.

In each case, after acquisition, we looked for ways to streamline operations, and shed expensive facilities, reduce labor and material costs, while maintaining and/or growing the revenue and increasing the margins. This process can appear to be messy to an outsider but is a process that management believes will ultimately yield the biggest rewards for our shareholders over time. In most cases each acquisition was followed by a larger acquisition as the Company built momentum. Consequently, the Company had its largest revenue quarter in the 4th quarter of 2019 when it topped $1 million in quarterly revenues for the first time ($1,003,549 vs $ 19,105 in 2018).

Subsequent to December 31,2019 in the first quarter of 2020 the processes discussed here continued and accelerated until our business was interrupted by nationwide closures due to the COVID-19 pandemic. Management used this period once most operations were closed to more swiftly shutter unprofitable retail stores, close the unprofitable Utah factory, and further streamline operations which management believes may make the Company a much stronger player post COVID-19 pandemic. (See Risk Factors).

During the 4th quarter of 2019 the company completed the last two acquisitions for the year (Bluwire Group, LLC & Social Decay d/b/a Social Sunday) and began to consolidate them into 12 Retail. 12 Retail was itself divided into two operating segments; Retail and Fashion (Bluwire and 12 Fashion Group respectively). Angelo Ponzetta our CEO who had 25 years of retail experience was named as the acting CEO of Bluwire and Emily Santamore with over 10 years of experience in the fashion industry was named President of the unincorporated division of 12 Retail Corporation we call 12 Fashion Group.

Principal subsidiaries

The details of the principal subsidiaries of the Company as of December 31, 2019, are set out as follows (additional consolidation may occur in the future):

12 Retail Corporation:12 Fashion Group; unincorporated division of 12 Retail Corporation

-On February 19. 2019 we acquired Red Wire Group, LLC. (“RWG”) a Utah Limited Liability company pursuant to a Share Exchange Agreement whereby the Company exchanged and the members of RWG (the “Members”) Pursuant to the terms of the Exchange Agreement, the Company will acquire (i) 75% of the membership interests of RWG in exchange for 54,000 shares of the Corporation’s Series D-6 Preferred Stock and with a stated value of $5.00 (ii) the remaining 25% of the membership interests of RWG in exchange for 37,500 shares of the Corporation’s Series D-5 Preferred Stock with a stated value of $4.00 per share, RWG operates its own “cut & sew operation for independent third parties contract to produce cloths operating out of its factory in Salt Lake City, Utah.12.

As of the end of November 30, 2019, we closed the factory in Utah while 12 Fashion Group retained the customers by completing the orders in process. We were able to produce the products through 3rd party factories in New York City and Los Angeles for less than it cost us to produce the products in our own factory in Salt Lake City, Utah. Subsequent to December 31, 2019, on March 6, 2020 we filed a Chapter 11 Bankruptcy filing in Phoenix Arizona. This filing may allow us to sell the equipment we no longer need, pay off the secured creditors and shed all of Red Wire’s debt from our balance sheet. 12 Fashion Group continues to service those customers acquired as well as obtaining new accounts by marketing under the d/b/a Red Wire Designs.

Prior to 2019 the Company had acquired Emotion Apparel, Inc., and formed a new entity under the name Emotion Fashion Group, Inc, a Utah Corporation. The products of Emotion Fashion Group; Lexi-Lu Dancewear and Emotion Fashions will continue to be designed, manufactured and marketed by the staff at 12 Fashion Group.

The history of the Emotion Apparel, Inc/Emotion Fashion Group transaction is as follows:

The Original EAI Transaction was accounted for as follows: The fair value of the 1.0 million shares of common stock issued amounted to $80,000. EAI owned four wholly-owned and majority-owned subsidiaries: Lexi Luu Designs, Inc, (a Nevada Corporation), Punkz Gear, Inc, (a Wyoming Corporation), Cleo VII, Inc. (a Nevada Corporation) and Skipjack Dive & Dance Wear, Inc. (a Nevada Corporation), which together owns five microbrands that were included in this transaction and target specific niche markets: Lexi-Luu Dancewear, Punkz Gear, Cleo VII, Skipjack Dive & Dance Wear, and E-motion Apparel, Inc. The acquisition of EAI was accounted for under ASC 805 where purchase price was allocated based on assets acquired and liabilities assumed as of the acquisition date May 1, 2018, at the estimated fair value. During the fourth quarter of 2018, the Company determined that the goodwill associated with the acquisition should be fully impaired, and as such was expensed during the fourth quarter of 2018.

On July 6, 2018, the Company incorporated a new Emotion Apparel Inc in the state of Utah and immediately re-named it as Emotion Fashion Group, Inc. (“Emotion Fashion Group” or “EFG”) and does business under the brand name, “Emotion Fashions”.

The EAI share exchange agreement included terms that the Company would provide funding of at least $200,000 in the first 12 months after acquisition and the Seller, who remained as manager, would produce revenues in excess of $1.3 million dollars over that period. The Company secured its investment with a secured line of credit and a landlord’s lien through one of its other subsidiaries. Those liens covered all of the intellectual property and physical assets of Emotion Apparel, Inc. On September 30, 2019, the Company effectively foreclosed on its liens taking possession of the assets including the brands; Lexi-Luu, Emotion Fashion Group, Punkz Gear and returned the stock in Emotion Apparel, Inc. and its subsidiaries to the Seller. In the 4th quarter 2019 the Company plans to market those brands under new management as part of its consolidation of its acquisitions and utilize its Emotion Fashion Group, Inc, subsidiary that was incorporated in Utah in July 2018. As a result, the related accounts payable and accrued expenses which were payable by Emotion Apparel, Inc. which totalled $511,486 including $250,000 Note Payable, were offset to other income. For further details see Note 7 Accounts Payable and Accrued Expenses and 9 Notes Payable for further details.

Business and Operations

12 ReTech Corporation is a holding company with subsidiaries that develop, sell and install software that we believe will REINVENT RETAIL for shoppers and retailers. As a holding company we also acquire synergistic operating companies that manufacture and sell products to other retailers as well as selling products online. In October 2019, we acquired 12 retail stores in airport terminals and casinos creating a true Omni-Channel retailer. This will allow us to deploy our cutting-edge software in the United States to demonstrate its effectiveness as well as to test, real time new software products to continue to delight consumers and generate additional revenue and profits for retailers.

12 Retail is itself divided into two operating units; Bluwire Group, LLC (“Bluwire”) that operates our 12 retail stores in airports and casinos and 12 Fashion Group, an unincorporated division of 12 Retail that operates our fashion wholesale and direct to consumer brands. including; Rune NYC, Social Sunday, Red Wire Design, Emotion Fashion Group. 12 Retail will serve to demonstrate the effectiveness of the software technology created by 12 Tech in improving revenues and profits for emailers as well as providing access to other retailers through our whole fashion business relationships.

12 Tech, Inc. provides technology solutions to physical retailers currently mainly in Asia and is now positioned in the United States market, the world’s largest. We have consolidated or shuttered our international units ,focused on our technology deployment (“12 Japan” and “12 Europe”), and consolidated our software company 12 Hong Kong, Ltd (“12 HK”) under 12 Tech to further streamline operations.

As the retail environment continues to evolve, we as retailers and as primarily a technology company will evolve with it. We believe our developed software and those products in development will delight consumers, provide contactless experiential shopping and bring revenue back to retailers as they combat the dual threat of Amazon and Walmart. Our software, once fully deployed and implemented, may provide retailers with another electronic and effective sales channel other than Google, Amazon, and/or Facebook/Instagram.

To summarize the Company earns money from four different revenue streams (in declining order): Retail Sales, Wholesale and Online sales of Fashion products, Royalty Payments for 3rd party licensing of the Bluwire name, and technology sales.

As an innovative holding company that has been built through acquisitions and ideas, we will continue to search for other synergistic acquisitions that bring additional revenues, and/or provide innovative software solutions.

For more information about our technology please visit our website at www.12retech.com.

Financing and Convertible Debt

To finance our operations the Company has historically resorted to a number of convertible debt providers (see Note 10). These debt providers have in many cases exercised their rights to convert their debt into the Company’s common stock at a discount to market. They then sell that stock to recover their investment and profits. This has over time depressed the value of our Company’s common stock and caused a significant dilution to our shareholders. This could not be avoided and management believes it was necessary in order to provide continuation of the Company’s business so that we could make significant acquisitions. The Company has been building revenue momentum through these acquisitions and is no longer exclusively reliant on this form of fund raising. The vast majority of the funds the Company has received over the last 4 months have been sourced through non-convertible debt incurred by our operating subsidiaries. There is however, still a considerable amount of convertible debt that needs to be retired over the near term. Management is working closely with the convertible note holders to find less dilutive alternatives and management believes that first half of 2020 it will arrive at a solution that will involve less dilution, may require some cash payments from other sources including an equity offering and/or debt offerings through one or more of its subsidiaries as well as leak out provisions negotiated with the convertible debt holders themselves.

The Company had also entered into a $12 million dollar Equity Line of Credit with Oasis Capital which it has been unable to access due to some delays in the audits of one of its acquired subsidiaries. That has been resolved and Management has been in talks with Oasis on amending that original offering, so that the Company may refile the S-1 required with the SEC. The equity line of credit is ineffective at the current share price, and we will not be able to reinstitute at current share price levels.

In addition, Management has received tentative commitments for preferred Equity Funding that if completed would allow the Company to fully retire the convertible debt. Management, however, cautions readers that while promising no Equity or Debt funding can truly be counted upon until the money is in the bank. The exact amount of the final funding and timing have not been fully determined at this time.

However, management believes that now that the Company has significant and growing revenue, has streamlined operations, is set to launch its software products in its own stores in the United States and has access to more standard debt capital, that the issues associated with the convertible debt have become more manageable and therefore will be resolved more favorably to the Company than was previously observed.

YEAR ENDED December 31, 2019 COMPARED TO THE YEAR ENDED December 31, 2018

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

Revenues

During the year ended December 31, 2019 our revenues increased to $1,628,607 from $92,831 in the prior comparable year. This represents an increase of $1,535,776 or 1,654%, which is primarily the result of the new 2019 acquisitions of Bluwire Group, RWG, Rune and Social Sunday.

Cost of revenues

During the twelve months ended December 31, 2019 we incurred Cost of Revenues associated with the delivery of our products in the amount of $1,122,086, as compared to $50,558 for the comparable period in 2018. These expenses are related to costs of delivering goods. In 2019, our Cost of Revenues as a percentage of Revenues was 68.9% as compared to 54.5% in the prior comparable period. The higher Cost of Revenues as a percentage of Revenues in 2019 is mainly the result of higher purchasing costs of the Bluwire operations in the 4^th quarter due to the lack of cash on their balance sheet when acquired. This was compounded by extraordinary expenses incurred by 12 Fashion Group in the second half during a particularly complicated production project. 

General and Administrative

Our general and administrative expenses for the year ended December 31, 2019 were $2,124,372, a slight decrease of $22,013 or 1.0% when compared to $2,146,385 for the year ended December 31, 2018. The decrease is a result of increase in general and administrative expenses from the 2019 acquisitions offset by general and administrative cost reductions implemented in the parent as described above.

Professional fees

Our professional fee expenses for the year ended December 31, 2019 were $1,225,699 an increase of $83,542 or 7.3% when, compared to $1,142,127 for the year ended December 31, 2018. Our professional fees include expenses related to our external auditors, legal costs, and consultants.

Other Expense

Our Other Expenses increased by $3,692,762 or 67.0% to $9,204,291 for the year ended December 31, 2019 compared to $5,511,530 for the year ended December 31, 2018. There are four main components of the increase of the 2019 Other Expense category:

See these components described in further detail below.

Other Income

The Company recognized a loss impairment of software development costs of $513,601 December 31, 2019 without a similar comparable expense during the prior period ending December 31, 2018. Periodically, management reviews its capitalized costs to determine if they are properly valued or should they be impaired. As of September 30, 2019. Management had capitalized approximately $513,601 in development costs for its 12 Technology Suite and 12 Sconti APP. While management still believes in the long-term validity of these software applications, the fact remains that adoption by retailers has not met management’s expectations. This led management to cut costs in the 12 Europe and 12 Japan operations. Therefore, management believes that the capitalized costs for the software development should be fully impaired during the 4^th quarter of 2019. 12 Sconti App was initially deployed in early 2019 as the Company partnered with the major Swiss retailer Jelmoli. Jelmoli did not adopt the rest of the 12 Technology Suite. In the second half of 2019, 12 Europe’s office has been closed and the technology licensed to a third party so that any revenues generated would not have significant related costs. Many elements of the 12 Technology Suite were launched in Japan more than 3 years ago at one specific retailer, ITOYA. In 2018, elements of the 12 Technology Suite were installed in a second new ITOYA store. ITOYA has indicated interest in expanding its use of elements of the 12 Technology Suite to the remainder of its stores (more than 25) and while talks are ongoing, no decisions have been made. Management has decided to minimize its costs by downsizing 12 Japan, closing the office and hiring the one former employee as a contractor of its 12 Hong Kong subsidiary.

The Company recognized other income primarily from 12 Europe declaring bankruptcy on August 26, 2019 whereby all debts of the company were eliminated with the exception of $35,757 in accounts payable resulting in a gain of $445,244.

In addition, as discussed in Note 4, the Company effectively foreclosed on its liens against the assets of Emotion Apparel, Inc. taking possession of assets including the brands; Lexi-Luu, Emotion Fashion Group, Punkz Gear and retuned the equity of Emotion Apparel, Inc. and its subsidiaries to the Seller. As a result of the debts related to Emotion Apparel, Inc, which reverted to the Seller including all accounts payable, accrued expenses and notes payable resulting in a gain of $511,486 to the Company. Lastly, after careful review by management, certain accounts payable were determined not to be valid expenses. These payables totaling approximately $68,000 were offset as a gain to other income.

Interest Expense

There was also an increase in interest expense of $7,700,011 compared to $8,995,066 for the period ended December 31, 2019 compared to $1,295,055 the period December 31, 2018. Increase in interest expenses is related to increase in convertible notes’ convertible preferred stock during the same period. As well as a significant increase in interest expense associated with the additional derivative liability and for the general default reserve.

Change in Derivative Liability

There was a gain as a result of the change of derivative liability of $3,524,861 for the period ended December 31, 2019 compared to a loss $3,595,055 as of December 31, 2018. The reason for the change was because of a change in the calculation method from Black-Scholes model to the more accurate Lattice model, which is the preferred valuation method.

General Reserve Expense

The company recognized a general default reserve expense of for the year ended December 31, 2019 of $2,139,961 compared to zero as of December 31, 2018. On July 25, 2019 the Company was served with a lawsuit from Auctus Fund, LLC (“Auctus”). For additional details, see MD&A including the settlement of $120,375 which is still pending. However, management calculated a default reserve which represents the additional amount management would have to payout to all note holders in the event of the default. Management quantified what this amount would be which includes additional premiums, additional accrued interest and default accrued interest. The total reserve quantified by management amounted to $2,139,961.

Impairment of Goodwill

The Company recognized an impairment of goodwill associated with acquisition of Bluwire, Rune, RWG and Social Sunday of $1,971,677 for the year ended December 31, 2019 compared to zero for the year ended December 31, 2018. The Company tested goodwill for impairment as of December 31, 2019 and determined that the goodwill was impaired based on the various factors. There were a number of factors which included representations made by management which were 50% less than realized. Please see further detail in Goodwill in the Notes of this filing.

Net Income

During the year ended December 31, 2019, we incurred a net loss of $12,150,698 compared to a net loss of $8,767,383 for the year ended December 31, 2018. This increased loss is primarily the result of the increase in interest expense, general default reserve expense offset by the change in derivative liability and gain in other income.

The Company is expending working capital to further their business plan. This includes the further development, refinement and improvement of their software and its adaptation to various 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.

Significant Acquisitions in 2019

In the first quarter of 2019 the Company made two significant acquisitions as detailed above with the acquisition of Red Wire Group on February 19, 2019 and Rune NYC, LLC on March 14, 2019. the Company gained two revenue-producing operations. As also detailed above on October 1, 2019 the Company acquired Bluwire Group, LLC and effective November 1, 2019, the Company acquired Social Decay, LLC dba Social Sunday. With the combination of these acquisitions, management believes that the Company will benefit, and it will significantly expand the sales channels for all of its brands. As of December 31, 2019, the Company performed its annual impairment test on all reporting units and determined that each unit had indicating factors of impairment due to failure to meet respective sales projections. For further details, see Note 3.

Management believes that these acquisitions are “game changers” for the Company for two more reasons; 1) the wholesale customers acquired sell to are and will become targets for the Company to sell its disruptive retail technology solution to other retailers and 2) is already attracting interest among other companies that would like to join the 12 ReTech team either through acquisition or through strategic partnership.

While management believes the results of operations for 2019 for the acquired companies are not indicative of the future results for all of the reasons herein above combined with impact of COVID -19, management believes it is important to show how materially the prior year’s revenues would have been for the Company had they been acquired at the beginning of 2019 without the material improvements we have made since acquiring them.

Company Initiatives to Enhance Shareholder Value

The Company continues to take steps to enhance shareholder value.

Consolidation of Operations

In order to achieve cost synergies, the Company continues to take steps to reduce and eliminate redundant and unnecessary costs in its operations. Management recently created the 12 Fashion Group division of 12 Retail to house and operate its fashion brand operations. The operations of Rune NYC, Red Wire Group and Social Sunday were combined, and steps were taken to reduce expenses while still working to expand the business.

Management’s recent decision in the 1^st quarter of 2020 to outsource Red Wire Group’s manufacturing operations to qualified third parties has increased the potential for profitability of the 12 Fashion Group’s DIFY (“Do it For You”) apparel design and apparel manufacturing Today, we no longer operate our own factory but still service existing customers and recruit new customers. As a result, we have cut expenses dramatically and no longer have a manufacturing factory’s expenses such as payroll and rent. We have increased the customer base and conduct our business providing design and project management services to our client base. We have also decided to put the Red Wire Group into bankruptcy protection which will eventually allow us to eliminate the debts of the former operation. This may result in future gains in net income as well as allowing the successor business to operate with a cost structure that doesn’t need to scale up with operational expansion and potentially earn a profit.

During the transition, Red Wire Design had a number of customer projects where they had taken deposits (typically 50% of total project revenues) and could not finish the project in its own factory. 12 Fashion Group found manufacturing partners who were willing to finish each and every unfinished project. The completed projects were invoiced for the remainder of the balances due and the resultant payments were used to pay the manufacturing partners for their services. As a result, customer relationships were salvaged, and we can expect that 12 Fashion Group will continue to receive business from these former customers of Red Wire Design.

This salvage operation allowed the Company to recognize revenues and expenses as it would have done if Red Wire Group had completed their projects on their own. However, there was a negative cash flow effect as all the resultant collected accounts receivables generated by these projects went out to pay the manufacturing partners. Management expects this to negatively affect gross margins for the Company in the upcoming financial reports of the 1^st quarter of 2020. Going forward in the second half of 2020, Management expects gross margins to return to levels of between 30% and 40% for the 12 Fashion Group business.

Social Sunday’s operations are also being restructured. Management has taken steps to reduce cash outflows while it makes a decision regarding the future of the Social Sunday operation. In the meantime, this business has been stood still and it may be that we will use the bankruptcy laws to eliminate the debts.

Rune’s business has also been consolidated into the 12 Fashion Group Division with Rune’s President; Emily Santamore installed as President for the 12 Fashion Group’s operation. Rune’s business continues to service existing clients and recruit new clients. It is Management’s strategy that the improved cost structures of the 12 Fashion Group will allow the business to grow and generate profits over the next 12 months and beyond.

Beginning in early March 2020, the apparel business of 12 Fashion Group was affected by the business shutdowns of geographies in the USA related to the COVID-19 pandemic. Manufacturing partners had to shut down their operations unless they were producing products such as face masks or hospital gowns that were deemed essential to the fight against this infectious disease. As such, 12 Fashion Group and select manufacturing partners got into the face mask business. So far, this business has produced quantities of product and revenues that are approximately a third of what management would consider normal business activity levels. Management does not expect business activities of the fashion industry to return to normal levels until the following year.

In another consolidation of operations and expenses, Management has consolidated the operations of 12 Japan into 12 Hong Kong. In so doing, we are eliminating the overhead expenses of one of the Asian operations while retaining the ability to service our existing customer base.

Bluwire Group which provided the bulk of the revenue growth of the 4^th quarter of 2019 has also been impacted by the COVID-19 pandemic. On or about March 16, 2020 every one of the Bluwire stores was shut down by local government mandate. Stores were shuttered and our staff was laid off. We are staying in close communication with our landlords and the various airport authorities where we have stores located. At this point, Management still does not have a timeline for the reopening of these business operations. This shutdown has negatively impacted the Company’s revenues and cash flow. We have applied for and received CARES Act Payment Protection Program funding for each of the stores. These funds will help Bluwire get back on its feet when the airport and casino stores are allowed to reopen. Management predicts that it will likely be the following year before airport traffic levels get back to normal if not longer. We are currently expecting to report large negative impacts to the Bluwire business in terms of revenues for the balance of this year.

Select unaudited Pro-forma 2019 Financial Information.

The following table will show the unaudited combined revenues, costs of goods sold, and resultant gross margins of the Company together with the four acquisitions as if these acquisitions had been acquired at the beginning of FY2019 and 2018, without any material improvements from consolidation. Please note the acquisition of RWG and Rune are included in 12 ReTech numbers and figures for Bluwire and Social Sunday post acquisitions are included in 12 ReTech column.

Unaudited FY2019 Proforma P&L

Unaudited FY2018 Proforma P&L

The four acquisitions would have resulted in significantly larger revenues than the standalone 12 ReTech had generated in FY2019. The gross margins of the Bluwire operations are larger than the Company’s own gross margins. Management believes that with the improvements that the combined operation is exhibiting since acquisition that the results for 2020 will be considerably improved from the FY2019 standalone 12 ReTech financial results not-withstanding the impact of COVID -19. Please note the net loss in pro forma net loss is primarily due to non-cash expenses related to reserve expenses, interest expense and offset by change derivative liability expense noted above.

Liquidity and Capital Resources

The Company has met its current capital requirements primarily 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, 2019, the Company had a deficit in working capital (current liabilities in excess of current assets) of $11,786,147. A portion of this working capital deficit has been financed loans from stockholders. As of December 31, 2019, amounts owed to stockholders totaled $384,091. At December 31, 2018, the Company had a deficit in working capital (current liabilities in excess of current assets) of $6,324,849. A portion of this working capital deficit has been financed loans from stockholders. As of December 31, 2018, amounts owed to stockholders totaled $766,397. The increase in working capital deficit when compared to December 31, 2018 was principally due to an increase in notes payable (“debt-equity”) due to unrelated parties, amounts owed to stockholders, issuance of preferred stock and to a lesser extent, increase in accounts payable.

The Company has financed our cash flow requirements through the issuance of debt-equity and preferred stock. As the Company expands, we may 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 balances.

Management believes that our acquisition strategy will successfully 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 filed a Certificate of Designation on January 9, 2019 to create 1,000,000 Series D-5 Convertible Preferred Stock with par value $0.00001 and stated value of $4.00 per share. Also on January 9, 2019, the Company filed a Certificate of Designation to create One Million (1,000,000) Series D-6 Convertible Preferred Stock with par value $0.00001 and stated value of $5.00 per share.

The Company filed an amendment on January 11, 2019 to Series C Preferred shares where each issued and outstanding shares of Series C Preferred Stock shall be entitled to 8,000,000,000 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.

The Company also filed with the State of Nevada an Amendment to its Articles of Incorporation on March 8, 2018, that increased it authorized common shares from One billion to eight billion common shares authorized. On March 14, 2019, the Company entered into a PIPE Equity Purchase Agreement whereby an institutional investor agreed to purchase up to $500,000 worth of the Company’s D-2 Preferred Shares with a $2.00 face value at to be determined discount to face value. Concurrent with the execution of this Agreement, the Company sold 103,500 preferred D-2 Preferred Shares and received net proceeds after expenses of $100,000 (Tranche #1). The D-2 Preferred Shares are convertible to common shares after a 6 month or more holding period at market price. (See Form 8-K filed on March 20, 2019).

Concurrent with the execution of the PIPE Funding Agreement the Company executed an Exchange Agreement with the same institution investor whereby that investor exchange all of its Series D-1 preferred shares for newly issued Series D-2 Preferred Shares. (See Form 8-K filed on March 20, 2019).

In connection with the with PIPE Funding Agreement and the Exchange Agreement listed above the Company filed with the State of Nevada a new Certificate of Designation which took 2.5 million of the blank check preferred shares the Company has and designated them as Series D-2 Preferred Shares. (See Form 8-K filed on March 20, 2019).

On September 25. 2019, the Company’s Rune subsidiary entered into two separate future receivables purchase agreements with Vox Funding and received gross proceeds for $49,000 which were used in part to retire a previous and smaller obligation to Vox Funding. The Agreements provided for payment over 6 months and carries a fee of $1,470. This obligation is not convertible under any terms into Company Stock.

On September 26, 2019, the Company sold 9,009 Series D-2 Convertible Shares to Oasis Capital and received $10,000.

In connection with the acquisition of Bluwire Group, LLC, on October 3, 2019 one of the Sellers of Bluwire provided $300,000 to its Bluwire subsidiary under a secured demand promissory note executed jointly by Bluwire and the Company. This note caries interest of 15%. This obligation is not convertible into Company stock under any terms. On October 3, 2019, one of the Bluwire Sellers made a capital contribution to Bluwire on that has not been adequately documented. In an effort to be conservative, we have added a 15% interest rate although final terms have not been agreed between the parties for payment and cost. In Addition, on October 15, 2019 the Company’s Bluwire subsidiary entered into a future receivable purchase agreement with Libertas Funding and received $343,000. This agreement provides for payment over 8 months and caries a fee of $7,000. This obligation is not convertible under any terms into Company stock. Lastly, on November 5. 2019, the Company’s Rune subsidiary entered into a future receivables purchase agreement with Vox funding and received gross proceeds for $145,500 which were used in part to retire a previous and smaller obligation to Vox Funding. The Agreement provided for payment over 6 months and caries a fee of $4,500. This obligation is not convertible under any terms into Company Stock.

As a subsequent event, on March 18, 2020 the Company entered into a back end promissory note agreement with Adar Alef, LLC (“Adar”) for loans totaling $33,600. The consideration to the Company was $30,000 with $3,600 of legal fees. As a subsequent event, on March 25, 2020 the Company entered into a back end promissory note agreement with LG Capital, LLC (“LG”) for loans totaling $33,600. The consideration to the Company was $30,000 with $3,600 of legal fees. The note is convertible after 181 days at a (i) $0.0075 ceiling or (ii) 60% of the lowest trading price over the past twenty trading days prior to the conversion date.

On March 5, 2020, the Company’s Bluwire subsidiary entered into a second future receivable purchase agreement with Reliant Funding and received $83,000. This agreement provides for payment over 6 months and caries a fee of $3,000. This obligation is not convertible under any terms into Company stock.

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, 2019, the Cash and Cash Equivalents balance was $118,860 compared to December 31, 2018, the Cash and Cash Equivalents balance was $37,721.

During the year ended December 31, 2019, the current liabilities increased by $5,860,651 when compared to December 31, 2018. The primary reason for the increase was the increase in due to derivative liabilities of $2,662,972 and default reserve of $1,769,791 as of December 31, 2019 compared to zero as of December 31, 2018 and increase in accounts payable and accrued expenses of $932,789 as of December 31, 2019 compared to December 31, 2018, and to a lesser extent, increase in convertible notes payable of $683,247 for the same period.

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.

Although, our business plan calls for high growth we anticipate that we may continue to incur operating losses during the next twelve months. 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, consolidated, and we reap the benefits of consolidation, we cannot accurately include their results in our projection of cash needs.

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.

Impact of COVID-19 (subsequent event)

Like most other business in the United States, our businesses have been severely impacted by the COVID-19 Pandemic. While the first quarter of any calendar year is historically the slowest quarter of the year for revenues for our main operating subsidiaries the first quarter of 2020 was severely impacted by US Government’s business shut downs and stay at home orders related to COVID-19.We derive most of our revenue from our 12 Retail Corporation which is itself composed of two Operating units: 12 Fashion Group and Bluwire Group, LLC.

In response to the President’s “stay at home orders” on March 16, 2020 we promptly laid off almost all of our 12 Fashion Group employees and contractors. 12 Fashion Group retained three employee/contractors and focused on producing and selling of washable reusable masks, both wholesale and direct to consumer online.

Our Bluwire retail stores in Newark airport, Dallas airport and JFK international airport were temporarily closed on or about March 17, 2020. Our Casino location was temporarily closed on or about March 17, 2020 when the Mohegan Sun Casino itself was closed. We laid off all of our Bluwire employee/contractors except two members of the headquarters staff who continued to source innovative products for our stores when they re-open, some of which will be uniquely desired by consumers due to changing buying habits due to COVID-19.

The financial effects of these closures are reflected in the Management Discussion and Analysis.

The Cares Act and the Payroll Protection Program SBA Loans (PPP Loans).

The Company has applied for PPP Loans for all of its U.S. operating Companies and is in the process of analysing if it would qualify for similar governmental assistance for its reduced operating unit in Japan (12 Japan Ltd). The Company has qualified for an aggregate of $294,806.78 of PPP Loans for its operating companies. These funds are being used to re-hire previously laid off personnel where appropriate and hire new personal that management believes better fits the post COVID-19 shut down environment. The Company is hiring personnel that will help the operating units generate revenues in a more contactless environment and to create changes to our cutting edge retail software to help pier stores and well as other retailers attract consumers in this new environment. The Cares Act provides very favorable terms for the repayment or forgiveness of the monies lent to qualifying businesses like ours. While the final rules are not yet formalized the initial guidelines allows for complete forgiveness for monies spent on approved expenses such as payroll and labor with non- approved expenses to be paid back over 2 years at 1% annual interest with no payments for the first 6 months after receipt. No collateral was pledged for these loans and management did not have to sign any personal guarantees. Management will make every effort to utilize these PPP loan funds in a manner that may allow for complete forgiveness of the loan(s) while providing the best opportunity for the continuity and growth of the business.

During the COVID-19 shutdown period management sourced new products and vendors for its businesses and is now optimistic that it will shortly obtain additional funding of debt or preferred equity to grow our business.

Reliance on the SEC’s March 25, 2019 order regarding extension of filing deadlines due to COVID-19

As a direct result of the COVID-19 shutdowns and travel restrictions the SEC provided for any public company impacted by COVID-19 to extend its filing of its 10-K or 10-Q or other required filings for 45 additional days and would still be eligible for the further normal extensions of 15 and 5 days respectively. As noted herein we have been extremely impacted on an operational level, delayed in obtaining information from our foreign subsidiaries in Hong Kong and Japan as well as being delayed in our ability to obtain capital for the professional fees to complete our filings and further compromised by the fact that our CEO and CFO are both restricted from travel to the United States at this time as they are in Hong Kong and Japan respectively. Therefore, we filed for a 45 day and 15 day NT10–KA Filing extensions in reliance on the March 25, 2019 order and have further been in communication with the SEC for additional consideration for timely filing under these extraordinary circumstances.

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 yet 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 year ended December 31, 2019. Our total accumulated deficit at December 31, 2019 was $22,756,345 compared to $11,180,903 as of December 31, 2018.

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 and Estimates

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 during the year ended December 31, 2019. See Note 3 to the consolidated statements in this Annual Report 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 consolidated statements in this Annual Report for a complete discussion of our significant accounting policies and estimates.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

12 RETECH CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019 AND 2018

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

12 ReTech Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of 12 ReTech Corporation and subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for the year 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, 2019 and 2018, 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.

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.

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 audit. 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 audit 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.

We have served as the Company’s auditors since 2019.

San Diego, California

June 18, 2020

12 RETECH CORPORATION

Consolidated Balance Sheets

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

12 RETECH CORPORATION

Consolidated Statements of Operations

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

12 RETECH CORPORATION

Consolidated Statements of Stockholders Deficit

Years ended December 31, 2019 and 2018