12 Retech Corp - Quarter Report: 2019 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 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)

Nevada

38-3954047

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

10785 W. Twain Ave,

Suite 210

Las Vegas, Nevada

89135

(Address of principal executive offices)

(Zip Code)

530-539-4329

Registrant’s telephone number

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 fling requirements for the past 90 days.

Yes [X] No [ ]

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

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

Large accelerated filer [ ]		Accelerated filer [ ]

Non-accelerated filer [X]		Smaller reporting company [X]

		Emerging Growth Company [ ]

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]

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares		RETC		OTC: PINK

The number of shares of common stock ($0.00001 par value) outstanding as of October 31, 2019 was 25,410,392.

12 RETECH CORPORATION

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2019

Index to Report

		Page
PART I	FINANCIAL STATEMENTS (unaudited)	4

Item 1.	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders Deficit	6
	Condensed Consolidated Statements of Cash Flow	7
	Notes to Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II	OTHER INFORMATION	37

Item 1.	Legal Proceedings	37
Item 1A.	Risks Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	38

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:

	-	our current lack of working capital;

	-	inability to raise additional financing;

	-	that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;

	-	deterioration in general or regional economic conditions;

	-	adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;

	-	inability to efficiently manage our operations;

	-	inability to achieve future sales levels or other operating results; and

	-	the unavailability of funds for capital expenditures.

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. FINANCIAL STATEMENTS

12 ReTech Corporation

Condensed Consolidated Balance Sheets

(unaudited)

	September 30, 2019			December 31, 2018
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	40,258		$	37,721
Accounts receivable		26,972			15,609
Inventory		-			23,140
Prepaid expenses		7,600			4,884
Other current assets		-			19,344
Total Current Assets		74,830			100,698

Fixed assets, net		156,456			98,295
Goodwill		874,821			-
Software development		-			371,118
Security deposit		12,143			12,936
TOTAL ASSETS	$	1,118,250		$	583,047

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable and accrued liabilities	$	924,452		$	1,234,712
Due to stockholders		120,742			766,397
Notes payable, net of discounts		31,000			158,245
Convertible notes payable, net of discounts		1,006,013			624,845
Derivative liabilities		14,494,342			2,696,470
General default reserve		1,687,528			-
Series B Preferred Stock, 1,000,000 shares designated; $0.00001 par value, $1.00 stated value; 0 shares and 68,000 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively. Liquidation preference $0 as of September 30, 2019 and $68,000 as of December 31, 2018.		-			48,144
Series D-1 Preferred Stock, 500,000 shares designated; $0.00001 par value $2.00 stated value; 0 shares and 311,250 shares issued and outstanding at September 30, 2019 and December 31, 2018. Liquidation preference $0 as of September 30, 2019 and $622,500 as of December 31, 2018.		-			622,500
Series D-2 Preferred Stock, 2,500,000 shares designated; $0.00001 par value, $2.00 stated value; 941,408 shares and 0 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively. Liquidation preference $1,882,816 as of September 30, 2019		1,882,816			-
Series D-3 Preferred Stock, 500,000 shares designated; $0.00001 par value $5.00 stated value; 54,846 shares issued and outstanding at September 30, 2019 and December 31, 2018. Liquidation preference $274,234		274,234			274,234
Total Current Liabilities		20,421,127			6,425,547

Total Liabilities		20,421,127			6,425,547

Commitments and Contingencies

Stockholders’ Deficit:
Preferred stock: 50,000,000 authorized; $0.00001 par value:
Series A Preferred Stock, 10,000,000 shares designated; $0.00001 par value; 8,529,316 shares and 6,500,000 issued and outstanding at September 30, 2019 and December 31, 2018, respectively		85			65
Series C Preferred Stock, 2 share designated; $0.00001 par value; 1 shares issued and outstanding at September 30, 2019 and December 31, 2018		1			1
Series D-5 Preferred Stock, 1,000,000 shares designated; $0.00001 par value, $4.00 stated value; 120,088 shares and 0 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		480,352			-
Series D-6 Preferred Stock, 1,000,000 shares designated; $0.00001 par value $5.00 stated value; 55,600 shares and 0 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		278,000			-
Common stock: 80,000,000 authorized, $0.00001 par value; 25,410,374 and 6,542,519 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		254			65
Additional paid-in capital		6,581,434			5,336,977
Minority interest		20,301			-
Accumulated other comprehensive income (loss)		(2,320	)		1,295
Accumulated deficit		(26,660,984	)		(11,180,903	)
Total Stockholders’ Deficit		(19,302,877	)		(5,842,500	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	1,118,250		$	583,047

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

12 ReTech Corporation

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018

Revenues	$	165,798		$	48,102		$	625,058		$	73,726
Cost of revenues		113,015			26,795			426,393			26,831
Gross Profit		52,783			21,307			198,665			46,895

Operating Expenses
General and administrative		300,673			506,327			1,068,216			1,740,398
Professional fees		311,113			429,409			840,611			934,459
Depreciation		4,973			2,552			16,095			5,085
Total Operating Expenses		616,759			938,288			1,924,922			2,679,942

Loss from operations		(563,976	)		(916,981	)		(1,726,257	)		(2,633,047	)

Other Expense
Other income		1,027,306			(7	)		1,034,956			(7	)
Reserve Expense		(142,354	)		-			(1,687,528	)		-
Loss on debt extension		-			-			-			(75,000	)
Interest expense		(2,196,459	)		(147,719	)		(8,296,103	)		(986,312	)
Loss on exchange of equity instruments		-			-			(132,812	)		-
Loss on impairment of software development cost		-			-			(513,601	)		-
Loss on derivative liability		(3,200,690	)		(704,116	)		(4,169,269	)		(1,637,527	)
Net Other Expense		(4,512,197	)		(851,842	)		(13,764,357	)		(2,698,846	)

Net Loss	$	(5,076,173	)	$	(1,768,823	)	$	(15,490,614	)	$	(5,331,893	)

Other comprehensive income (loss) - foreign currency translation adjustment	$	7,804		$	131		$	(3,615	)	$	5,256

Comprehensive Loss	$	(5,068,369	)	$	(1,768,692	)	$	(15,494,229	)	$	(5,326,637	)

Minority Interest	$	(5,939	)	$	-		$	(10,533	)	$	-

Net Loss to 12 ReTech Corporation	$	(5,062,430	)	$	(1,768,692	)	$	(15,483,696	)	$	(5,326,637	)

Net Loss Per Common Share: Basic and Diluted	$	(0.21	)	$	(1.74	)	$	(0.98	)	$	(5.95	)

Weighted Average Number of Common Shares Outstanding: Basic and Diluted		24,128,911			1,015,155			15,860,943			896,603

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

12 ReTech Corporation

Condensed Consolidated Statement of Stockholder’s Deficit

Three and Nine months ended September 30, 2019 and 2018

(unaudited)

	Series A Preferred Stock				Series C Preferred Stock				Series D-5 Preferred Stock				Series D-6 Preferred Stock				Common Stock						Additional						Common						Other						Total
	Number of Shares		Amount		Number of Shares		Amount		Number of Shares		Amount		Number of Shares		Amount		Number of Shares			Amount			Paid-in Capital			Subscription receivable			Stock to be issued			Minority Interest			Comprehensive Income			Accumulated Deficit			Stockholders’ Deficit

Balance - June 30. 2018		5,000,000		50		-		-		-		-		-		-		938,457			9			3,911,976			(320,000	)		-			-			6,638			(6,607,906	)		(3,009,233	)

Common Stock issued for cash																								67,999			252,500															320,499
Common Stock issued for services																		106,667			1			(751,342	)																	(751,342	)
Common stock issued for conversion of notes payable and accrued interest																		227,171			2			168,110																		168,117
Common stock issued for Preferred Shares conversion																		236,504			2			(8,784	)																	(8,784	)
Common Stock issued to Noteholder																		36,443			-			65,765																		65,765
Preferred shares issues for services		1,500,000		15		1		1																																		16
Foreign currency translation adjustments																																				(6,638	)					(6,638	)
Net Loss																								16,250															(1,182,303	)		(1,166,053	)

Balance - September 30, 2018		6,500,000		65		1		1		-		-		-		-		1,545,242			1,545			3,469,975			(67,500	)		-			-			-			(7,790,209	)		(4,387,653	)

Balance - December 31, 2018		6,500,000	$	65		1	$	1		-	$	-		-	$	-		6,542,520		$	65		$	5,336,977			-		$	-		$	-		$	1,295		$	(11,180,903	)	$	(5,842,500	)

Balance - December 31, 2017		5,000,000	$	50	$	-	$	-		-		-		-		-		822,000		$	8		$	1,268,780			-		$	92,646		$			$	1,514		$	(2,413,739	)	$	(1,050,791	)

Series B Preferred stock issued for cash																								260,000																		260,000
Common stock issued as part of funds raised																		7,683			-			117,646						(92,646	)											25,000
Common Stock issued for cash																		62,500			1			599,249			(67,500	)														531,752
Common stock issued for services																		136,001			1			(302,482	)					-												(302,481	)
Common stock issued for conversion of notes payable and accrued interest																		234,111			2			346,982																		346,985
Common stock issued for acquisition of E-motion																		10,000			-			80,000																		80,000
Common stock issued for Preferred Shares conversion																		236,504			2			(8,558	)																	(8,555	)
Common Stock issued to Noteholder																		36,443			1			65,801																		65,801
Preferred shares issued for Cash																								16																		16
Beneficial conversion feature																								774,282																		774,282
Deemed Dividend																								252,078																		252,075
Foreign currency translation adjustments																																				(1,514	)					(1,514	)
Net Loss																								16,247															(5,376,470	)		(5,360,223	)

Balance - September 30, 2018		6,500,000		65		1		1		-		-		-		-		1,545,242			15			3,469,975			(67,500	)		-			-			-			(7,790,209	)		(4,387,653	)

Balance - December 31, 2018		6,500,000	$	65		1	$	1		-	$	-		-	$	-		6,542,520		$	65		$	5,336,977			-		$	-		$	-		$	1,295		$	(11,180,903	)	$	(5,842,500	)

Balance - June 30, 2019		6,500,000		65		1		1		120,088		480,352		55,600		278,000		20,285,708			203			5,249,407						-			26,240			(10,124	)		(21,590,749	)		(15,546,521	)

Common stock issued for conversion of notes payable and accrued interest		-		-		-		-		-		-		-		-		2,124,667			21			10,623			-			-			-			-			-			10,645
Common stock issued for Preferred Shares conversion		-		-		-		-		-		-		-		-		3,000,000			30			27,000			-			-			-			-			-			27,030
Preferred stock issued with acquisition		-		-		-		-		-		-		-		-		-			-			-			-			-			-			-			-			-
Preferred stock issued for services		114,165		1		-		-		-		-		-		-		-			-			62,999			-			-			-			-			-			62,999
Series D-2 shares exchanged for common stock		-		-		-		-		-		-		-		-		-			-			-			-			-			-			-						-
Exchange Series A preferred stock for related party and third party liabilities		1,915,151		19		-		-		-		-		-		-		-			-			1,179,663			-			-			-			-			-			1,179,663
Relief of derivative through conversion and issuance of preferred stock derivatives		-		-		-		-		-		-		-		-		-			-			51,676			-			-			-			-			-			51,676
Net loss		-		-		-		-		-		-		-		-		-			-			-			-			-			(5,938	)		7,804			(5,070,236	)		(5,068,370	)

Balance - September 30, 2019		8,529,316		85		1		1		120,088		480,352		55,600		278,000		25,410,374			254			6,581,368			-			-			20,302			(2,320	)		(26,660,984	)		(19,302,877	)

Balance - December 31, 2018		6,500,000	$	65		1	$	1			$				$			6,542,520		$	65		$	5,336,977		$	-		$	-		$	-		$	1,295		$	(11,180,903	)	$	(5,842,500	)

Common stock issued for conversion of notes payable and accrued interest		-		-		-		-		-		-		-		-		10,904,612			109			303,375			-			-			-			-			-			303,484
Common stock issued for Preferred Shares conversion		-		-		-		-		-		-		-		-		8,025,742			80			255,733			-			-			-			-			-			255,814
Preferred stock issued with acquisition		-		-		-		-		120,088		480,352		55,600		278,000		-			-			-			-			-			30,834			-			-			789,272
Preferred stock issued for services		114,165		1		-		-		-		-		-		-		-			-			62,999			-			-			-			-			-			62,999
Series D-2 shares exchanged for common stock		-		-		-		-		-		-		-		-		(62,500	)		(1	)		(523,375	)		-			-			-			-			-			(523,376	)
Exchange Series A preferred stock for related party and third party liabilities		1,915,151		19		-		-		-		-		-		-		-			-			1,179,663			-			-			-			-			-			1,179,663
Relief of derivative through conversion and issuance of preferred stock derivatives		-		-		-		-		-		-		-		-		-			-			(34,004	)		-			-			-			-			-			(34,004	)
Net loss		-		-		-		-		-		-		-		-		-			-			-			-			-			(10,532	)		(3,615	)		(15,480,081	)		(15,494,229	)

Balance - September 30, 2019		8,529,316		85		1		1		120,088		480,352		55,600		278,000		25,410,374			254			6,581,368			-			-			20,302			(2,320	)		(26,660,984	)		(19,302,877	)

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

12 ReTech Corporation

Condensed Consolidated Statements of Cash Flow

(unaudited)

	Nine Months Ended
	September 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(15,490,614	)	$	(5,331,893	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		16,095			5,085
Bad debt		-			-
Stock based compensation		63,000			1,231,549
Amortization of debt discount		674,210			972,641
Change in fair value of derivative liabilities		-			1,637,527
Loss on debt extinguishment		-			75,000
Accretion of interest for note payable		-			1,854
Increase in notes payable and Series D-2 for defaults		1,687,528			-
Impairment of software development costs		513,601			-
Loss on derivative liability and additional interest expense recorded on issuance		11,199,339			-
Loss on exchange and issuance of preferred stock and additional interest expense		674,644			-
Excess fair market value of common shares over liabilities settled		196,713			-
Relief of notes payable and other liabilities through rescindment of Emotion acquisition		(163,805	)		-
Changes in operating assets and liabilities:
Accounts receivable		(11,363	)		(26,396	)
Prepaid Expenses		(2,716	)		(13,865	)
Inventory		23,140			18,874
Other current assets		108,600			(2,257	)
Security deposit		793			3,143
Accounts payable and accrued liabilities		115,724			443,981
Net Cash Used in Operating Activities		(395,111	)		(984,757	)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of equipment		(16,146	)		(2,412	)
Cash received from acquisition		12,924			779
Cash paid on acquisition		(79,937	)
Software development costs		(142,483	)		(177,270	)
Other assets		5,519
Net Cash Used in Investing Activities		(220,123	)		(178,903	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stockholders		52,646			62,326
Repayment to stockholders		-			(36,931	)
Proceeds from convertible notes payable		527,740			482,500
Costs on issuance of convertible notes payable		-			(26,469	)
Issuance of common stock for cash		-			211,250
Proceeds from sale of Series D-3 Preferred Stock		-			100,000
Proceeds from sale of Series B Preferred Stock		-			329,000
Costs of issuance of Series B preferred Stock		-			(9,000	)
Proceeds from sale of preferred and common stock		10,000			0
Proceeds from notes payable		31,000			0
Net Cash Provided by Financing Activities		621,386			1,112,676

Effect of Exchange Rate Changes on Cash and Cash Equivalents		(3,615	)		1,231

Net decrease in cash and cash equivalents		2,537			(49,751	)
Cash and cash equivalents, beginning of period		37,721			100,264
Cash and cash equivalents, end of period	$	40,258			50,513

Supplemental cash flow information
Cash paid for interest	$	-		$	-
Cash paid for taxes	$	-		$	-

Non-cash transactions:
Common stock to be issued in current period				$	12,500
Discounts on convertible notes payable	$	452,528		$	-
Conversions of convertible notes payable, accrued interest and derivatives	$	1,020,790		$	-
Reduction of APIC related to derivative recorded on Preferred Stock in equity	$	850,695		$	-
Preferred stock issued for acquisitions	$	758,352		$	-
Original issue discount on convertible notes payable	$	509,157		$	-
Exchange of common stock and preferred stock for different series	$	1,145,938		$	-
Issuance of Series D-2 for accounts payable	$	200,000		$	-
Issuance of Series A for liabilities	$	431,338		$	-
Common stock issued in conjunction with convertible notes	$	-		$	86,600
Conversion of Series B and D-2 preferred stock into common stock	$	-		$	46,234
Beneficial conversion feature for Series B preferred stock	$	-		$	173,923
Beneficial conversion feature for convertible notes payable	$	-		$	349,576
Related party liability relived with Series D-3 preferred stock	$	-		$	154,234
Common stock issued for acquisition for E-motion	$	-		$	80,000

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

12 RETECH CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2019

(Unaudited)

Note 1 – Nature of the Business

12 ReTech Corporation (“the Company”) is a holding company with subsidiaries that develop, sell and deploy software that the Company believes 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 sell products online.

As a subsequent event on October 1, 2019, the Company acquired twelve (12) retail stores operating in airport terminals and casinos transforming the Company into a true Omni-Channel retailer. The new operations will allow us to deploy our cutting-edge software in the United States to demonstrate its effectiveness as well as to test, in real time, new software products that will continue to delight consumers and generate additional revenue and profit opportunities for retailers.

Principal subsidiaries

The details of the principal subsidiaries of the Company are set out as follows:

Name of Company

Place of Incorporation

Date of Incorporation

Acquisition Date

Attributable Equity

Interest %

Business

12 Hong Kong Limited (“12HK”)

Hong Kong, China

February 2, 2014

June 27, 2017

100

Development and sales of technology applications

12 Retail Corporation (“12 Retail”)

Arizona, USA

Sept. 18, 2017

Formed by 12 ReTech Corporation

100

As a holding Company to execute the Company’s roll up acquisition strategy as well as to penetrate the North American market with our technology to select retailers.

Red Wire Group, LLC

Utah, USA

July 2, 2015

February 19, 2019

100

A subsidiary of 12 Retail and is part of the brand acquisition strategy. Operates its own “cut & sew” factory for independent third party brands who contract us to produce their apparel products.

Rune NYC, LLC

New York, USA

Jan 23, 2013.

March 14, 2019

92.5

A subsidiary of 12 Retail and is part of the brand acquisition. Operates contemporary women’s ‘Athleisure’ brand which is primarily sold to retailers.

12 Japan Limited (“12JP”)

Tokyo, Japan

February 12, 2015

July 31, 2017

100

Consultation and sales of technology applications

12 Europe AG (“12EU”)

Zurich, Switzerland

August 22, 2013

October 26, 2017

100

Inactive as of August 20, 2019

Bluwire Group, LLC (“Bluwire”)

Florida, USA

October 1, 2019

As a subsequent event, this 12 location retailer was acquired.

Note 2 – Going Concern

The Company accounts for going concern matters under the guidance of ASU 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a” Going Concern” (“ASU 2014-15”). The guidance in ASU 2014-15 sets forth management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements for interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management’s plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt.

These interim financial statements have been prepared on a going concern basis which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As of September 30, 2019, the Company had a total accumulated deficit totaling $26,660,984 since inception, has not yet generated significant revenue from its operations, and will require additional funds to maintain its normal operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. These interim financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 3 – Acquisitions

The Company accounts for all business combinations in accordance with Financial Accounting Standards Board (“FASB”) ASC 805, “Business Combinations” (“ASC 805”), using the acquisition method of accounting. Under this method, assets and liabilities, including any remaining non-controlling interests, are recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and is recognized as goodwill. Certain adjustments to the assessed fair values of the assets, liabilities, may be made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period would be recorded as income. Results of operations of the acquired entity are included in the Company’s results from operations from the date of the acquisition onward and include amortization expense arising from acquired assets. The Company expenses all costs as incurred related to an acquisition in the condensed consolidated statements of operations.

Red Wire Group, LLC.

On February 19, 2019, the Company completed the acquisition of Red Wire Group, LLC. (“RWG”) a Utah limited liability company, pursuant to a share exchange agreement whereby the Company exchanged the Company’s Series D-5 and Series D-6 for 100% of the outstanding equity of RWG. Pursuant to the terms of the exchange agreement, the Company acquired (i) 75% of the membership interests of RWG in exchange for 54,000 shares of the Company’s Series D-6 Preferred Stock (stated value of $5.00 per share), and (ii) the remaining 25% of the membership interests of RWG in exchange for 37,500 shares of the Company’s Series D-5 Preferred Stock (stated value of $4.00 per share).

The powers, preferences and rights, and the qualifications, limitations and restrictions of the Series D-5 and Series D-6 Preferred Stock are set forth in the Company’s Current Report on Form 8-K and exhibits attached thereto previously filed with the Securities and Exchange Commission on January 11, 2019.

RWG continued its operations uninterrupted following the closing and retained key employees. The exchange agreement included customary representations, warranties and covenants of the parties. The closing of the Exchange Agreement is subject to certain closing conditions, including that the Members have not materially misrepresented any of the representations contained in the Exchange Agreement and its exhibits.

The Company has consolidated the acquisition effective February 1, 2019 to simplify the accounting under ASC 805 purchase accounting as it pertains to the acquisition of the RWG.

The assets and net liabilities acquired (based on fair values) were as follows:

Cash	$	10
Other assets (except cash)		106,110
Goodwill		480,381
Liabilities		(136,501	)
Net consideration provided	$	450,000

The fair values of the net assets acquired were determined using the market approach, which indicates value for a subject asset based on available market pricing for comparable assets. The fair value of the fixed assets of $58,110 has been determined by a third-party valuation firm and is valued at its estimated sale price. The Company also capitalized assets of approximately $48,000. The fair value of the debt has been determined using an appropriately required payment amount.

The purchase price for the acquisition was allocated to the fair value of the assets acquired and liabilities assumed based on the estimates of the fair values at the acquisition date, with the amount exceeding the estimated fair values being recorded as goodwill.

The fixed assets are being depreciated over their estimated useful lives of 5 years. Goodwill recorded will not be amortized but tested for impairment at least annually, which will occur during the fourth quarter of the current year. The Company assumed the liabilities of the RWG of $136,501.

RWG results of operations have been included in the Company’s operating results for the period subsequent to the February 1, 2019. RWG contributed revenues of $529,201 for the nine months ended September 30, 2019. The Company is still evaluating the total assets and liabilities at the date of acquisition and further adjustments might be made to the purchase price.

RuneNYC, LLC.

On March 14, 2019, the Company completed the acquisition of RuneNYC, LLC (“Rune”), a New York limited liability company, pursuant to a share exchange agreement whereby the Company exchanged the Company’s Series D-5 shares for 92.5% of the total outstanding equity of Rune and the members of Rune (the “Members”). Pursuant to the terms of the exchange agreement, the Members of Rune (the “Members”) representing 92.5% of the membership interests have agreed to tender their interests to the Company, and the Company closed the tender offer period on March 14, 2019 at which time the exchange agreement became effective. Accordingly, pursuant to the terms of the exchange agreement, at closing the Company acquired 92.5% of the membership interests of Rune were exchange for 82,588 shares of the Company’s Series D-5 Preferred Stock with a stated value of $4.00 per share.

The powers, preferences and rights, and the qualifications, limitations and restrictions of the Series D-5 Preferred Stock are set forth in the Corporation’s Current Report on Form 8-K and exhibits attached thereto previously filed with the Securities and Exchange Commission on January 11, 2019.

Rune continued its operations uninterrupted during closing and retained certain key employees. The exchange agreement included customary representations, warranties and covenants of the parties. The closing of the exchange agreement was subject to certain closing conditions, including that the Members have not materially misrepresented any of the representations contained in the exchange agreement and its exhibits.

The Company has consolidated the acquisition effective February 1, 2019 to simplify the accounting under ASC 805 purchase accounting as it pertains to the acquisition of the Rune.

The assets and net liabilities acquired (based on fair values) were as follows:

Cash	$	12,914
Other assets (except cash)		41,586
Goodwill		394,440
Liabilities		(37,817	)
Net consideration provided	$	411,123

Rune’s results of operations have been included in the Company’s operating results for the period subsequent to it’s acquisition on February 1, 2019. Rune contributed revenues of $123,168 in 2019. The Company is still evaluating the total assets and liabilities at the date of acquisition and further adjustments might be made to the purchase price.

The below table sets forth selected unaudited and unreviewed pro forma financial information for the Company for 2018 compared to 12 ReTech as if RWG and Rune was owned for the nine months ended September 30, 2019 and 2018.

	Proforma
	Nine months ended
	September 30,
	2019			2018
Revenues	$	705,058		$	1,180,989
Cost of revenues		466,393			805,532
Gross profit		238,665			375,457

Operating expenses	$	1.924,922		$	491,487
Operating losses	$	(1,686,257	)	$	(116,030	)

Net Loss	$	(15,450,614	)	$	(2,698,846	)

Earnings Per Share	$	(0.97	)	$	(3.14	)

The unaudited pro forma information set forth above is for informational purposes only. The pro forma information should not be considered indicative of actual results that would have been achieved if the RWG and Rune acquisition had occurred on January 1, 2018. The unaudited supplemental pro forma financial information was calculated by combining the Company’s results with the stand-alone results of Rune. For the identified periods, which were adjusted for certain transactions and other costs that would have been occurred during this pre-acquisition period.

Emotion Apparel, Inc. & Emotion Fashion Group, Inc.

On May 1, 2018, the Company completed the acquisition of E-motion Apparel, Inc. (“EAI”) a California corporation, pursuant to a share exchange agreement whereby the Company exchanged 1.0 million of its common shares for 100% of the outstanding equity of EAI, in a third-party transaction. (This company shed this subsidiary as of September 30th, 2019 see below).

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 an 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 retuned 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 totaled $511,486 including $250,000 Note Payable, were offset to other income. For further details see Note 6 Accounts Payable and Accrued Expenses and 9 Notes Payable for further details.

12 Japan, LTD.

After the initial acquisition of 12 Hong Kong, LTD during 2017 and the first half of 2018 the Company made several acquisitions including; 12 Japan, LTD. Subsequent to this acquisitions the Company took steps to consolidate the assets and streamline operations that effectively by the end the 3rd quarter 2019, this Company’s no longer function as independent subsidiaries.

12 Japan LTD, in order to streamline operations in the third quarter the Company closed the physical offices in Japan and while revenues continue to be generated in Japan through its flagship customer ITOYA it is serviced under a licensing agreement by 12 Hong Kong Ltd. Management believes that these changes will result in a profit for the Company, from operations in Japan beginning in the 4th quarter of 2019.

12 Europe, A.G.

12 Europe A.G. which was acquired in 2017 has underperformed against expectation. In the third quarter 2019 it was determined by management that the costs of continuing to support the expenses of an independent 12 Europe A.G., were unsupportable. Therefore, the Company reaffirmed its previous master representation agreement between 12 Hong Kong, LTD and Coppola, AG so that the software customers in Europe can continue to be supported and then closed its operations in Europe. 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 approximately $35K by the Company. Therefore, this subsidiary is no longer in existence. Management does not consider this closure as a condition for discontinued operations as master representation agreement between 12 Europe is now been transferred to 12 Hong Kong and Coppola AG. As such, software customer in Europe will continue to be supported.

Bluwire Group, LLC.

On October 1, 2019, the Company acquired a retailer with 11 airport terminal locations and one casino location under an equity exchange agreement. Under the terms of the agreement the Company issued to the sellers 500,000 Series A Preferred Shares in exchange for 51% of the equity in Bluwire Group, LLC and its subsidiaries (“Bluwire”). The Sellers retained 30% of Bluwire and 19% is reserved for 12 months for potential equity investors into Bluwire. Any of this equity reserve not used to raise capital for Bluwire over that period would be divided equally between the Company and the Sellers. The Sellers will continue to manage Bluwire under consulting agreements. See filed 8K between the Company and Bluwire Group, LLC on October 16, 2019.

The Company is expected to consolidate this acquisition effective October 1, 2019, under ASC 805 purchase accounting. However, the accounting impact of this acquisition, including the purchase price and fair value of assets and liabilities acquired, is still being determined and will the result of an independent valuation and will be shown as part of the Company’s 2019 10-K.

The below table sets forth selected unaudited and unreviewed pro forma financial information for the Company for 2018 compared to 12 ReTech as if Bluwire Group, Redwire and Rune were owned for the nine months ended September 30, 2019 and 2018.

	Proforma
	Nine months ended
	September 30,
	2019			2018
Revenues	$	3,838,793		$	5,873,098
Cost of revenues		1,881,970			2,744,412
Gross profit		1,956,823			3,128,686

Operating expenses	$	3,969,923		$	2,958,089
Operating loss	$	(2,013,100	)	$	170,597

Net Loss	$	(15,777,457	)	$	(2,528,249	)

Earnings (Loss) Per Share	$	(0.99	)	$	(2.82	)

The unaudited proforma information set forth above is for informational purposes only. The proforma information should not be considered indicative of actual results that would have been achieved if the Bluwire Group, LLC acquisition had occurred on January 1, 2018. The unaudited supplemental pro forma financial information was calculated by combining the Company’s results with the stand-alone results of Bluwire Group, LLC. For the identified periods.

Note 4 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. Notes to the unaudited interim condensed consolidated financial statements that would substantially duplicate the disclosures contained in the audited condensed consolidated financial statements for fiscal year 2018 have been omitted. This report should be read in conjunction with the audited condensed consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2018 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission on April 16, 2019.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries 12HK, 12JP, 12EU. 12 Retail, Rune NYC, LLC, Red Wire Group, LLC (“RWG”), and Emotion Fashion Group which included Emotion Apparel, Inc., Lexi Luu Designs, Inc., Punkz Gear, Skipjack Dive and Dance Wear, Inc. and Cleo VII, Inc. Since January 2019, the consolidation includes both Rune and RWG which were acquired in the first quarter 2019. All inter-company accounts and transactions have been eliminated. We currently have no investments accounted for using the equity or cost methods of accounting. On October 1, 2019, Bluwire Group, LLC will be included in the consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

Software Development Costs

At September 30, 2019 and December 31, 2018 software development costs totaled $0 and $371,118, respectively. Capitalized costs related to the software under development are treated as an asset until the development is completed and the software is available for licensure under a software-as-a-service (“SaaS”) arrangement. Periodically, management reviews its capitalized costs to determine if they are properly valued or should they be impaired. As of June 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. As a result, management believed that the capitalized costs for the software development should be fully impaired as of that date. As of September 30, 2019, management has not since revised its opinion. Please see Management, Discussion Analysis for further details in the resulting cutting of costs in 12 Europe and 12 Japan.

Goodwill

Goodwill represents the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired.

The goodwill amount of $480,381 related to the acquisition of RWG and $394,440 related to the acquisition of Rune as of September 30, 2019. Goodwill is not amortized, but is tested annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount. The Company has determined that there has been no impairment of goodwill at September 30, 2019. The Company performs its annual test during the fourth quarter.

Revenue Recognition

The Company recognizes revenue from the sale of products and services in accordance with ASC 606, “Revenue from Contracts with Customers”. Revenue is recognized when the earnings process is complete typically when services or products are provided to the customer.

Convertible Debt and Convertible Preferred Stock

When the Company issues convertible debt or convertible preferred stock, it first evaluates the balance sheet classification of the convertible instrument in its entirety to determine whether the instrument should be classified as a liability under ASC 480, Distinguishing Liabilities from Equity, and second whether the conversion feature should be accounted for separately from the host instrument. A conversion feature of a convertible debt instrument or certain convertible preferred stock would be separated from the convertible instrument and classified as a derivative liability if the conversion feature, were it a standalone instrument, meets the definition of an “embedded derivative” in ASC 815, Derivatives and Hedging. Generally, characteristics that require derivative treatment include, among others, when the conversion feature is not indexed to the Company’s equity, as defined in ASC 815-40, or when it must be settled either in cash or by issuing stock that is readily convertible to cash. When a conversion feature meets the definition of an embedded derivative, it would be separated from the host instrument and classified as a derivative liability carried on the consolidated balance sheet at fair value, with any changes in its fair value recognized currently in the consolidated statements of operations.

If a conversion feature does not meet the conditions to be separated and accounted for as an embedded derivative liability, the Company then determines whether the conversion feature is “beneficial”. A conversion feature would be considered beneficial if the conversion feature is “in the money” when the host instrument is issued or, under certain circumstances, later. If convertible debt contains a beneficial conversion feature (“BCF”), the amount of the amount of the proceeds allocated to the BCF reduces the balance of the convertible debt, creating a discount which is amortized over the debt’s term to interest expense in the consolidated statements of operations.

When a convertible preferred stock contains a BCF, after allocating the proceeds to the BCF, the resulting discount is either amortized over the period beginning when the convertible preferred stock is issued up to the earliest date the conversion feature may be exercised, or if the convertible preferred stock is immediately exercisable, the discount is fully amortized at the date of issuance. The amortization is recorded similar to a dividend.

Derivative Liabilities and Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Observable inputs are based on market data obtained from sources independent of the Company. Unobservable inputs reflect our own assumptions based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels, defined as follows:

Level 1	—	Inputs are quoted prices in active markets for identical assets or liabilities as of the reporting date.

Level 2	—	Inputs other than quoted prices included within Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3	—	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs. Unobservable inputs for the asset or liability that reflect management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability as of the reporting date.

The Company carries certain derivative financial instruments using inputs classified as “Level 3” in the fair value hierarchy on the Company’s consolidated balance sheets.

The Company classified certain conversion features in the convertible notes issued during 2019 and 2018 as embedded derivative instruments due to down-round ratchet provisions and potential adjustments to conversion prices due to events of default and accordingly measures and carries the conversion features as derivative liabilities in the consolidated financial statements. Also, the Company determined that the certain notes should be measured and carried at fair value in the consolidated financial statements according to ASC 480, as they are settleable in a variable number of shares based on a fixed monetary amount known at inception. These fair value estimates were measured using inputs classified as “Level 3” of the fair value hierarchy. The Company develops unobservable “Level 3” inputs using the best information available in the circumstances, which might include its own data, or when it believes inputs based on external data better reflect the data that market participants would use, its bases its inputs on comparison with similar entities. Due to the existence of down round provisions, which create a path-dependent nature of the conversion prices of the convertible notes, the Company decided a Black Scholes Simulation model, which incorporates inputs classified as “Level 3” was appropriate.

The conversion feature was recognized as an embedded derivative and was valued using a Black Scholes model that resulted in a derivative liability of $14,494,342 and $2,696,470 at September 30, 2019 and December 31, 2018, respectively.

	September 30, 2019
Risk-free interest rates		1.74 – 2.63	%
Expected life (years)		0.05 – 1.00 years
Expected dividends		0	%
Expected volatility		226 – 736	%

In connection with convertible notes payable, the Company records derivative liabilities for the conversion feature. During the year ended December 31, 2018, the Company recorded initial derivative liabilities of $3,229,344. Upon initial valuation, the derivative liability exceeded the face value certain of the convertible note payables by approximately $1,637,572, which was recorded as a day one loss on derivative liability. On December 31, 2018, the derivative liabilities were revalued at $2,696,470 resulting in a loss of $760,508 related to the change in fair market value of the derivative liabilities during the year ended December 31, 2018. In connection with convertible notes, as disclosed in Note 8, the Company reclassified derivative liabilities with a fair value of $1,418,516 to additional paid-in capital during year ended December 31, 2018. The Company revalued the derivative liabilities at each conversion date recording the pro-rata portion of the derivative liability as compared to the portion of the convertible note converted to the pre-conversion carrying value to additional paid-in capital.

During the nine months ended September 30, 2019, the Company recorded additional derivative liabilities of $1,150,152 related to convertible notes payable and $2,717,043 for various series of preferred stock. The Company also recorded $4,555,575 of additional derivative liability for the default reserve related to the potential additional liability for the default on convertible notes and certain Series D Preferred Stock. See further details convertible notes below and management discussion analysis section. On September 30, 2019, the derivative liabilities were revalued at $14,494,342 resulting in a loss of $4,169,269 related to the change in fair market value of the derivative liabilities during the nine months ended September 30, 2019.

	For the Nine Months Ended September 30, 2019
Balance – December 31, 2018	$	2,696,470
Issuance of new derivative liabilities		8,422,770
Conversions to paid-in capital		(794,167	)
Change in fair market value of derivative liabilities		4,169,269
Balance – September 30, 2019	$	14,494,342

Management views these convertible notes, due to their conversion feature to be viewed as equity, and the expenses associated through derivative calculations to be estimates that are only finalized once the actual conversion has been consummated. For the balance outstanding, please see Note 8.

Commitments and Contingencies

The Series B Redeemable Convertible Preferred Stock is classified as temporary equity, as it is mandatorily redeemable by the holder at a future date. The Series D-2 Preferred Stock is classified as temporary equity due to the fact that it is redeemable immediately. The Series D-3 Preferred Stock is also classified as temporary equity due to the existence of the PUT. Under the terms of the acquisition of the Red Wire Group, certain members received Series D-5 with a PUT option with a face value of $150,000. If those members so elect, to not convert those shares to common stock, they have the right to PUT those shares to the Company for cash. This would be an additional cash constraint on the company. For additional detail, See Note 3 Acquisitions.

Earnings (Loss) per Share

The Company follows ASC 260, “Earnings per Share” (“EPS”), which requires presentation of basic EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying financial statements, basic earnings (loss) per share are computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. As a subsequent event, 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. Per ASC 505-10, if a reverse split occurs after the date of the latest reported balance sheet but before the release of the financial statements, then such changes in the capital structure must be given retroactive effect in the balance sheet. As such, the reverse split has been retroactively applied to these financial statements.

Diluted earnings per share reflects the potential dilution that could occur if securities were exercised or converted into common stock or other contracts to issue common stock resulting in the issuance of common stock that would then share in the Company’s earnings subject to anti-dilution limitations. In a period in which the Company has a net loss, all potentially dilutive securities are excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact. For the nine months ended September 30, 2019, potentially dilutive common shares consist of common stock issuable upon the conversion of convertible notes payable, Series A Preferred Stock, Series B Preferred Stock, Series D-2 Preferred Stock, Series D-3 Preferred Stock, Series D-5 Preferred Stock and Series D-6 Preferred Stock (using the if converted method). All potentially dilutive securities were excluded from the computation of diluted weighted average number of shares of common stock outstanding as they would have had an anti-dilutive impact. If all dilutive securities were converted the Company would be in excess of their authorized shares of common stock.

Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities, due to stockholders and notes payable. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.

Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

Note 5 – Fixed Assets

Fixed assets at September 30, 2019 and December 31, 2018 consisted of the following:

	September 30, 2019			December 31, 2018

Office equipment	$	90,798		$	32,107
Furniture and equipment		607			607
Computer		13,704			13,704
Technical equipment		27,492			27,492
Intellectual Property		74,982			65.487
Subtotal Fixed Assets	$	207,583		$	139,397
Less: accumulated depreciation		(51,127	)		(41,102	)
Fixed Assets	$	156,456		$	98,295

Depreciation expense for the nine months ended September 30, 2019 and 2018 was to $16,095 and $5,085, respectively.

Note 6 – Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities at September 30, 2019 and December 31, 2018 consisted of the following:

	September 30, 2019		December 31, 2018

Accounts payable	$	308,230	$	379,448
Accrued expenses		452,838		495,785
Accrued salaries		6,753		206,031
Accrued board of director fees		-		74,295
Accrued interest		156,631		79,153
	$	924,452	$	1,234,712

During the three months ended September 30, 2019, some accounts payable and accrued expenses were exchanged for Series A Preferred shares. The majority of which represented professional consulting fees of approximately $161,221 and board of director fees of approximately $264,616. See Note 10 Series A Preferred Stock for further details.

In addition, as detailed in Note 3, on September 30, 2019 the Company effectively foreclosed on its liens taking possession of the assets including the brands; Lexi-Luu, Emotion Apparel, Inc., Punkz Gear and retuned the stock in Emotion Apparel, Inc. and its subsidiaries to the Seller. As a result, the related accounts payable and accrued expenses which were payable by Emotion Apparel, Inc. which totaled $511,486 including $250,000 Note Payable, were offset to other income. For further details See Note 9 Notes Payable for further details.

Also 12 Europe, 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 by the Company. As a result of filing for bankruptcy, all the companies have been discharged and are no longer owed by the Company with the exception of approximately $35K in social benefits liabilities. As such the total discharged accounts payable totaled $445,244 and were offset to other income.

Lastly, after careful review by management, certain invoices posted to accounts payable were deemed to not be owed by the Company. These payables totaled approximately $68K were offset to other income.

See further discussion as part of the Management Discussion and Analysis below.

Note 7 – Due to Stockholders

Amounts due to stockholders (related party) at September 30, 2019 and December 31, 2018 consist of the following:

	September 30, 2019		December 31, 2018
Daniel Monteverde	$	1,388	$	143,195
Angelo Ponzetta		119,354		623,201
	$	120,742	$	766,397

On August 12, 2017, Gianni Ponzetta loaned CHF 60,000. The promissory note was unsecured, bore an interest at 1% per annum and is due December 31, 2019. In September 2018, Gianni Ponzetta converted this note and all the due to Gianni Ponzetta payables to Preferred D-3 shares. See Preferred D-3 shares in Note 10 below. During the 12 months ended December 31, 2018 total advances and expenses paid directly by stockholders on behalf of the Company $107,326 and $36,931.

During the nine months ended September 30, 2019, the Company exchanged most its accounts payables due to Daniele Monteverde and Angelo Ponzetta of approximately $723,253 into Series A Preferred shares. See Note 10 Series A Preferred Stock for further details.

Note 8 – Convertible Notes Payable

Convertible notes payable at September 30, 2019 and December 31, 2018 consists of the following:

	September 30, 2019			December 31, 2018
September 15, 2017	$	337,653		$	344,262
December 8, 2017		-			52,260
December 12, 2017		-			107,109
March 15, 2018		40,123			40,123
April 27, 2018		-			16,000
May 17, 2018		56,714			60,000
September 17, 2018		60,000			60,000
September 21, 2018		30,285			64,500
November 28, 2018		64,500			64,500
November 28, 2018		25,000			25,000
December 13, 2018		105,000			105,000
January 15, 2019		115,000			-
February 7, 2019		132,720			-
February 19, 2019		64,500			-
February 19, 2019		55,125			-
March 13, 2019		55,125			-
May 14, 2019		26,500			-
May 17, 2019		27,825			-
August 1, 2019		53,500			-
August 7, 2019		55,125			-
Total	$	1,304,695		$	938,754

Less: unamortized debt discount		(298,682	)		(313,909	)

Total convertible notes	$	1,006,013		$	624,845

For the nine months ended September 30, 2019, the Company recognized interest expense of $674,210, all of which represented the amortization of original issue discounts, debt discounts and beneficial conversion features. For the nine months ended September 30, 2019, the Company reduced the principal by $339,371 principal through conversion through the issuance of 10,904,612 shares of common stock. The issue discounts and debt discounts are being amortized over the life of the convertible notes using straight line amortization due to the short-term nature of the note. Remaining issue discounts and debt discounts of $298,682 will be fully amortized by May 2020.

The Company has twenty four (24) outstanding convertible notes as of September 30, 2019, with a total outstanding balance of $1,006,013. All the notes have matured that were entered into prior to 2019. The 2019 notes mature from January 2020 to March 2020. These notes carry an interest rate ranging between 8% and 12% per annum. The notes carry an original issue discounts ranging between 10% to 25% of the face value of each note.

The notes may be converted into shares of the Company’s common stock at any time on or after the occurrence of an event of default. The conversion price shall be the 60% multiplied by the lowest trading price during the 30 trading days period ending, in holder’s sole discretion on each conversion, on either (i) the last complete trading day prior to the conversion date or (ii) the conversion date. All terms of the note, including but not limited to interest rate, prepayment terms, conversion discount or look-back period will be adjusted downward if the Company offers more favorable terms to another party, while this note is in effect.

For some notes, the Company agreed to pay a one-time interest charge of 9% of the principal amount for each note. The notes may be converted at any time after the maturity date. The conversion price shall be 75% multiplied by the lowest trading price during the 10 prior trading days period ending on either (i) the last complete trading day prior to conversion date or (ii) the conversion date. All terms of the note, including but not limited to interest rate, prepayment terms, conversion discount or look-back period will be adjusted downward if the Company offers more favorable terms to another party, while this note is in effect.

The note may be redeemed by the Company at rates ranging from 105% to 130% depending on the redemption date provided that no redemption is allowed after the 180^thday. All terms of the note, including but not limited to interest rate, prepayment terms, conversion discount or look-back period will be adjusted downward in the Company offers more favorable terms to another party, while this note is in effect. As additional consideration, the Company is to issue to Adar Bays Capital shares of common stock with a value equal to 25% of each note, determine at the time of signing of each note.

See summary of outstanding notes payable by debt holder with related change in derivative liability and amortization of debt discount for the period ended September 30, 2019.

	Loan Holder	Principal Amount		Date		Maturity		Balance at 12 31 18		Additions		Payments			Conversion			Balance at 9 30 19
1	SBI Investment	$	200,000		9/27/2017		3/15/2018		156,850		-		-			(6,697	)		150,153
1	SBI Investment	$	187,500		11/14/2017		5/14/2018		187,500		-		-			-			187,500
2	LG Capital Funding, LLC	$	185,292		12/8/2017		6/8/2018		52,260		-		-			(52,260	)		-
3	Cerberus Finance Group Ltd	$	185,292		12/12/2017		6/8/2018		107,109		-		(99,684	)		(7,425	)		-
6	Bellridge Capital LP	$	60,000		5/17/2018		5/17/2019		16,000		-		-			(16,000	)		-
7	Auctus	$	100,000		4/27/2018		4/25/2019		40,123		-		-			-			40,123
8	Bellridge Capital LP	$	60,000		9/17/2018		3/15/2019		60,000		-		-			(3,286	)		56,714
9	Bellridge Capital LP	$	60,000		10/18/2018		10/18/2019		60,000		-		-			-			60,000
10	Adar Alef Omnibus	$	64,500		11/28/2018		11/29/2019		64,500		-		-			(34,215	)		30,285
11	Adar Alef Debt Purchase	$	25,000		11/28/2018		11/29/2019		-		-		-			-			-
12	LG Capital Omnibus	$	64,500		11/28/2018		11/29/2019		64,500		-		-			-			64,500
13	LG Capital Debt Purchase	$	25,000		11/29/2018		11/29/2018		25,000		-		-			-			25,000
14	LG Capital Omnibus	$	105,000		12/13/2018		12/14/2019		105,000		-		-			-			105,000
15	LG Capital Omnibus	$	115,000		1/15/2019		1/15/2020		-		115,000		-			-			115,000
16	Adar Alef Omnibus	$	132,720		2/7/2019		2/7/2020		-		132,720		-			-			132,720
17	Adar Alef Debt Note	$	108,055		2/7/2019		2/7/2019		-		108,055		-			(108,056	)		-
18	Adar Alef Omnibus	$	64,500		2/19/2019		2/19/2020		-		64,500		-			-			64,500
19	LG Capital Omnibus	$	55,125		2/19/2019		2/19/2020		-		55,125		-			-			55,125
20	LG Capital Omnibus	$	55,125		3/13/2019		3/13/2020		-		55,125		-			-			55,125
21	Adar Alef Omnibus	$	26,500		5/14/2019		2/20/2020		-		26,500		-			-			26,500
22	LG Capital Omnibus	$	27,825		5/17/2019		2/15/2020		-		27,825		-			-			27,825
23	Adar Alef Omnibus	$	53,500		8/1/2019		2/7/2020		-		53,500		-			-			53,500
24	LG Capital Omnibus	$	55,125		8/6/2019		2/7/2020		-		55,125		-			-			55,125

Convertible note total								$	938,843	$	693,475		(99,684	)		(227,939	)		1,304,695

On July 25, 2019 the Company was served with a lawsuit from Auctus Fund, LLC (“Auctus”). For additional details, see MD&A Item 1. Legal Proceedings

As a subsequent event, on October 3, 2019 the Company received an additional $5,000 from Adar Alef as part of aback end promissory note agreement. The cost to the Company was $5,350 which includes $350 OID.

As a subsequent event, on October 8, 2019 the Company entered into a promissory note agreement with LG Capital Funding, LLC (“LG”) for loans totaling $6,850. The consideration to the Company is $5,000 with $1,500 legal fees and a $350 OID. LG delivered those funds on October 24, 2019.

Note 9 – Note Payable

On May 1, 2018, 12 ReTech acquired Emotion Apparel, Inc. As part of the acquisition, Emotion Fashion Group was obligated under a disputed note payable to a third party in the amount of $250,000, maturing in July 2027 and bearing an interest rate of 2% per annum. The note calls for monthly payments to be made to the third party equal to ten percent (10%) of the gross sales of the Company until paid in full, including accrued interest. When the note was acquired, the Company recorded the note at its fair market value of $156,014. The note discount is being amortized to interest expense through maturity. Prior to September 30, 2019 the total payments made under the note payable were $0. Amortization of debt discount amortized amounted to $8,340 and $2,780 for the nine and three months ended September 30, 2019. 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 retuned the stock in Emotion Apparel, Inc. and its subsidiaries to the Seller. As detailed in Note 6, all accounts payable, accrued expenses and notes payable reverted back to the seller and offset to Other Income.

As a subsequent event, on October 3, 2019 one of the Sellers of Bluwire to the Company 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.

As a subsequent event, 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.

As a subsequent event, 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 caries a fee of $4,500. This obligation is not convertible under any terms into Company stock.

Note 10 – Common and Preferred Stock

Capitalization

The Company has authorized shares of common stock of 80,000,000 at a par value of $0.00001, and 50,000,000 shares of Preferred Stock as described below.

Preferred Stock

The Preferred Stock may be divided into such number of series as the Board of Directors may determine. The Board of Directors is authorized to determine and alter the rights, preferences, privileges and restrictions granted to and imposed upon any wholly unissued series of Preferred Stock, and to fix the number of shares of any series of Preferred Stock and the designation of any such series of Preferred Stock. The Board of Directors, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series.

Commitment and Contingencies

The Series B Redeemable Convertible Preferred Stock is classified as temporary equity, as it is mandatorily redeemable by the holder at a future date. The Series D-1 Preferred Stock is classified as temporary Series D-1 as temporary equity due to the fact that redeemable immediately. The Series D-3 Preferred Stock is classified as temporary equity due to the existence of the PUT. Under the terms of the acquisition of the Red Wire Group, certain members received Series D-5 with a PUT option with a face value of $150,000. If those members so elect to not convert those shares to common stock, they have the right to PUT those shares to the Company for cash. This would be an additional cash constraint on the company. For additional detail, See Note 3 Acquisitions.

Series A Preferred Stock

On July 19, 2018, 1,500,000 shares of Series A Preferred Stock were deemed issued as compensation for services These were, by agreement, not delivered until August, 2019.

As detailed in Note 6 and 7, during the third quarter 2019, Series A preferred stock was issued in exchange for certain accounts payable, accrued expenses, board director fees and related parties payable which total approximately $1,154,572 for 1,915,151 Series A Preferred Shares. In addition, management issued Series A Preferred shares in exchange for professional fees of 114,165 Series A shares.

The Company issued a total of 2,029,316 Series A preferred shares related to the aforementioned.

Therefore, as of September 30, 2019 and December 31, 2018, there was 8,529,316 and 6,500,000 shares of Series A Preferred Stock deemed issued and outstanding.

In addition, as a subsequent event, effective October 1, 2019, the Company issued 500,000 Series A shares in exchange for equity in Bluwire Group, LLC. See Note 3 above for further details.

Series B Preferred Stock

The Series B Redeemable Convertible Preferred Stock is classified as temporary equity, as it is mandatorily redeemable by the holder 15 months after issuance and thus have been recorded as mezzanine. During the six months ended September 30, 2019, the Company issued Series B Preferred Stock and converted to common shares the following Series B Preferred shares as follow:

●

As of September 30, 2019 and December 31, 2018, 0 and 68,000 shares of Series B Preferred Stock were issued and outstanding at $1.00 par value, respectively. The Company recognized interest expense of $12,063 for the nine months ended September 30,2019.

Series C Preferred Stock

There was a single issuance of the Series C Preferred Stock during the years ended December 31, 2018. There have been no additional Series C Preferred Stock issued during the three and six months ended September 30, 2019.

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 is not convertible into common shares, but authorizes the holder to vote eight billion (8,000,000,000) votes on any matter that shareholders are entitled to vote for under our Bylaws at a cost of $1.00 per share. Please note, original 1 share of Series C Preferred shares authorized the holder to vote one billion (1,000,000,000) votes on any matter that shareholders are entitled to vote but was modified on January 14, 2019 to be eight billion (8,000,000,000) votes 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.

There is one share of Series C Preferred Stock issued and outstanding as of September 30, 2019 and December 31, 2018.

Series D Preferred Stock

Series D Preferred Stock are “Blank Check” Preferred which allows the Board of Directors to subdivide and/or determine the rights, privileges and other features of this stock.

The total number of shares of Series D Preferred Stock the Company is authorized to issue is ten million (10,000,000) shares, with a stated par value of $0.00001 per share with such powers, preferences, rights and restrictions which shall be determined by the Company’s Board of Directors in its sole discretion, and which designations and issuances shall not require the approval of the shareholders of the Corporation.

Series D Preferred Stock are “Blank Check Preferred” which allows the Board of Directors to subdivide and/or determine the rights, privileges and other features of this stock. On July 13, 2018, the Company filed an amended certificate of designation increasing the authorized Series D preferred shares from 1 million (1,000,000) to 10 million (10,000,000), as a reallocation of the 50 million (50,000,000) shares of preferred stock authorized. All of these 10 million (10,000,000) shares of Series D Preferred Stock are part of the 50 million (50,000,000) authorized shares of preferred stock.

Series D-1 Preferred Stock

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 2, 2018, the Company entered into an equity line of credit agreement with Oasis Capital, LLC (“Oasis Agreement”) and as a part of that Agreement the Company created a subset Series D-1 Preferred Stock from the authorized Series D Preferred Stock having special rights and privileges as follows:

The total number of shares of Series D-1 Preferred Stock issued was 311,250 shares, with a par value of $0.0001 per share and a stated value of $2.00 per share (the “Stated Value”). The Series D-1 Preferred Stock as a whole, of which Series D-1 is a subset, has such powers, preferences, rights and restrictions which shall be determined by the Company’s Board of Directors in its sole discretion, and which designations and issuances shall not require the approval of the shareholders of the Company. For additional information on Series D-1 Preferred Stock, please see Company’s 10_K filed April 16, 2019.

As of December 31, 2018 with the execution of the Oasis Agreement, the Company issued 311,250 shares of Preferred Series D-1 shares which are at par value of $2 per share total $622,500. The Company recorded a derivative liability of approximately $700,000 associated with Series D-1 Preferred Shares. The Series D-1 Preferred Stock is classified Series D-1 as temporary equity due to the fact that redeemable immediately.

During the first quarter of, 2019 Oasis Capital converted 28,500 shares for 630,000 common stock and reduced the principal outstanding balance by $28,500. As such, the Company recorded a change in derivative liability associated the Series D-1 Preferred Shares of approximately ($86,428).

On March 14, 2019, the Company executed an agreement with Oasis Capital, whereby the Company agreed to exchange the remaining outstanding of Series D-1 Preferred Shares of 282,750 for 282,750 Series D-2 Preferred Shares. In addition, the Company executed an agreement whereby 62,250 outstanding D-1 shares for 62,250 Series D-2 preferred shares in exchange of $100,000. In addition, the Company agreed to pay 1,425 shares of D-2 shares as a finance charge for this agreement. The excess fair value of the shares exchanged was recorded as additional interest expense. As of September 30, 2019 there are no Preferred Series D-1 shares outstanding.

Series D-2 Preferred Stock

The Company designated Series D-2 Preferred Stock. The following summary of the Company’s 8% Series D-2 Preferred Stock. The Series D Preferred Stock as a whole, of which Series D-2 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 stockholders of the Company. Before any dividends shall be paid or set-side for payment on any Junior Security Corporation, each holder of Series D-2 Preferred Stock shall be entitled to receive dividends, in the manner provided herein, payable on the stated value of the Series D-2 Preferred Stock at a rate of 8% per annum, or 18% per annum following the occurrence of an Event of Default, which shall be cumulative and be due and payable in shares of Common Stock on the Conversion date or in cash on the Redemption Date. Such dividends shall accrue from the date of issue of each share of Series D-2 Preferred Stock.

The total number of shares of Series D-2 Preferred Stock this Company is authorized to issue 2,500,000 shares, with a par value of $0.00001 per share and a stated value of $2.00 per share.

The Company issued 346,625 Series D-2 shares to Oasis Capital with a value of $692,850. On May 9, 2019, the Company received $50,000 in exchange for 45,045 Series D-2 Preferred Shares from Oasis Capital with which the Company had previously executed the PIPE Securities Purchase Agreement in March of 2019. During the three months ended September 30, 2019 Oasis Capital redeemed $30,000 or 15,000 shares of its Series D-2 Preferred shares for 300,000,000 common shares. In addition, Oasis purchased an additional 9,009 series D-2 Preferred shares for $10,000. For the nine months ended September 30, 2019, Oasis redeemed and exchanged $115,500 or 57,750 shares of its D-2 Preferred shares for 558,000,000 commons shares.

On April 3, 2019, the Company entered into a Securities Exchange Agreement with Mr. D’Alleva and issued him 332,032 Series D-2 Preferred Shares in exchange for the 6,250,000 common shares that Mr. D’Alleva had previously purchased from the Company.

Mr. D’Alleva received 318,750 Series D-2 shares in exchange for the 6,250,000 common shares that he previously purchased for $531,250. He will also receive an additional 13,282 Series D-2 Preferred shares in the form of debt discount in this share exchange.

Also on April 3, 2019, concurrent with the PIPE Securities Purchase Agreement entered into with Mr. D’Alleva, the Company entered into a PIPE Securities Purchase Agreement with Dominic D’Alleva to sell to Mr. D’Alleva in various $25,000 tranches up to 93,750 Series D-2 Preferred Shares for a commitment of a $150,000 investment into the Company.

Thus far, Mr. D’Alleva has purchased 15,625 Series D-2 Preferred Shares for $25,000. He has delivered $12,500 and the Company expects him to deliver the remainder of the purchase price in the current period.

In addition, on April 3, 2019, the Company entered into a PIPE Securities Purchase Agreement with a key technology vendor where the Company exchanged 125,000 Series D-2 Preferred Shares for $200,000 of Company debt held by that vendor. An additional $50,000 was expensed as a result of this transaction.

As of September 30, 2019 the Company had 941,408 Series D-2 Preferred Shares with a face value of $1,882,816.

The Series D-2 Preferred Stock is classified temporary equity due to the fact that the shares are redeemable immediately. As such, the Company recorded an associated derivative liability of $2,156,164 a general default reserve of $387,002 and derivative on default of $701,229.

Series D-3 Preferred Shares

On September 29, 2018, the Board of Directors of 12 ReTech corporation authorized the issuance of twenty thousand (20,000) shares of Series D-3 Preferred Shares to Gianni Ponzetta at a price of $5.00 par value in exchange for $100,000. On the same date, 12 ReTech corporation authorized the issuance of four thousand (4,000) shares of its Series D-3 preferred shares to Gianni Ponzetta at $5.00 par value with a face value of $20,000 as incentive shares at no additional costs to Gianni Ponzetta. Lastly, 12 ReTech corporation issued 30,840 shares of Series D-3 Preferred Shares to Gianni Ponzetta with par value per share of $5.00 in exchange of $154,234 which was owed to Gianni Ponzetta. On October 30, 2018, this Certificate of Designation was filed with the Secretary of State in the State of Nevada.

The Company agrees in connection with this subscription created a sub-class of its Series D Preferred shares which are designated as “Blank Check Preferred” which allows the Board of Directors of the Company to designate, without further shareholder approval, the rights, privileges and preferences or some, part or all of the Series D Preferred Shares and/or to create sub-classification of those Series D Preferred Shares as they deem necessary. The Holder may convert some, part of all of the Securities into common shares of the Company based on the closing market price on the day before notice of conversion is presented to the Company. The Company will pay dividends on the Securities at the rate of 10% per annum and shall pre-pay the Holder the first 12 month’s dividends from proceeds. After 12 months the Company would pay the pro-rata interest on a monthly basis due the first of each month and late after the 10th of each month. For additional information of Series D-3 Preferred Shares, please see the Company’s filed 10-K from April 16, 2019.

The Series D-3 Preferred Stock is classified as temporary equity due to the existence of the PUT. As of September 30, 2019, there were 54,846 Preferred Series D-3 shares outstanding at $5.00 par representing a total of $274,234.

Series D-5 Preferred Stock

The Company designated Series D-5 Preferred Stock, which consists of one million (1,000,000) shares of stock that are designated as the Series D-5 Convertible Preferred Stock. The par value of each issued share of Series D-5 Preferred Stock is $0.00001 per share, and the stated value of each issued share of Series D-5 Preferred Stock is deemed to be $4.00. Series D-5 Preferred Stock carries an annual dividend of 6% which will be paid in arrears. Holders of the shares of Series D-5 Preferred Stock shall not have the right to vote on any matter as to which shareholders are required or permitted to vote, except as otherwise required by law. On February 21, 2019, the Company issued 37,500 shares for 25% minority interest in the Red Wire Group. On March 14, 2019, the Company issued 82,588 shares of Series D-5 Preferred Stock for 92.5% interest in Rune. See Note 3, Acquisitions for additional information. The company recorded an associated derivative liability of $424,753 which remained the same as of September 30, 2019.

As of September 30, 2019 the Company had 120,088 Series D-5 Preferred Shares with a face value of $480,352.

Series D-6 Preferred Stock

The Company designated Series D-6 Convertible Preferred Stock, which consists of one million (1,000,000) shares of stock. The par value of each issued share of Series D-6 Preferred Stock is $0.00001 per share, and the stated value of each share is $5.00. On February 21, 2019, the Company issued 54,000 shares for 75% minority interest in the Red Wire Group. See Note 3, Acquisitions for additional information.

The Company issued 55,600 Series D-6 shares related to the acquisitions of RWG (54,000 shares) and another individual (1,600 shares) with a value of $278,000. The Company recorded an associated derivative liability of $248,618 which remained the same as of September 30, 2019.

As of September 30, 2019 the Company had 55,600 Series D-6 Preferred Shares with a face value of $278,000.

Common Stock

The Company is authorized to issue 80,000,000 shares of common stock at a par value of $0.00001.

Common stock issued for the three months ended September 30, 2019 was as follows:

The Company issued 2,124,667 shares for an exchange of the settlement of the convertible debt. The Company issued 3,000,000 common shares to Oasis Capital in exchange for Preferred shares.

Common stock issued for the nine months ended September 30, 2019 was as follows:

The Company issued 10,904,612 shares in exchange of the settlement of the convertible debt. The Company issued 8,025,742 common shares to Geneva Roth and Oasis Capital in exchange for Preferred shares.

As of September 30, 2019, and December 31, 2018, 25,410,374 and 6,542,519 shares of common stock were issued and outstanding, respectively.

As a subsequent event, on October 18, 2019 the Company completed a 100 for 1 reverse common stock split reducing the outstanding common shares to 25,410,391. All of the above transactions occurred prior to the completion of the Reverse Stock split and with the exception of the authorized common shares which remain at 8 billion authorized common stock issuances listed here had the effect of being divided by 100.

Note 11 – Segment Data

The Company does business on three continents (North America, Asia, and Europe) in three different jurisdictions (Hong Kong-special economic zone of the People’s Republic of China, Japan, United States of America, and the European common market through Switzerland). These segments are components of the Company about which separate financial information is available and regularly evaluated by the Chief Executive Officer decision maker in deciding how to allocate resources and in assessing performance. The accounting policies of the segments are the same as those described in Note 3, Summary of Significant Accounting Policies.

The following table shows operating activities information by geographic segment for the nine and three months ended September 30, 2019 and 2018.

Nine months ended September 30, 2019

September 30, 2019		North America				Asia				Europe				Total
Revenue		$	597,678			$	27,091			$	289			$	625,058

September 30, 2019		North America				Asia				Europe				Total
Fixed assets, net		$	68,109			$	88,347			$	-			$	156,456

Three months ended September 30, 2019

September 30, 2019		North America				Asia				Europe				Total
Revenue		$	156,788			$	9,010			$	-			$	165,798

Nine months ended September 30, 2018

September 30, 2018		North America				Asia				Europe				Total
Revenue		$	26,896			$	46,792			$	38			$	73,726

September 30, 2018		North America				Asia				Europe				Total
Fixed assets, net		$	22,916			$	8,179			$	-			$	31,095

Three months ended September 30, 2018

September 30, 2018		North America				Asia				Europe				Total
Revenue		$	19,642			$	28,460			$	-			$	48,102

Note 12 – Subsequent Events

The Company evaluated all events and transactions that occurred after September 30, 2019 and through the date of this filing in accordance with FASB ASC 855, “Subsequent Events.” The Company determined that it does have a material subsequent events to disclose as follows:

The Company obtained additional working capital from the following sources:

●	As a subsequent event on October 1, 2019 the Company acquired a retailer with 11 airport terminal locations and one casino location under an equity exchange agreement. Under the terms of the agreement the Company issued to the Sellers 500,000 Series A Preferred Shares in exchange for 51% of the equity in Bluwire Group, LLC and its subsidiaries (“Bluwire”). The Sellers retained 30% of Bluwire and 19% is was 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 to manage Bluwire under consulting agreements.

●	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 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.

●	The Company has decided to decrease costs in 12 Japan as well. By cutting all fixed costs and having the one employee in 12 Japan work directly for 12 Hong Kong, Ltd, as a contractor, the Company will now generate an operating profit from the licensing and maintenance revenue generated from 12 Japan.

●	On October 3, 2019 the Company received an additional $5,000 from Adar Alef as part of aback end promissory note agreement. The cost to the Company was $5,350 which includes $350 OID.

●	On October 8, 2019 the Company entered into a promissory note agreement with LG Capital Funding, LLC (“LG”) for loans totaling $6,850. The consideration to the Company is $5,000 with $1,500 legal fees and a $350 OID. LG delivered those funds on October 24, 2019.

●	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% per annum. This obligation is not convertible into Company stock under any terms.

●	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 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 caries a fee of $4,500. This obligation is not convertible under any terms into Company stock.

ITEM 2. MANAGEMENT’S 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 products to other retailers as well as selling products online. As a subsequent event on October 1, 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.

The Company is organized as a holding Company with two main operating subsidiaries; 12 Hong Kong, LTD (“12HK”) acquired on June 27, 2017 and 12 Retail Corporation (“12Retail”). Formed on September 28, 2017. 12 HK holds all of the intellectual property related to what management believes is our cutting-edge software designed to delight shoppers and provide revenue and net income lift to retailers. 12 Retail currently operates all of the subsidiaries that actually manufacture, as well as distribute physical products through various channels including; wholesale, retail and online. 12 Retail provides a number of specific functions for 12 HK including testing the latest software ideas in a real world setting, the ability to demonstrate revenue and net income lift for other retailers as well as avenues to introduce our software products to retailers that we already do business with. 12 Retail has the following Operating Company subsidiaries:

	●	Red Wire Group, LLC. (“RWG”) a Utah Corporation was acquired effective February 19, 2019, 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 (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 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.

	●	Rune NYC, LLC. (“Rune”) a New York Corporation was acquired effective March 14, 2019, pursuant to a Share Exchange Agreement whereby the Company exchanged with the members of Rune (the “Members”), the members of representing 92.5% of the membership interests have agreed to tender their interests to the Corporation, and the Corporation closed out the tender offer period and the Exchange Agreement became effective. Accordingly, pursuant to the terms of the Exchange Agreement, at closing the Company acquired 92.5% of the membership interests of Rune in exchange for 82,588 shares of the Corporation’s Series D-5 Preferred Stock with a stated value of $4 per share. Rune’s operations continued uninterrupted in New York City following the closing and retained key employees.

	●	Bluwire Group, LLC. As a subsequent event on October 1, 2019 the Company acquired the retailer with 11 airport terminal locations and one casino location under an equity exchange agreement. Under the terms of the Agreement the Company issued to the Sellers 500,000 Series A Preferred Shares in exchange for 51% of the equity in Bluwire Group, LLC and its subsidiaries (“Bluwire”). The Sellers retained 30% of Bluwire and 19% is reserved for 12 months for potential equity investors into Bluwire. Any of that 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 to manage Bluwire under consulting agreements.

	●	12 Hong Kong, Ltd., a corporation organized in the special economic region of Hong Kong. On June 27, 2017 the Company acquired 12 Hong Kong, Ltd. in a share exchange transaction. This is the technology that manages all the Company’s proprietary and licensed technology that is utilized and sold by the other subsidiaries. In addition, this subsidiary serves as an additional marketing and sales hub for Asia, particularly the Chinese market, excluding Japan.of the account in Europe to a manufacturer’s representative subsequent to the end of this quarter.

●

Emotion Apparel, Inc. and Emotion Fashion Group, Inc. (“EFG”). On May 1, 2018, the Company completed the acquisition of E-motion Apparel, Inc. (“EAI”) a California corporation, pursuant to a share exchange agreement whereby the Company exchanged 1.0 million of its common shares for 100% of the outstanding equity of EAI, in a third-party transaction. (This company shed this subsidiary as of September 30th, 2019 see below)

On July 6, 2018, the Company incorporated an new Emotion Apparel Ind 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.”

Business and Operations

Brick and mortar retailers continue to struggle against online competition, even though online sites haven’t changed in many years. Consumers are now looking for new ways to purchase products, with a larger focus on individualism and social sharing. Retailers and merchants are searching for new ways to entice consumers through software technologies that engage consumers both online and in the physical store. These disruptive changes are affecting merchants and retailers and all stages of their supply chains from design and manufacture to distribution and logistics.

The Company’s business plan is to develop and implement cutting edge software that engages and delights consumers, reduces retailers costs and demonstrates revenue and net income lift to retailers. To demonstrate the effectiveness of our technology the Company has acquired (see subsequent events) a twelve chain retailer (Bluwire Group) with high profile stores in airport terminals and casinos that provides significant revenue to the Company and will be the perfect operation to demonstrate many of our software products and develop new products. In addition, the Company operates a number of other subsidiaries that sell products on a wholesale basis to other retailers as well as direct to consumers. These other subsidiaries in addition to providing considerable revenue to the Company management believes that they will provide an entree to sell our software products too once we can demonstrate the revenue and income lift management believes that Bluwire will experience through the deployment of our technology in the U.S.

The Company also plans to continue to make additional synergistic acquisitions that will increase revenue of our existing subsidiaries, and/or reduce costs, and/or open additional sales channels and/or provide opportunities to sell or license our software products. Management is also in early stage talks with point of sales (“POS”) software and credit card processing companies that we may partner with to market our software products.

For more information about our technology please visit our website at www.12retech,com. For more information about. our business or subsidiaries please see our Form 10-K for the period ended December 31, 2018.

Financing and Convertible Debt

To finance our operations the Company has historically resorted to a number of convertible debt providers (see Note 8). 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 helped and management relieves 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 surfs 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 during the 4th quarter 2019 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. If and when approved by the SEC this Equity Line of Credit cajoled provide fund to retire the convertible debt instrument upon much more favorable terms than the original convertible debt which would prove significantly less dilutive to our shareholders.

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 store 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.

Results of Operations

Three Months Ended September 30, 2019 and 2018

Revenues

During the three months ended September 30, 2019 our revenue increased to $165,798 from $48,102, an increase of $117,696 or 245%, which is primarily the result of new acquisitions of RWG and Rune.

Cost of revenues

During the three months ended September 30, 2019 we incurred costs associated with the delivery of our products in the amount of $113,015, as compared to $26,795 for the comparable period in 2018. These expenses are related to costs of manufacturing goods.

General and Administrative

Our general and administrative expenses for the three months ended September 30, 2019 were $300,673, a decrease of $205,654, compared to $506,327 for the three months ended September 30, 2018. This is primarily due decrease of Stock based compensation expense of $448,757.

Professional fees

Our professional fees for the three months ended September 30, 2019 were $311,113, compared to $429,409 for the three months ended September 30, 2018. Our professional fees include expenses related to our external auditors, legal costs, and consultants.

Other Expense

Our other expenses increased by $3,660,355 to $4,512,197 for the three months ended September 30, 2019 compared to $851,842 for the three months ended September 30, 2018. The majority of the increase is made up of three components, increase in other income to $1,027,306 for the three months ended September 30, 2019 compared to $7 for three months ended September 30, 2018, offset by increase interest expense to $2,196,459 compared to $147,719 for the three months ended September 30, 2018 and increase in change in derivative liability of $2,496,574 for the three months ended September 30, 2019 to $3,200,690 compared to $704,116, for the three months ended September 30, 2018. See each component described in further detail below. Offset by the company recognizing a general default reserve expense of for the three months ended September 30, 2019 of $142,354 compared to zero as of September 30, 2018.

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 detailed in Note 3, the Company effectively foreclosed on its liens taking possession of the assets including the brands; Lexi-Luu, Emotion Fashion Group, Punkz Gear and retuned the stock in Emotion Apparel, Inc. and its subsidiaries to the Seller. AS a result of the debts related to Emotion Apparel, Inc, reverted to the seller including all accounts payable, accrued expenses and notes payable resulting in a gain of $511,486. Lastly, after care review by management, certain accounts payable were determined to not be payable. These payables total approximately $68K were offset to other income.

There was also an increase in interest expense to $2,196,459 from $147,719 for the period ended September 30, 2019 compared to the period September 30, 2018. Increase in interest expenses is related to the increase in convertible notes and the cost of convertible preferred stock during the same period. In addition, there was a significant increase in interest expense associated with the additional derivative liability for the general default reserve. This resulted in increase in interest expense of $1,786,353.

Lastly there was change of derivative liability of $3,200,690 compared to $704,116 for the period ended September 30, 2019 compared to the September 30, 2018.

Net Loss

As a result of the foregoing, for the three months ended September 30, 2019, we incurred of a net loss of $5,068,369 compared to a comprehensive net loss of $1,768,692 for the three months ended September 30, 2018. This increased loss is primarily the result of the increase in interest expense, and change in derivative liability offset by other income. These are not operating expenses.

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 European 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.

Nine Months Ended September 30, 2019 and 2018

Revenues

During the nine months ended September 30, 2019 our revenue increased to $625,058 from $73,726, an increase of $551,332 or 748%, which is primarily the result of new acquisitions of RWG and Rune.

Cost of revenues

During the nine months ended September 30, 2019 we incurred costs associated with the delivery of our product in the amount of $426,393, as compared to $26,831 for the comparable period in 2018. These expenses are related to costs of manufacturing goods.

General and Administrative

Our general and administrative expenses for the nine months ended September 30, 2019 were $1,068,216, a decrease of $672,182, compared to $1,740,398 for the nine months ended September 30, 2018. This is primarily due decrease in stock compensation expense of $448,757. This decreased is a result of managements continued efforts to reduce and control costs.

Professional fees

Our professional fees for the nine months ended September 30, 2019 were $840,611, compared to $934,459 for the nine months ended September 30, 2018. Our professional fees include expenses related to our external auditors, legal costs, and consultants. The decrease is a result of managements continued efforts to reduce and. control costs

Other Expense

Our other expenses increased of $11,065,511 to $13,764,357 for the nine months ended September 30, 2019 compared to $2,698,846 for the nine months ended September 30, 2018. The majority of the increase is made up of the following components, impairment costs of $513,601 for the nine months ended September 30, 2019 compared to zero for nine months ended September 30, 2018, default reserve expense of $1,687,128 compared to zero for the nine months ended September 30, 2019, increase in interest expense of $7,309,791 for the nine months ended September 30, 2019 to $8,296,103 compared to $986,312 for the nine months ended September 30, 2018 and lastly change in derivative liability of $4,196,269 for the period ended September 30, 2019 compared to $1,637,527. These costs are estimates that may or may not be realized on a cash basis. These increases are offset by increase in other income to $1,034,956 compared to $7 as of September 30, 2018. See each component described in further detail below.

The company recognized a loss impairment of software development costs of $513,601 compared to zero as of September 30, 2019 and September 30, 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 12 Europe and 12 Japan. Therefore, management believes that the capitalized costs for the software development should be fully impaired as of the quarter. 12 Sconti App was deployed in 2018 and then the company partnered with major retailer called Jemoli beginning in 2019. Jelmoli has not adopted the balance of the 12 Technology suite. The 12 Europe office has been closed and the technology licensed so that any revenues generated are mostly profit without any significant related costs. Many elements of the 12 Technology suite was launched in Japan more than 3 years ago at one specific retailer, ITOYA. In 2018, elements of the 12 Technology Suite was 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 determination has been made. Management has determined to minimize its costs by, downsizing 12 Japan, closing the office and hiring the one former employee as a contractor of 12 Hong Kong.

In addition, the company recognized a general default reserve expense of for the nine months ended September 30, 2019 of $1,687,528 compared to zero as of September 30, 2018.

On July 25, 2019 the Company was served with a lawsuit from Auctus Fund, LLC (“Auctus”). For additional details, see MD&A Item 1. Legal Proceedings, 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 $1,687,528.

There was also an increase in interest expense of $7,309,791 to $8,296,103 for the period ended September 30, 2018 compared to $986,312 the period September 30, 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.

Lastly there was change of derivative liability of $4,169,269 compared to $1,637,527 for the period ended September 30, 2019 compared to the September 30, 2018.

Net Loss

As a result of the foregoing, for the nine months ended September 30, 2019, we incurred of a net loss of $15,494,229 compared to a comprehensive net loss of $5,326,637 for the nine months ended September 30, 2018. This increased loss is primarily the result of the increase in interest expense, general default reserve expense in case of default pay out and loss on impairment of development costs off set by decrease in selling general and administrative expense.

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. As of September 30, 2019, the Company had a deficit in working capital (current liabilities in excess of current assets) of $20,346,297. The majority of the deficit is derivative liability of $14,494,342 and a general default reserve of $1,687,528 and convertible notes of $1,006,013. A portion of this working capital deficit has been financed loans from stockholders. As of September 30, 2019, amounts owed to stockholders totaled $120,742 which was significant reduced during the third quarter of 2019. The total stockholders’ deficit as of September 30, 2019 and December 31, 2018 was $19,302,877 and $5,842,500. The increase in working capital deficit when compared to December 31, 2018 was principally due to an increase in notes payable (“debt-equity”) and associated derivative liability and to a lesser extent, an 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 field 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.

As a subsequent event, 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. 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.

At September 30, 2019, the Cash and Cash Equivalents balance was $40,258 compared to $37,721 as of December 31, 2018.

During the nine months ended September 30, 2019, current liabilities increased by $13,995,580 when compared to December 31, 2018. The primary reasons for the increase was an increase is due to derivative liabilities of $11,797,872, default reserve of $1,687,528 offset by decrease in accounts payable (“debt-equity”) of $310,260. The decrease in accounts payable and accrued expenses is primarily due to some of this debt being exchanged for Series A preferred stock.

The Company’s lack of operating history makes predictions of future operating results difficult to ascertain. However, as a subsequent event, the Company acquired controlling interest in Bluwire Group, LLC effective October 1st, 2019 which shows substantial operating history which improves the company’s prospects. Still, the Company’s prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies at our stage, particularly companies in new and rapidly evolving markets. Our roll up acquisition strategy seeks to mitigate some of those risks but until more acquisitions can be completed, we cannot include their results in our projection of cash needs.

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

Going Concern

The Company’s financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Since the Company has not generated significant revenue or gross profits adequate to cover operating costs, has negative cash flows from operations, and negative working capital, the Company has included a reference to the substantial doubt about our ability to continue as a going concern. In connection with our consolidated financial statements for the period ended September 30, 2019. Our total accumulated deficit as of September 30, 2019 was approximately $26.6 million.

The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay, reduce the scope of or eliminate one or more of the Company’s research and development activities or commercialization efforts or perhaps even cease the operation of its business. The ability of the Company to continue as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. There is substantial doubt about the ability of the Company to continue as a going concern for one year from the issuance of the accompanying consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Listing Status

On July 11, 2018, the Company’s stock began trading on the OTC QB market under the symbol ‘RETC’ after successfully meeting the listing standards for that exchange. During the company the Company lost this qualification due to its stock price which was below the exchange standard of $0.01. Currently the Company’s stock is quoted on the OTC Pink marketplace.

As a subsequent event, on October 18, 2019, the Company’s 1 for 100 Reverse Stock split became effective. Therefore, as of October 31, 2019, there are 25,410,374 common shares of stock outstanding and 8 billion common shares authorized.

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 for the period ended September 30, 2019. See Note 4 to the consolidated statements in this Quarterly 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 our 2018 Annual Report for a complete discussion of our significant accounting policies and estimates.

Off-Balance Sheet Transactions

At September 30, 2019, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item 3.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures, as of September 30, 2019 were not effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Accounting Officer, as appropriate to allow timely decisions regarding disclosure. A control system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Management’s Quarterly Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes.

In connection with our completed acquisitions of significant operating companies during the first three quarters of 2019, Management has begun to institute some financial controls. The first area management is improving is cash and expense payment controls. Management has implemented a segregation of duties and authorities in this area:

	1.	Revenues are deposited in 98% of all cases electronically wither by our credit card processors or factors.

	2.	The accounting department does not make any direct payments and all invoices are approved by the management of the operating companies, reviewed by the accounting department and representatives of senior management.

	3.	Weekly the managers of each operating company reviews with representatives of senior management which payments are to be made from the accounts payable listing.

	4.	The payments are then made by a third party payments person directed by senior management and recorded by the accounting department. Payments are mostly made by check, or automatic bill payment from the bank.

	5.	The accounting department then verifies and reports to senior management that the payments were made as approved by serious management.

	6.	Future improvements as the accounting staff will grow will be to segregate posting of entries from the person who can make journal entries.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Our management, with the participation of the principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s internal control over financial reporting as of September 30, 2019. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework. Based on the criteria established by COSO, management concluded that the Company’s internal control over financial reporting was not effective as of September 30, 2019 as a result of the identification of the material weaknesses described below.

Specifically, management identified the following control deficiencies: (1) The Company has not properly segregated duties as one or two individuals initiate, authorize and complete all transactions. The Company has not implemented measures that would prevent the individuals from overriding the internal control system.; (2) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines and (3) the Company has installed accounting software that does not prevent erroneous or unauthorized changes to previous reporting periods and does not provide an adequate audit trail of entries made in the accounting software.

Our Company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2018: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Accordingly, while the Company has identified certain material weakness in its system of internal control over financial reporting, it believes that is has taken reasonable steps to ascertain that the financial information contained in this report is in accordance with accounting principles generally accepted in the United States of America. Management has determined that current resources would be appropriately applied elsewhere and when resources permit, they will alleviate material weaknesses through various steps.

Changes in Internal Control Over Financial Reporting

As of September 30, 2019, there were no changes in the Company’s internal controls over financial reporting known to the Chief Executive Officer or the Chief Accounting Officer that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

Item 1. Legal Proceedings

The Company was not currently a party to any pending legal proceedings in the end quarter and subsequently involved in any legal proceedings that it believes will have a material adverse effect on its business or financial condition. The Company may, however, be subject to various claims and legal actions arising in the ordinary course of business from time to time.

On July 25, 2019 the Company was served with a lawsuit from Auctus Fund, LLC (“Auctus”) alleging a default under their convertible promissory note with an original amount due of $100,000 and claiming to now be owned $ 482,509 including principal, Interest, damages, defaults and other costs. Management believes that this is a frivolous lawsuit directly related to the fact that Auctus ran out of reserve shares because of failure to act in a timely fashion to increase their reserve shares through the Company’s transfer agent. Management believes that this will be easily resolved as soon as more reserve shares are available. The Company currently owe’s approximately $40,000 in principal to Auctus.

On August 26, 2019, the Company reached preliminary settlement with Auctus Fund, LLC to their lawsuit served on July 25, 2019 (“Auctus”). While Auctus had alleged a default under their convertible promissory note with an original amount due of approximately $40,000 and claiming to now be owned $ 482,509 including principal, Interest, damages, defaults and other costs a settlement was reached whereby the Company has agreed to pay only $120,375. Management believes that it will continue to work directly with Auctus management to either pay the amount agreed or now that the reverse split has taken effect provide Auctus with sufficient stock to leach out stock sales to repay this obligation. However it should be noted that management has created a reserve for the full amount of the lawsuit of $482,509.

Item 1A. Risk Factors

The Company’s investors should consider the risks that could affect its business as set forth in Item 1A, Risk Factors, of its Annual Report on Form 10-K for the year ended December 31, 2018.

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 a risk limited controls and procedures. As a result of the aforementioned reason there is a limit on the amount of internal controls during our financial reporting process.

The Company’s Chief Financial Officer is currently the Chief Financial Officer of another company

The Company Chief Financial Officer is also the Chief Financial Officer 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 your Board of Directors

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

The 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 may control the Company.

Small customer base makes on dependent on a few customers

The Company currently has a small base of customers from which it derives its revenue. This could adversely affect the Company as it is dependent on a few customers for its current revenue.

There are a 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 of these convertible instrument convert into common stock, he 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.

Item 2. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Number		Description of Exhibit

31.1		8K- Amendment to Articles of Incorporation filed October 18, 2019.

31.2		8K- Share Exchange Agreement between 12 ReTech and Bluwire Group, LLC filed on October, 16 2019.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

12 ReTech Corporation

Date: November 19, 2019	By:	/s/ Angelo Ponzetta
		Angelo Ponzetta
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

12 ReTech Corporation

Date: November 19, 2019	By:	/s/ Angelo Ponzetta
		Angelo Ponzetta

	Its:	Chairman, Director, President,
		Chief Executive Officer,
		(Principal Executive Officer)

	By:	/s/ Daniele Monteverde
		Daniele Monteverde

	Its:	Director
		Secretary
		Treasurer
		Chief Operating Officer
		(Principal Accounting Officer)
		(Principal Financial Officer)