U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018March 31, 2019

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 000-54107

COLORSTARS GROUP

(Exact name of registrant as specified in its charter)

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

(Address of principal executive offices)

(949) 336-6161(+886) 2-8667-6600

(Registrant’s telephone number, including area code)

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

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

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

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

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

As of DecemberMay 10, 2018,2019, there were 102,274,515 shares of common stock, par value $0.001, issued and outstanding.

COLORSTARS GROUP

FORM 10-Q

INDEX

COLORSTARS GROUP

COLORSTARS GROUP

CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

TABLE OF CONTENTS

COLORSTARS GROUP

COLORSTARS GROUP

CONSOLIDATED BALANCE SHEETS

June 30, 2018(Unaudited)March 31, 2019(Unaudited) and December 31, 2017(Audited)2018(Audited)

(in USD)

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

COLORSTARS GROUP

COLORSTARS GROUP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(in USD)

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

COLORSTARS GROUP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSCOLORSTARS GROUP

(UNAUDITED)CONSOLIDATED STATEMENT OF CASH FLOWS

((UNAUDITED)

in USD)USD

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

COLORSTARS GROUP

CONSOLIDATED STATEMENTSTATEMENTS OF CASH FLOWSSTOCKHOLDERS’ (DEFICIT) EQUITY

(UNAUDITED)(IN US$)

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

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 – Nature of Business and Basis of Presentation

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

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

The company signed a joint venture agreement with an entity in the Kingdom of Saudi Arabia in February of 2019. According to this joint venture agreeemnt the company will be transformed into a holding company duetransfer its IPs, trade marks, and technologies in LED lighting to environmental changes at 2018.this new joint venture company. The company is seeking Investmentwill stop the LED lighting business line and pursue other business opportunities, in various business lines, including solar power projects, waste tire to oilwaste-tire-to-oil systems, and LNG trading projects.

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

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair statement of the financial position, results of operations and cash flows for the three and six months ended June 30,March 31, 2019 and 2018 and 2017 have been included. Operating results for the three and six months ended June 30, 2018March 31, 2019 are not necessarily indicative of the results to be expected for any subsequent interim period or for the year ending December 31, 2018.2019.

The balance sheet at December 31, 20172018 included herein was derived from the consolidated financial statements included in the Company’s Annual Report on Form 10-K as of that date. Accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017,2018, as filed with the Securities and Exchange Commission (“SEC”) on November 5, 2018.April 12, 2019.

Certain previouslyprevisouly reported amounts have been reclassifiedadjusted to conform to current-period presentation, althoughhowever there is no net effect onto the previously-reported financial informationinformation.

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

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has negative working capital of $88,233$281,720 and an accumulated deficit of $4,451,752$4,649,231 as of June 30, 2018,March 31, 2019, and it reported net losses for past two years. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 3 - Concentration of Risk

For the sixthree months ended June 30,March 31, 2019, products sold to largest customers accounted for approximately 54% of total revenue. No purchases occurred in this period

For the three months ended March 31, 2018, products sold to largest customers accounted for approximately 100% of total revenue. Products purchased from largest suppliers accounted for approximately 100% of the total purchases during the sixthree months ended June 30,March 31, 2018.

On Feb. 26, 2019, the company signed a joint venture agreement (JVA) with an entity in the Kingdom of Saudi Arabia (KSA). According to this JVA, the company shall make transfer of its patents, trademarks, and customer list to the new joint company to be formed. The company will also help to build an electronic manufacturing plant in the KSA, and to provide training of its staff and operators for the engineering, manufacturing, and selling of LED lighting products. For the six months ended June 30, 2017, products sold to largest customers accountedpatents and trademarks granted in the JVA, the company shall be compensated with US$1.5 million dollars in cash payment. In addition, for approximately 29%the technology and training support, the company shall be awarded with US$2.65 million dollars in the form of total revenue. Products purchased from two suppliers accountedshares in the new joint venture company, calculated based on fair price. The closing conditions for approximately 66%the cash payment and 27%the shares granted for the joint venture company are mainly (1) government approvals for the investment in the joint venture company for both parties, (2) formation of the total purchases duringjoint company, and (3) board approval of the six months ended June 30, 2017.joint venture company to undertake activities in the JVA. We are not sure when the Company will start the execution of the JVA and will receive the cash payment and share grants of the joint venture company.

Note 4 - Long Term Investments

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

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

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Anteya Technology Corp (Anteya) is a private company incorporated in Taiwan. The equity interest held by the Company is 13.68% on June 30, 2018.March 31, 2019.

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

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 5- Inventory

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

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

Note 6 - Income Taxes

The Company is subject to U.S. federal income tax as well as income tax in states and foreign jurisdictions(Taiwan). For the major taxing jurisdictions, the tax years 20162017 through 20182019 remain open for state and federal examination. The Company believes assessments, if any, would be immaterial to its consolidated financial statements. With respect to the foreign jurisdiction, the Company is no longer subject to income tax audits for the years prior to 20172018 (inclusive).

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The income tax provision information is provided as follows:

The income tax section listed above are taxes charged by the US federal, State and Local, and Foreign thorities for income taxes and taxes associated with doing business in the region.

Note 7 - Bank Short Term Debt

The Company signed revolving credit agreements withGiven the Company’s history of operating losses, a lending institution.. All loans were fully repaid on December 5, 2017.

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 8 - Long Term Loan

The Company signed sales with buyback agreementfull valuation of 5 million New Taiwan Dollars (US$164,542) with Chailease Finance Co., Ltd.the deferred tax assets related to the Company’s net operating losses has been recorded, resulting in July 2016. The loan is amortized to 36 months and the monthly repayment amount is basedno material impact on the remaining principal at the beginning of each 12 months. The interest rate is fixed at 6.37% per annum over the term of the agreement. For the first 12 months of the term the monthly repayment was $196,000 NTD (US$6,450) beginning in July 2016, and fixed for the following 12 months until June 2017. The monthly repayment was reduced to $168,000 NTD (US$5,529) beginning in July 2017, and fixed for the following 12 months until June 2018. However, the company made an overall repayment of the remaining amounts due of $2,283,954 NTD (US$75,161) on Feb. 13, 2018 and terminated this loan agreement. An imputed effective interest of $11,364 on this pay off was recognized as interest expense for the reporting period ended March 31, 2018. There is no more long term loans for the three months ended June 30, 2018.financial statements.

Note 97 - Geographic Information

Product revenues for the three and six months ended June 30,March 31, 2019 and 2018 and 2017 are as follows:

Note 108 - Related Party Transactions

The Company has recorded expenses for the following related party transactions for sixthree months ended June 30, 2018March 31, 2019 and 2017:2018:

Mr. Chen was willing to exempt the rent payment of the Company for the 6-month period ended June 30, 2018, as the Company was going through transformation and seeking new business opportunities. The rent payment will be forgiven only for the 9-month period ended September 30, 2018.COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

COLORSTARS GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company conducted business with a related party company Anteya Technology Corp. The Company owns 13.68% of the outstanding common stock of Anteya Technology Corp as of June 30,December 31, 2018. All transactions were at market-based prices. No (or very little) business activity took place between the Company and Anteya in the 2 years presented

Mr. Wei-Rur Chen made various advances to the Company as personal loan. This personal loan carried no interest and was payable upon request. For the six monthsyear ended June 30, 2018,March 31, 2019, advances from Mr. Chen was $91,919 and repayment to Mr. Chen totaled $267,678 and the net repayment was $175,759.$28,202. The balance of advance from Mr. Chen was $265,844$294,921 as of June 30, 2018.March 31, 2019.

Note 119 - Commitments

The company leases offices in Taiwan. The main office is relocated in New Taipei City with monthly rentalrent of NTD$120,000, and the term is from 11-7-2015 to 10-6-2020. The company rented a branch office located in Taipei City with a monthly rental of NTD$160,000 on 11-11-2017, and the term is from 12-1-2017 to 11-30-2019. However, this branch office is closed on April 10, 2018 and the lease is cancelled. The minimum future rental payments due under non-cancelable operating leases with remaining terms at June 30,lease of the main office remains in effect. Total rent paid for 3 months ended March 31, 2019 and 2018 are as follows:listed below:

Note 12 - Issuance of New Shares and Proceeds

The Company issued a totalfollowing table presents our contractual obligations and commitments as of 12,000,000 shares of Company common stock to 23 investors at a price per share of US $0.034188 for a total proceeds of US $410,256.38 on February 5, 2018. Part of this total proceeds of $199,967 was collected and deposited by the Company in the reporting period ended DecemberMarch 31, 2017 and was recorded as current liabilities. Upon the issuance of these new shares the current liabilities were reduced by the same amount for this reporting period. The proceeds were used for the repayment of the short-term loan and some of the shareholder's personal loan to the Company and fund for operations.2019:

Note 1310 -Subsequent Events

The Company evaluated all events subsequent to June 30, 2018Mar 31, 2019 through the date of the issuance of the financial statements, there are no other significant or material transactions to be reported except as follows:reported.

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

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

On November 10, 2018, Mr. Hsui-Fu Liu resigned as a Director of the Company . His resignation was not the result of any disagreements with the Company.

On November 29, 2018, the remaining two directors on the Board of Directors of the Company appointed Mr. Michael W. Chung to the Board of Directors to fill the vacancy created by the resignation of Mr. Liu Hsiu-Fu.

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

Forward Looking Statements

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

Overview

(a)Business Overview.

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

(b)Material Transactions During the Reporting Period.

None.

Results of Operations

Comparison of Three Months Ended June 30, 2018March 31, 2019 to Three Months Ended June 30, 2017March 31, 2018

Net Sales.Net sales decreasedincreased to $0$6,768 for the three months ended June 30, 2018,March 31, 2019, from $1,992$1,185 for the three months ended June 30, 2017.March 31, 2018. The decreaseincrease in sales was due to global competition and lacksales of new products launching this period.inventory items to existing customers.

Cost of Goods Sold.Cost of goods sold decreased to $0 for the three months ended June 30, 2018March 31, 2019, from $1,526$597 for the three months ended June 30, 2017.March 31, 2018. The decrease in cost of goods sold was primarily due to the decrease in overall sales.goods are from existing inventory itesm.

Gross Profit.Gross profit decreasedincreased to $0$6,768 for the three months ended June 30, 2018March 31, 2019, from $466$588 for the three months ended June 30, 2017.March 31, 2018. The decreaseincrease in gross profit was primarily due to the decreaseincrease in overall sales.

Gross Profit Percentage.Gross profit percentage decreasedincreased to 0%100% for the three months ended June 30, 2018March 31, 2019, from 23.39%49.6% for the three months ended June 30, 2017.March 31, 2018. The decreaseincrease in gross profit percentage was due to no saleshigh margin items sold for smaller quantities from the period.existing inventory.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased to $77,717$17,389 for the three months ended June 30, 2018March 31, 2019, from $84,220$21,053 for the three months ended June 30, 2017.March 31, 2018. The decrease in selling, general and administrative expenses is primarily relatedwas due to employee lay-off expense during the 2017 period.decrease in maintenance and repair cost and business meeting expenses.

Research and Development Expenses. Research and development (R&D) expenses were $0 for the three months ended June 30, 2018 as compared toMarch 31, 2019, from $0 for the three months ended June 30, 2017.March 31, 2018. The lack of research and development expenditure was due to overall lack of profitability.

Depreciation and Amortization.Depreciation and amortization decreased to $448$394 for the three months ended June 30, 2018March 31, 2019, from $1,802$470 for the three months ended June 30, 2017. The decrease in depreciation and amortization was mainly due to the decrease of asset value over time.

Interest Expense. Interest expense decreased to $25 for the three months ended June 30, 2018 from ($5,450) for the three months ended June 30, 2017. The decrease in interest expense was due to overall repayment of long term loan.

Net Income (loss). For the three months ended June 30, 2018, we incurred a net loss of $(80,493) as compared to a net loss of $(98,807) for the three months ended June 30, 2017. The decrease in net loss was primarily a result of decrease in selling, general and administrative and rent expenses.

Comparison of Six Months Ended June 30, 2018 to Six Months Ended June 30, 2017

Net Sales.Net sales decreased to $1,182 for the six months ended June 30, 2018, from $18,597 for the six months ended June 30, 2017. The decrease in sales was due to global competition and lack of new products launching this period.

Cost of Goods Sold.Cost of goods sold decreased to $595 for the six months ended June 30, 2018 from $14,301 for the six months ended June 30, 2017. The decrease in cost of goods sold was primarily due to the decrease in overall sales.

Gross Profit.Gross profit decreased to $587 for the six months ended June 30, 2018 from $4,296 for the six months ended June 30, 2017. The decrease in gross profit was primarily due to the decrease in overall sales.

Gross Profit Percentage.Gross profit percentage increased to 49.66% for the six months ended June 30, 2018 from 23.1% for the six months ended June 30, 2017. The increase in gross profit percentage was primarily due to higher margin products were sold for the period inMarch 31, 2018.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased to 114,365 or the six months ended June 30, 2018 from $119,938 for the six months ended June 30, 2017. The decrease in selling, general and administrative expenses is primarily due to decrease in staff head count.

Research and Development Expenses. Research and development (R&D) expenses were $0 for the six months ended June 30, 2018 as compared to $0 for the six months ended June 30, 2017. The lack of research and development expenditure was due to overall lack of profitability.

Depreciation and Amortization.Depreciation and amortization decreased to $918 for the six months ended June 30, 2018 from $3,864 for the six months ended June 30, 2017. The decrease in depreciation and amortization was mainly due to some assets were of end of life value for the period.

Interest Expense. Interest expense increaseddecreased to ($11,308)$0 for the sixthree months ended June 30, 2018March 31, 2019, from ($10,533)$(1,364) for the sixthree months ended June 30, 2017.March 31, 2018. The increasedecrease in interest expense was due to acceleratedfull repayment of the long-term loan.

Net Income (loss). For the sixthree months ended June 30, 2018,March 31, 2019, we incurred a net loss of $(147,867)$(10,360) as compared to a net loss of $(147,498)$(67,411) for the sixthree months ended June 30, 2017.March 31, 2018. The increasedecrease in net loss is mainly due towas primarily a result of the decrease in net salesoperating expenses and gross profit.interest payout.

Financial Condition, Liquidity and Capital Resources

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

Net cash provided by (used in) operating activities.During the sixthree months ended June 30, 2018,March 31, 2019, net cash used inby operating activities was ($318,743)$(29,139) compared with $(179,001)$(249,607) used in operating activities for the sixthree months ended June 30, 2017.March 31, 2018. The cash flow used by operating activities in the three months ended March 31, 2019 was primarily the operational loss and account payable for Mr. Chen’s wages. The cash flow used in operating activities in the sixthree months ended June 30,March 31, 2018 was primarily the result of netoperational loss and transfer of proceeds paid in operations and receipts in advance and other current liabilities. The cash flow used in operating activities in the six months ended June 30, 2017 was primarily the result of the Company’s increase in accounts payable payments and operating net loss.by shareholders.

Net cash provided by (used in) financing activities. During the sixthree months ended June 30, 2018,March 31, 2019, net cash provided by financing activities was $146,961$28,202 compared with $171,629$261,232 provided for the three months ended March 31, 2018. The cash flow provided by investingfinancing activities forin the sixthree months ended June 30, 2017.March 31, 2019 was primarily from the advance of shareholders. The cash flow provided by financing activities in the three months ended March 31, 2018 was primarily the proceeds from issuance of new shares.

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

Recent Developments

There are no recent developments to report.

Inflation

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

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Related Party Transactions

The Company leases office space from Mr. Wei-Rur Chen. The Company leases office space from Mr. Wei-Rur Chen whichfor the monthly rent of NTD$120,000, and the term is from 11-7-2015 to 10-6-2020. The rent payments were $11,731 and $0 for the agreement is from November 2015 to November 2020 with amount rent of $45,000. Rent payments were $0 and $23,363 for the sixthree months ended June 30,March 31, 2019 and 2018, and 2017, respectively. Mr. Wei-Rur Chen owns one hundred percent (100%) interest in the lease agreement. Mr. Wei-Rur Chen is the President, Chief Executive Officer, Chief Financial Officer, and Chairman of the Board of the Company, as well as beneficial owner of more than five percent (5%) of the Company’s common stock.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures.

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

Changes in internal control over financial reporting.

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

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

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

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

On October 18, 2018, the Company had a pre-hearing telephone conference with the Commission regarding the Proceeding. During the pre-hearing conference, it was agreed that the Commission’s motion for summary disposition against the Company would bewas due on November 15, 2018; the Company’s opposition brief would bewas due on December 13, 2018; and that the Commission’s reply brief would bewas due on December 20, 2018. The2018, and such filings were made. In the pre-hearing telephone conference with the Commission, hasthe Commission offered the Company the alternative to consent to the revocation of the registration of the Company’s securities pursuant to Section 12 of the Exchange Act to avoid the time and cost associated with contesting the Proceeding. If the Company were to consent to the revocation of its registration, the Company would then need to file a registration statement (with two years of audited financials) with the Commission and cause that registration statement to become effective in order to reinstate the registration of the Company’s securities. It is the Company’s understanding from the pre-hearing conference with the Commission that the only remedy the Commission has for delinquent filers such as the Company, even if the filer becomes current by the date of the hearing, is the revocation of the registration of the Company’s securities pursuant to Section 12 of the Exchange Act. Therefore, the Company cannot provide any assurances that it will be able to avoid the revocation of the registration of the Company’s securities pursuant to Section 12 of the Exchange Act due to the Company becoming delinquent in its filings. If the registration of the Company’s securities is revoked, the Company intends to file a registration statement with the Commission to reinstate the registration of the Company’s securities. The Company cannot provide any assurances as to the timing of the filing and effectiveness of such a registration statement.

Item 1A. Risk Factors.

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

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

(a)Unregistered Sales of Equity Securities.

None.

(b)Use of Proceeds.

Not applicable.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

INDEX TO EXHIBITS

SIGNATURES

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