COLORSTARS GROUP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operation.

Edgar Glimpses |

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 . On , 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 to Three Months Ended

Net Sales. Net sales were $0 for the three months ended and $0 for the three months ended .

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

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

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

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

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

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

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

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



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Comparison of Six Months Ended to Six Months Ended

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

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

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

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

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

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

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

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

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

Financial Condition, Liquidity and Capital Resources

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

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



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

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



Recent Developments


There are no recent developments to report.



Inflation


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

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.



Related Party Transactions


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

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