12 RETECH : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS (kind 10-Q)

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

With the intended future launch of our social shopping app which is in
development in 2021 (see subsequent events), we intend to associate with other
retailers on a new shopping platform that will benefit both consumers and
retailers in new and exciting ways.

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

12 Retail operates its own retail outlet(s) as well as those of Bluwire Group,
LLC (“Bluwire”), that operates retail stores in airports (mainly in
international terminals) and casinos. Because of their locations mainly in
international terminals of airports, all Bluwire Company owned stores and all
but one royalty store remains closed due to Covid-19. 12 Retail will also serve
to demonstrate the effectiveness of the software technology created by 12 Tech
in improving revenues and profits for retailers as well as providing access to
other retailers through our soon-to-be-launched social shopping app, and through
our wholesale fashion business relationships.

12 Fashion Group, Inc., an Arizona Corporation, was formed on June 26, 2020, and
operates our fashion wholesale and direct to consumer brands, including Rune
NYC, Social Sunday, and Red Wire Design, as well as consolidating remaining
operations from our other smaller fashion acquisitions.

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

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

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

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Principal subsidiaries

The details of the principal subsidiaries of the Company as of December 31,
2020, are set out as follows (additional consolidation may occur in the future):

Attributable
Name of Place of Date of Acquisition Equity
Company Incorporation Incorporation Date Interest % Business
12 Retail Arizona, USA Sept. 18, Formed by Includes the operations of
Corporation 2017 12 ReTech Bluwire Group, LLC (acquired
(“12 Corporation October 1, 2019), and its
Retail”)

subsidiaries and as its own

100

% operations.

12 Fashion Arizona, USA June 26, 2020 Formed by Includes the operations of
Group Inc 12 ReTech

Red Wire Group, LLC (acquired

Corporation February 19, 2019, now
defunct), Rune NYC, LLC

(acquired March 14, 2019),

and Social Decay, LLC dba

Social Sunday (acquired

November 01, 2019) and other

100

% brands

12 Tech Inc Arizona, USA Dec 26,2019 Formed by

Includes the operations and

12 ReTech

Intellectual Properties of 12

Corporation

Japan Limited (acquired July

31, 2017), 12 Hong Kong

Limited) acquired July 31,

2017), and 12 Europe AG

(acquired October 26, 2017,

now defunct), and its own
100 % operations

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Business and Operations

12 ReTech Corporation is a Technology company that is creating software that
management believes will create new platforms and tools for smaller retailers to
compete with major companies like Amazon and Walmart and delight consumers. To
better understand the entire retail environment the Company has acquired
operating companies that sell direct to consumers online and in physical stores
as well as to other retailers. These acquisitions, in addition to providing
current revenue to the Company management believes that they will provide entree
to other retailers for the sale and or licensing of our technology solutions.

From an operating perspective, 12 ReTech Corporation is a holding company with
three main operating companies that themselves may now and/or in the future own
other subsidiaries. They are: 12 Retail Corporation which now operates our
casino stores and subsidiaries Bluwire Group, LLC, 12 Fashion Group, Inc, that
operates our fashion brands and wholesale manufacturing brands, and 12 Tech Inc
that designed and develops our retail software.

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

Effects on us of the Covid-19 Pandemic

While the Company’s operations were severely impacted during 2020 from the
Covid-19 pandemic, the lock downs, stay at home orders, and reductions capacity
limits in retail stores and restaurants and restriction on travel Management
used that time to tighten up our operations, raise capital and focus on creating
our Social Shopping App that we believe will be the future of retail. For more
details on the effect of Covid-19 and our operations in 2020 please see our Form
10-k for the 12 month period ended December 31, 2020 and subsequent events
therein.

Financing and Convertible Debt

During the period June 2017 until July 2021 the Company financed most of its
operations, acquisitions and technology through convertible debt. The issue with
convertible debt is the dilution that our shareholders experienced as these debt
holders converted their debt to common stock and then sold that common stock
into the market.

During 2020 and the first 6 months of 2021 the Company raised $449,450 in new
convertible debt and the existing debt holders converted their older debt in the
amount of $ 528,780 into 6,158,277,145 shares of common stock. At June 30, 2021
the Company owed $1,135,893 in convertible debt, held a default reserve of
$1,732,106 and maintained a derivative liability reserve of $ 6,062,003.

During 2020 the Company received $294,882 in PPP funds from the SBA under the
CARES Act (“ACT:) During this quarter the Company was able to have the SBA
forgive $70,200 in accordance with the ACT requirements leavening a PPP balance
of $ 224,682 which management believes will also be forgiven under the ACT.
After June 30, 2021, the Company was able to have the SBA forgive an additional
$166,435 leaving a remaining balance of $58,247 in PPP loans from 2020. In the
event that none of these additional PPP loans are not forgiven then the Company
will begin making payments of $2,451 per month. During 2021, the company also
received $302,602 in PPP funds. The company will also ask for these funds to be
forgiven in accordance with CARES ACT.

Also during 2020 the Company received $325,300 in EIDL Funds from the SBA. These
funds carry a 3.75% annual interest and the Company will begin making aggregate
monthly payments of $1,588 over the next 360 months.

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Results of Operations

Three Ended June 30,2021 and 2020.

Revenues

During the three months ended June 30, 2021 our revenue increased to $183,299
from $114,974 for the three months ended June 30, 2020, an increase of $68,325
or 59%, which is primarily the result of new Bluwire store.

Cost of revenues

During the three months ended June 30, 2021 we incurred costs associated with
the delivery of our products in the amount of $120,644, as compared to $75,769
for the comparable period in 2020. These expenses are related to costs of
manufacturing goods.

General and Administrative

Our general and administrative expenses for the three months ended June 30, 2021
were $407,729, an increase of $56,012, compared to $351,717 for the three months
ended June 30, 2020. This is primarily due to salary for personnel associated
with Bluwire stores.

Professional fees

Our professional fees for the three months ended June 30, 2021 increased by
$15,342 to $158,136, compared to $142,794 for the three months ended June 30,
2020. Our professional fees include expenses related to our external auditors,
legal costs, and consultants.

Other Income and Expense

Our other expenses increased by $12,925,769 to a net other expense of
$11,639,025 for the three months ended June 30, 2021 compared to other income of
$1,286,744 for the three months ended June 30, 2020. The majority of the
increase is due a increase in loss on derivative liability of $11,749,702, and
increase in interest expense of $1,580,691 partially offset by an decrease in
general default reserve expense of $314,550 and a decrease in other income of
$90,074. There are two main components of the increase of the 2021 Other Expense
category:

1. There was an increase in loss of derivative liability of $11,749,702 to

$10,244,460 from gain of $1,505,242 for the three months ended June 30, 2021

compared to three month ended June 30, 2020.

2. There was an increase of $1,580,691 in interest expense to $1,681,479 from

$100,788 for the period ended June 30, 2021 compared to the period June 30,

2020. The increase in interest expense is related to the cost of convertible

notes and the cost of convertible preferred stock during the same period.

Net Loss

For the three months ended June 30, 2021, we incurred of a net loss of
$12,157,721 compared to a net gain of $755,303 for the three months ended June
30, 2020. This decrease in net loss is primarily the result of the decrease

in
net other expense.

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 in the new post Covid-19 contactless environment.

Six Months Ended June 30, 2021 and 2020

Revenue

During the six months ended June 30, 2021 our revenue decreased to $320,727 from
$522,762, a decrease of $202,035 or 39%, compared to the six months ended June
30, 2020. The loss of revenues is as a result of the global pandemic due to
COVID 19 on our Bluwire subsidiary. Our only open subsidiary is located in the
state of Connecticut which fully reopening during the second quarter of 2021 and
caused a significant decrease in traffic at the Mohegan Sun. The company has not
yet opened our Dulles and Newark locations due to the COVID pandemic. The
Company hopes that this behavior will stabilize and that this location will see
a more normal level of traffic, not withstanding any unforeseen changes due

to
COVID 19 in that state.

Cost of revenue

During the six months ended June 30, 2021 we incurred costs associated with the
delivery of our products in the amount of $215,709, compared to $271,161 for the
comparable period in 2020. These expenses are related to costs of manufacturing
goods.

General and Administrative

Our general and administrative expenses for the six months ended June 30, 2021
were $747,348, a decrease of $311,225, compared to $1,058,573 for the six months
ended June 30, 2020. This decrease is primarily due result of impact due to
COVID 19 and forced closure of operations during many months.

Professional fees

Our professional fees for the six months ended June 30, 2021 decreased by
$32,331 to $302,171, compared to $334,502 for the six months ended June 30,
2020. Our professional fees include expenses related to our external auditors,
legal costs, and consultants. In order to preserve our subsidiaries operations,
the company conserved on spending during 2020 and 2021.

Depreciation and amortization

Our depreciation expense for the six months ended June 30, 2021 were $32,209, a
decrease of $163,213 or 84% when, compared to $195,422 for the six months ended
June 30, 2020. Our depreciation and amortization expense includes intangibles
and leasehold improvements added October 1, 2019 as part of the Bluwire
acquisition. The company had fully depreciated most of these assets as of
December 31, 2020 and as such there was less fix assets to depreciate in 2021.

Other Income and Expense

Our other expenses decreased by $8,547,053 to a net other expense of $726,601
for the six months ended June 30, 2021 compared to $9,273,654 for the six months
ended June 30, 2020. There are two main components of the increase of the 2021
Other Expense category:

1. A decrease in loss on derivative liability of $9,841,979 to gain of $830,299
from loss of $9,011,680 which is the result of the calculation of derivative
liability using Black-Scholes.

2. The significant increase in interest expense of $1,544,214. There was an
increase in interest expense to $1,780,801 from $236,587 for the period ended
June 30, 2021 compared to the period June 30, 2020. This is related to the cost
of convertible notes and the cost of convertible preferred stock during the

same
period.

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Net Loss

As a result of the foregoing, for the six months ended June 30, 2021, we
incurred of a net loss of $1,703,351 compared to a comprehensive net loss of
$10,609,591 for the six months ended June 30, 2020. This increase in net loss is
primarily the result of the increase in net other expense.

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.

Consolidation of Operations

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

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

During the transition, Red Wire Group had a number of customer projects where
they had taken deposits (typically 50% of total project revenues) and could not
finish the project in its own factory. 12 Fashion Group found manufacturing
partners who were willing to finish each and every unfinished project. The
completed projects were to be invoiced for the remainder of the balances due and
the resultant payments would be used to pay the manufacturing partners for their
services. Some of these projects still remain unfinished at the time of the
filing this report due to the government mandated closures. Through our efforts
and good communication most of these customer relationships were salvaged, and
we can expect that 12 Fashion Group will continue to receive business from these
former customers of Red Wire Group.

This salvage operation allowed the Company to recognize revenues and expenses as
it would have done if Red Wire Group had completed their projects on their own.
However, there was a negative cash flow effect as all the resultant collected
accounts receivables generated by these projects went out to pay the
manufacturing partners. Management expects this to negatively affect gross
margins for the Company in the upcoming financial reports of the 1st quarter of
2021. Going forward in the second half of 2021, Management expects gross margins
to return to levels of between 30% and 40% for the 12 Fashion Group business.

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

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

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

In another consolidation of operations and expenses, Management partially
consolidated the operations of 12 Japan into 12 Hong Kong. In so doing, we are
eliminating much of the overhead expenses of one of the Asian operations while
retaining the ability to service our existing customer base. As a subsequent
event, we have also received 2 million yen ($18,000) from the government of
Japan as a grant which management plans to use to try to expand our business in
Japan.

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

for
the balance of this year.

Liquidity and Capital Resources

The Company had met its current capital requirements primarily through the
issuance of debt-equity and preferred stock. With the resent acquisition and the
sale of the Medium Term Notes, Management believes it has sufficient working
capital to complete its business plans for the foreseeable future.

At June 30, 2021, cash and cash equivalents was $ 149,157 compared to $11,784 at
December 31, 2020.

Although, our business plan calls for high growth, we anticipate that we may
continue to incur operating losses during the next twelve months. Our prospects
must be considered in light of the risks, expenses, and difficulties frequently
encountered by companies at our stage, particularly companies in new and rapidly
evolving markets. Our roll up acquisition strategy seeks to mitigate some of
those risks, but until more acquisitions can be completed, consolidated, or we
successfully launch our Social Shopping App and we reap the benefits of these
activities, we cannot accurately include their results in our projection of cash
needs. However, we believe that we have sufficient cash on hand for the fore
foreseeable future.

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.

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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 June 30, 2021. Our total accumulated deficit as
of June 30, 2021 was approximately $16 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.

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 June 30, 2021. See Note 3 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 2020 Annual Report for a complete discussion of our
significant accounting policies and estimates.

Off-Balance Sheet Transactions

At June 30, 2021 and June 30, 2020, the Company did not have any transactions,
obligations or relationships that could be considered off-balance sheet
arrangements.

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