BTCS Inc. - Annual Report: 2010 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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[X]
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended April 30, 2010
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
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For the transition period from _________ to ________
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Commission file number: 333-151252
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TouchIT Technologies, Inc.
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(Exact name of registrant as specified in its charter)
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Nevada
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26-2477977
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Ataturk Bulvari Ali RizaEfendicd. A 4 Blok No.4
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TrakyaSerbestBolge, Istanbul, Turkey
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(Address of principal executive offices)
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(Zip Code) | |
| Registrant’s telephone number: +44 207 858 1045 | ||
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Securities registered under Section 12(b) of the Exchange Act:
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Title of each class Name of each exchange on which registered
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none
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not applicable
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Securities registered under Section 12(g) of the Exchange Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $0.001
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not applicable
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 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 [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 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]
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed fiscal quarter. $15,000
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 7,000,000 as of April 30, 2010.
PART I
EXPLANATORY NOTE
TouchIT Technologies, Inc. (the “Company”) was incorporated in the State of Nevada as “Hotel Management Systems, Inc.” (“HMSI”). After HMSI's fiscal year end of April 30, 2010, the Company entered into a share exchange agreement, dated May 7, 2010 (“Share Exchange”) whereby HMSI effectively ceased doing business as HMSI. The Share Exchange is more fully described in the 8-K filed by the Company with the Securities and Exchange Commission on May 12, 2010. In connection with the Share Exchange, the Company changed its fiscal year end from April 30 to December 31 and amended its Articles of Incorporation to change its name to TouchIT Technologies, Inc. This report shall cover the transition period of HMSI up through April 30, 2010, and the description of the business and financial information provided herein will be the business and financials of HMSI and not the Company as the business changed pursuant to the Share Exchange. To see the business of the Company please see the 8-K filed by the Company with the Securities and Exchange Commission on May 12, 2010 or the Company’s 10-Q filed on May 24, 2010.
Item 1. Business
We were incorporated as “Hotel Management Systems” on April 15, 2008, in the State of Nevada for the purpose of developing, perfecting and marketing our proprietary software program, the “Hotel Management Tool” or “HMT.” Our HMT software is designed to allow hotel or motel operators and their employees to manage the day-to-day operations of their business through a single system which coordinates the various operational functions of the enterprise. Ours is a scalable application that can grow with the customer’s business by adding additional capacity and accommodating more robust data base systems as the user’s operations expand. The product offers a tiered security system, is self-updating, and is fully customizable to the specific needs of the customer.
The “Hotel Management Tool” Software
The “Hotel Management Tool” software offers hotel operators a single software platform which integrates all major aspects of the day-to-day management of their enterprise. Although the HMT is fully customizable and able to incorporate additional modules, our standard version will feature three basic modules that deal with those hotel operating functions which can be most easily improved by the use of our software platform: Product and Supplies Management, Employee Data, and Employment Counseling and Reporting.
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Product and Supplies Management
This module of the HMT software will allow hotel management to track and manage its inventory of supplies and in-room products like shampoo, soap, and similar items. All of the supplies and in-room products commonly used by the hotel can be input into a database which will contain any necessary item or catalog numbers for each individual product. The hotel’s management will also input unit cost and a desired minimum and maximum quantity of hand for each product:
On a daily or other periodic basis, the hotel’s employees will then record inventory through the use of a count worksheet:
The hotel’s quantity on hand is then updated in a separate screen. As the minimum quantity on hand is approached, the HMT will know which products to re-order and in what quantity to order them and will produce the appropriate product order:
Employee Data Management
This module of the HMT software will allow for easy maintenance of a complete and user-friendly employee database. Through a series of screens, the employee’s personal information, contact and emergency information, and work-related information can be easily input and maintained by management:
Employment Counseling and Reporting
The third standard module to be included in the HMT software will allow hotel management to accurately record and track employee disciplinary incidents and any related counseling sessions with employees through a user-friendly data screen:
In the event that an employee must be terminated, a full record and evaluation of the employee’s attendance, cooperation, initiative, job knowledge, and over work quality can be easily input by management. The HMT will then generate a written report that can be given to the employee. The employee will sign a receipt of the report, which can be stored in the hotel’s permanent records:
Additional Standard Features
Together with the standard set of functions summarized above, the HMT offers some important standard features.
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Self-updating: The HMT automatically checks for newer versions of the software, available upgrades, and software updates. The software is updated automatically on a continuous basis, ensuring maximum performance and user satisfaction.
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Tiered Security: The HMT features a tiered security system with a separate login and set of security credentials for each employee of the hotel who will be using the program. Management can easily structure these security credentials to allow different levels and types of access to the HMT’s different functions depending upon the level of each employee’s security credentials.
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Fully Scalable: The HMT is fully scalable, which means that its capacity can grow and expand with the customer’s business. The software can easily add additional capacity and new features and can accommodate more robust database systems as the customer’s business operations become larger and more complex.
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Customization and Additional Modules Available
In addition to the 3 standard modules described above, the HMT can easily accommodate additional segments dealing with different aspects of the hotel and motel business. The core of the program is designed to operate as hub, with different sets of functions that can be added or subtracted to the core system like spokes on a wheel. Nearly every operating hotel already uses some type of reservation software and some type of employee timekeeping software. Once they have begun using our standard product, however, many customers may desire a more total and cost-effective integration of their operations. Additional modules that are ready to add-on to the HMT at the customer’s request include the following.
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Room inventory and reservations system
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Employee scheduling
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Employee timekeeping and payroll
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Online product ordering from key suppliers
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Pricing and Revenue Model
Our intended pricing structure will feature a base purchase price for the standard version of the HMT software, with an extra charge for each additional module requested by the customer. We will also charge a small monthly license fee for all maintenance and updates of the software and for storage of the customer’s data.
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Standard version:
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$1,500
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Each additional module:
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$500-$1,000 depending on specifications
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Monthly fee Including data storage :
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$20 per month per site
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Monthly fee if Customer stores own data :
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$8 per month per site
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The customer’s ongoing contract for maintenance, updates, and data storage will be renewable annually at the option of the customer. Larger customers will substantial data storage needs or complex customizations may be charged higher fees. We believe this pricing model will position us well to compete for the business of smaller hotel and motel operators (i.e.: those with ten or fewer sites) who may be looking for a flexible and effective management software solution at lower price than that typically charged by larger competitors in the field.
Competition
The field of hotel management software is flooded with an array of options which focus primarily on room reservations and room inventory management. We will face several larger and more established competitors. In addition, many larger hotel and motel chains use proprietary systems built-for-hire to suit their particular operations. We intend to focus our efforts on small independent hotels, motels, inns, and bed-and-breakfast properties. We believe or HMT software will be well-positioned to compete for the business of these operators because of the following advantages.
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Our software is fully scalable. A hotel or motel owner can purchase a basic product for relatively low cost that will be able to grow with the enterprise if and when it expands.
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Our software is able to integrate all functions of the enterprise, not just reservations and room inventory management. We believe this all-in-one capability will appeal to smaller customers with limited staff and resources for managing and integrating different functions of the enterprise by hand or through the use of multiple software products.
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We are a small company that will be focused on responsive and timely customer service.
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Intellectual Property
We have applied for copyright registration of the HMT software and we intend to aggressively assert our rights under trade secret, unfair competition, trademark and copyright laws to protect our intellectual property, including software design, proprietary software code and related technologies, product research and concepts and recognized trademarks. These rights will be protected through the acquisition of copyright and trademark registrations, the maintenance of trade secrets, the development of trade dress, and, where appropriate, litigation against those who are, in our opinion, infringing these rights.
While there can be no assurance that registered trademarks and copyrights will protect our proprietary information, we intend to assert our intellectual property rights against any infringer. Although any assertion of our rights can result in a substantial cost to, and diversion of effort by, our company, management believes that the protection of our intellectual property rights is a key component of our operating strategy.
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Regulatory Matters
We are unaware of and do not anticipate having to expend significant resources to comply with any governmental regulations applicable to our planned operations. We are subject to the laws and regulations which are generally applicable to business operations, such as business licensing requirements, income taxes and payroll taxes.
Employees
We have no other employees other than our sole officer and director, John Baumbauer. Mr. Baumbauer is our President, CEO, CFO, and sole member of the Board of Directors. Mr. Baumbauer oversees all responsibilities in the areas of corporate administration, product development, and marketing.
Environmental Laws
We have not incurred and do not anticipate incurring any expenses associated with environmental laws.
Item 1A. Risk Factors.
A smaller reporting company is not required to provide the information required by this Item.
Item 1B. Unresolved Staff Comments
A smaller reporting company is not required to provide the information required by this Item.
Item 2. Property
We do not own any real property. We maintain our corporate office at 440 Waterwheel Falls Dr., Henderson, NV 89015.
Item 3. Legal Proceedings
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's shareholders during the fiscal year ended April 30, 2010.
PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is currently quoted on the OTC Bulletin Board (“OTCBB”), which is sponsored by FINRA. The OTCBB is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current "bids" and "asks", as well as volume information. Our shares are quoted on the OTCBB under the symbol “HMSM.”
The following table sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCBB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
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Fiscal Year Ending
April 30, 2010
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Quarter Ended
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High $
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Low $
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April 30, 2010
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$ | 0.01 | $ | 0.01 | ||||
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January 31, 2010
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$ | 0.01 | $ | 0.01 | ||||
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October 31, 2009
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$ | 0.01 | $ | 0.01 | ||||
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July 31, 2009
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$ | 0.01 | $ | 0.01 | ||||
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of April 30, 2010, we had 7,000,000 shares of our common stock issued and outstanding
Dividends
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:
1. we would not be able to pay our debts as they become due in the usual course of business, or;
2. our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.
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Securities Authorized for Issuance under Equity Compensation Plans
We have not adopted any equity compensation or incentive plans at this time.
Recent Sales of Unregistered Securities
None.
Item 6. Selected Financial Data
A smaller reporting company is not required to provide the information required by this Item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 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 affect 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.
Plan of Operation
The HMT software has been in development for over two years and has been extensively used and tested at a medium-sized motel in Las Vegas, Nevada. Following exposure of the product to the challenges of real-world use in an active environment, we made certain changes and improvements and development of the product is essentially complete at this time.
Due to certain unexpected demands on the time of our sole officer and director, John Baumbauer, have cause us to delay our plans.
As we pursue our planned operations, our sole officer and director, John Baumbauer, will provide his time to the business at no charge. Mr. Baumbauer will be responsible for all administrative duties as well as overseeing the final development and perfection of the HMT software, developing our sales and marketing information material, researching potential customers, and performing on-site product demonstrations and follow-up customer relations. As we have limited financial resources, Mr. Baumbauer can only dedicate a portion of his time to attending the needs of the business.
To the extent that Mr. Baumbauer’s outside professional duties not related to the company continue to make extraordinary demands on his time, our pace of operational development may continue to be adversely affected.
We do not have plans to purchase any significant equipment or change the number of our employees during the next twelve months.
We have no employees other than our president and CEO, Mr. Baumbauer.
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Results of Operations for the years ended April 30, 2010 and 2009
We have not earned any revenues since the inception of our current business operations. We are presently in the development stage of our business.
We incurred operating expenses and net losses in the amount of $59,163 for the year ended April 30, 2010. We have incurred total operating expenses and net losses in the amount of $101,937 from inception on April 15, 2008 through April 30, 2010. Our losses are attributable to operating expenses together with a lack of any revenues at our current stage of development. We anticipate our operating expenses will continue increase as we continue with our plan of operations.
Liquidity and Capital Resources
As of April 30, 2010, we had current assets in the amount of $4,422, consisting entirely of cash. We had current liabilities of $80,130 as of April 30, 2010. Thus, we had a working capital deficit of $75,708 as of April 30, 2010.
Our ability to operate through the duration of our third fiscal year is contingent upon us obtaining additional financing and/or upon realizing significant revenues during the fiscal year. We intend to fund continuing operations through debt and/or equity financing arrangements as necessary and available. Any funds realized by us from such efforts may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.
Going Concern
We have not yet generated any revenues, have limited liquidity, and have not completed our efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. We anticipate that we will be dependent, for the near future, on additional investment capital to fund operating expenses. We intend to position ourselves so that we may be able to raise additional funds through the capital markets. There are no assurances that we be successful in this or any of our endeavors or become financially viable and continue as a going concern.
Off Balance Sheet Arrangements
As of April 30, 2010, there were no off balance sheet arrangements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
Item 8. Financial Statements and Supplementary Data
See the financial statements annexed to this annual report.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
No events occurred requiring disclosure under Item 307 and 308 of Regulation S-K during the fiscal year ending April 30, 2010.
Item 9A(T). Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of April 30, 2010. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, Mr. John Baumbauer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of April 30, 2010, our disclosure controls and procedures are effective. There have been no significant changes in our internal controls over financial reporting during the quarter ended April 30, 2010 that have materially affected or are reasonably likely to materially affect such controls.
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Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Limitations on the Effectiveness of Internal Controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Management’s Annual Report on Internal Control over Financial Reporting
This annual report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the company's registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.
Changes in Internal Control over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following information sets forth the names of our current directors and executive officers, their ages as of April 30, 2010 and their present positions.
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Name
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Age
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Position(s) and Office(s) Held
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John Baumbauer
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45
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President, Chief Executive Officer, Chief Financial Officer, and Director
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Set forth below is a brief description of the background and business experience of each of our current executive officers and directors.
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John Baumbauer. Mr. Baumbauer is the creator of the HMT software and is our President, CEO, and sole director. Mr. Baumbauer has worked in the computer programming field for over 14 years and is proficient in the Visual Basic, Visual Basic .NET, C, C++, PASCAL, and COBOL programming languages. He has several years of experience using Visual Studio and Microsoft Visual Basic 6, developing SQL Procedures and DTS packages, and building custom/to-order computer systems. Mr. Baumbauer is also skilled with regard to networking, software and hardware installation and troubleshooting, and installation, troubleshooting, and usage of Windows 3.1/95/98/NT4/2000/XP/Vista. He is also experienced with Microsoft Word 97/2000/2003/2007, Microsoft Access 97/2000/2003/2007, Microsoft Excel 97/2000/2003/2007, SQL 6.5, 7.0, 2000 and 2005, and MySQL. In addition to the HMT software, Mr. Baumbauer has also designed a finance program, a rental program, a contract program, a mailing list program, inventory systems, and a customer service program.
Directors
Our bylaws authorize no less than one (1) director. We currently have one Director.
Term of Office
Our Directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past five years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Audit Committee
We do not have a separately-designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and
Code of Ethics
As of April 30, 2010, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Item 11. Executive Compensation
Compensation Discussion and Analysis
The Company presently not does have employment agreements with any of its named executive officers and it has not established a system of executive compensation or any fixed policies regarding compensation of executive officers. Due to financial constraints typical of those faced by a development stage business, the company has not paid any cash and/or stock compensation to its named executive officers
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Our sole executive officer holds substantial ownership in the Company and is motivated by a strong entrepreneurial interest in developing our operations and potential revenue base to the best of his ability. As our business and operations expand and mature, we expect to develop a formal system of compensation designed to attract, retain and motivate talented executives.
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to each named executive officer for our last two completed fiscal years for all services rendered to us.
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SUMMARY COMPENSATION TABLE
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Name and
principal position
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Year
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Salary
($)
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Bonus
($)
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Stock Awards
($)
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Option
Awards
($)
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Non-Equity
Incentive Plan
Compensation
($)
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Non-qualified
Deferred
Compensation
Earnings ($)
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All Other
Compensation
($)
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Total
($)
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John Baumbauer, President, CEO, CFO, and director
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2008
2009
2010
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0
0
0
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0
0
0
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0
0
0
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0
0
0
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0
0
0
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0
0
0
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0
0
0
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0
0
0
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Narrative Disclosure to the Summary Compensation Table
Our named executive officers do not currently receive any compensation from the Company for their service as officers of the Company.
Outstanding Equity Awards At Fiscal Year-end Table
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer outstanding as of the end of our last completed fiscal year.
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
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OPTION AWARDS
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STOCK AWARDS
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Name
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Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
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Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
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Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
or Shares
of
Stock That
Have
Not
Vested
(#)
|
Market
Value
of
Shares
or
Shares
of
Stock
That
Have
Not
Vested
($)
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Shares or
Other
Rights
That Have
Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Shares or
Other
Rights
That
Have Not
Vested
(#)
|
|
John Baumbauer
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
11
Compensation of Directors Table
The table below summarizes all compensation paid to our directors for our last completed fiscal year.
|
DIRECTOR COMPENSATION
|
|||||||
|
Name
|
Fees Earned or
Paid in
Cash
($)
|
Stock Awards
($)
|
Option Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
John Baumbauer
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Narrative Disclosure to the Director Compensation Table
Our directors do not currently receive any compensation from the Company for their service as members of the Board of Directors of the Company.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of April 30, 2010, the beneficial ownership of our common stock by each executive officer and director, by each person known by us to beneficially own more than 5% of the our common stock and by the executive officers and directors as a group. Except as otherwise indicated, all shares are owned directly and the percentage shown is based on 7,000,000 shares of common stock issued and outstanding on April 30, 2010.
|
Title of class
|
Name and address of beneficial owner
|
Amount of
beneficial ownership
|
Percent
of class*
|
|
Common
|
John Baumbauer
440 Waterwheel Falls Dr., Henderson, NV 89015
|
5,500,000
|
78.57%
|
|
Common
|
Total all executive officers and directors
|
5,500,000
|
78.57%
|
|
Common
|
5% Shareholders
|
||
|
None
|
As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date.
12
The persons named above have full voting and investment power with respect to the shares indicated. Under the rules of the Securities and Exchange Commission, a person (or group of persons) is deemed to be a "beneficial owner" of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our common stock.
Item 13. Certain Relationships and Related Transactions, and Director Independence
None of the following parties has, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
|
Any of our directors or officers;
|
|
Any person proposed as a nominee for election as a director;
|
|
Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock;
|
|
Any of our promoters;
|
|
Any relative or spouse of any of the foregoing persons who has the same house address as such person.
|
Item 14. Principal Accounting Fees and Services
Below is the table of Audit Fees (amounts in US$) billed by our auditor in connection with the audit of the Company’s annual financial statements for the years ended:
|
Financial Statements for the
Year Ended April 30
|
Audit Services
|
Audit Related Fees
|
Tax Fees
|
Other Fees
|
|
2010
|
$7,000
|
$
|
$0
|
$0
|
|
2009
|
$7,625
|
$
|
$0
|
$0
|
|
2008
|
$6,000
|
$
|
$0
|
$0
|
13
PART IV
Item 15. Exhibits, Financial Statements Schedules
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TouchIT Technologies, Inc f/k/a Hotel Management Systems, Inc.
|
By:
|
/s/ Andrew Brabin
|
|
Andrew Brabin, Chief Financial Officer
|
|
|
August 13, 2010
|
In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
|
By:
|
/s/ Andrew Brabin
|
|
Andrew Brabin, Chief Financial Officer and Director
|
|
|
August 13, 2010
|
|
14
Silberstein Ungar, PLLC CPAs and Business Advisors
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Hotel Management Systems, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheets of Hotel Management Systems, Inc. (the “Company”) as of April 30, 2010 and 2009, and the related statements of operations, stockholders’ deficit, and cash flows for the periods then ended and for the period from April 15, 2008 (Date of Inception) through April 30, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hotel Management Systems, Inc. as of April 30, 2010 and 2009 and the results of its operations and its cash flows for the periods then ended and the period from April 15, 2008 (Date of Inception) through April 30, 2010 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has negative working capital, has not yet received revenue from sales of products or services, and has incurred losses from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 2. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ SilbersteinUngar, PLLC
Bingham Farms, Michigan
August 11, 2010
15
HOTEL MANAGEMENT SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF APRIL 30, 2010 AND 2009
|
2010
|
2009
|
|||||||
|
ASSETS
|
||||||||
|
Current assets
|
||||||||
|
Cash and cash equivalents
|
$ | 4,422 | $ | 19,281 | ||||
|
Total Assets
|
$ | 4,422 | $ | 19,281 | ||||
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
||||||||
|
LIABILITIES
|
||||||||
|
Current Liabilities
|
||||||||
|
Accrued expenses
|
$ | 80,130 | $ | 35,826 | ||||
|
Total Liabilities
|
80,130 | 35,826 | ||||||
|
STOCKHOLDERS’ DEFICIT
|
||||||||
|
Common stock, $.001 par value, 100,000,000 shares
authorized, 67,200,001 and 7,000,000 shares issued and outstanding, respectively
|
67,200 | 7,000 | ||||||
|
Additional paid in capital
|
0 | 19,229 | ||||||
|
Deficit accumulated during the development stage
|
(142,908 | ) | (42,774 | ) | ||||
|
Total Stockholders’ Deficit
|
(75,708 | ) | (16,545 | ) | ||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$ | 4,422 | $ | 19,281 | ||||
16
HOTEL MANAGEMENT SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED APRIL 30, 2010 AND 2009
FOR THE PERIOD FROM APRIL 15, 2008 (INCEPTION) TO APRIL 30, 2010
|
Period ended April 30, 2010
|
Period ended April 30, 2009
|
Period from April 15, 2008 (Inception) to April 30, 2010
|
||||||||||
|
REVENUES
|
$ | 0 | $ | 0 | $ | 0 | ||||||
|
OPERATING EXPENSES
|
||||||||||||
|
General and administrative
|
59,163 | 42,774 | 101,937 | |||||||||
|
TOTAL OPERATING EXPENSES
|
59,163 | 42,774 | 101,937 | |||||||||
|
NET LOSS BEFORE INCOME TAXES
|
(59,163 | ) | (42,774 | ) | (101,937 | ) | ||||||
|
PROVISION FOR INCOME TAXES
|
0 | 0 | 0 | |||||||||
|
NET LOSS
|
$ | (59,163 | ) | $ | (42,774 | ) | $ | (101,937 | ) | |||
|
NET LOSS PER SHARE: BASIC AND DILUTED
|
$ | (0.00 | ) | $ | (0.00 | ) | ||||||
|
WEIGHTED AVERAGE SHARES OUTSTANDING: BASIC AND DILUTED
|
67,200,001 | 65,069,587 | ||||||||||
17
HOTEL MANAGEMENT SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
AS OF APRIL 30, 2010
|
Common stock
|
Additional paid-in
|
Deficit accumulated during the development
|
||||||||||||||||||
|
Shares
|
Amount
|
capital
|
stage
|
Total
|
||||||||||||||||
|
Issuance of common stock for cash to founders
|
5,500,000 | $ | 5,500 | $ | - | $ | - | $ | 5,500 | |||||||||||
|
Balance, May 1, 2008
|
5,500,000 | 5,500 | - | - | 5,500 | |||||||||||||||
|
Issuance of common stock for cash in private placement
|
1,500,000 | 1,500 | 13,500 | - | 15,000 | |||||||||||||||
|
Contributed capital
|
- | - | 5,729 | - | 5,729 | |||||||||||||||
|
Net loss for the year ended April 30, 2009
|
- | - | - | (42,774 | ) | (42,774 | ) | |||||||||||||
|
Balance, April 30, 2009
|
7,000,000 | 7,000 | 19,229 | (42,774 | ) | (16,545 | ) | |||||||||||||
|
Adjustment re: April 2, 2010 8.6 to 1 stock dividend
|
60,200,001 | 60,200 | (19,229 | ) | (40,971 | ) | - | |||||||||||||
|
Net loss for the year ended April 30, 2010
|
- | - | - | (59,163 | ) | (59,163 | ) | |||||||||||||
|
Balance, April 30, 2010
|
7,000,000 | $ | 67,200 | $ | - | $ | (142,908 | ) | $ | (75,708 | ) | |||||||||
18
HOTEL MANAGEMENT SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED APRIL 30, 2010 AND 2009
FOR THE PERIOD FROM APRIL 15, 2008 (INCEPTION) TO APRIL 30, 2010
|
Period ended April 30, 2010
|
Period ended April 30, 2009
|
Period from April 15, 2008 (Inception) to April 30, 2010
|
||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
|
Net loss for the period
|
$ | (59,163 | ) | $ | (42,774 | ) | $ | (101,937 | ) | |||
|
Changes in assets and liabilities:
|
||||||||||||
|
Increase in accrued expenses
|
44,304 | 35,826 | 80,130 | |||||||||
|
CASH FLOWS USED IN OPERATING ACTIVITIES
|
(14,859 | ) | (6,948 | ) | (21,807 | ) | ||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
|
Proceeds from sale of common stock
|
0 | 20,500 | 20,500 | |||||||||
|
Contributed capital
|
0 | 5,729 | 5,729 | |||||||||
|
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
|
0 | 26,229 | 26,229 | |||||||||
|
NET INCREASE (DECREASE) IN CASH
|
(14,859 | ) | 19,281 | 4,422 | ||||||||
|
Cash, beginning of period
|
19,281 | 0 | 0 | |||||||||
|
Cash, end of period
|
$ | 4,422 | $ | 19,281 | $ | 4,422 | ||||||
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
||||||||||||
|
Interest paid
|
$ | 0 | $ | 0 | $ | 0 | ||||||
|
Income taxes paid
|
$ | 0 | $ | 0 | $ | 0 | ||||||
19
HOTEL MANAGEMENT SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 2010
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Hotel Management Systems, Inc. (the Company) was incorporated in the State of Nevada on April 15, 2008. The Company was engaged in the principal business activity of providing hotel management. The Company has not realized significant revenues to date and therefore is classified as a development stage company. On May 12, 2010, we changed our name to TouchIT Technologies, Inc. See Note 7.
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 at the date of the balance sheet. Actual results could differ from those estimates.
Basic Loss Per Share
Basic loss per share has been calculated based on the weighted average number of shares of common stock outstanding during the period.
Comprehensive Income
The Company has which established standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose this information on its Statement of Stockholders’ Equity (Deficit). Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. The Company has not had any significant transactions that are required to be reported in other comprehensive income.
Income Tax
Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized.
Cash and Cash Equivalents
TheCompanyconsidersallhighlyliquidinvestmentswiththeoriginalmaturitiesofthreemonthsorlessto be cash equivalents.
Accounting Basis
The basis is accounting principles generally accepted in the United States of America. The Company has adopted an April 30 fiscal year end.
20
HOTEL MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 2010
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-based compensation.
For the years ended April 30, 2010 and 2009, the Company has not issued any share-based payments to its employees.
Under the modified prospective method the Company uses, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date estimated fair value.
Recently Issued Accounting Pronouncements
In June 2009, the FASB approved the “FASB Accounting Standards Codification” (the “Codification”) as the single source of authoritative nongovernmental U.S. GAAP which went in effect on July 1, 2009. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative. The Codification is effective for interim and annual periods ending after September 15, 2009. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows.
In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-04, Accounting for Redeemable Equity Instruments - Amendment to Section 480-10-S99, which represents an update to section 480-10-S99, distinguishing liabilities from equity, per EITF Topic D-98, Classification and Measurement of Redeemable Securities. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.
In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-05, Fair Value Measurement and Disclosures Topic 820 – Measuring Liabilities at Fair Value, which provides amendments to subtopic 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. This Update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: 1. A valuation technique that uses: a. The quoted price of the identical liability when traded as an asset b. Quoted prices for similar liabilities or similar liabilities when traded as assets. 2. Another valuation technique that is consistent with the principles of topic 820; two examples would be an income approach, such as a present value technique, or a market approach, such as a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability. The amendments in this Update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. The amendments in this Update also clarify that both a quoted price in an active market for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.
21
HOTEL MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 2010
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-08, Earnings Per Share – Amendments to Section 260-10-S99, which represents technical corrections to topic 260-10-S99, Earnings per share, based on EITF Topic D-53, Computation of Earnings Per Share for a Period that includes a Redemption or an Induced Conversion of a Portion of a Class of Preferred Stock and EITF Topic D-42, The Effect of the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.
In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-09, Accounting for Investments-Equity Method and Joint Ventures and Accounting for Equity-Based Payments to Non-Employees. This Update represents a correction to Section 323-10-S99-4, Accounting by an Investor for Stock-Based Compensation Granted to Employees of an Equity Method Investee. Additionally, it adds observer comment Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees to the Codification. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.
In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-12, Fair Value Measurements and Disclosures Topic 820 – Investment in Certain Entities That Calculate Net Assets Value Per Share (or Its Equivalent), which provides amendments to Subtopic 820-10, Fair Value Measurements and Disclosures-Overall, for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). The amendments in this Update permit, as a practical expedient, a reporting entity to measure the fair value of an investment that is within the scope of the amendments in this Update on the basis of the net asset value per share of the investment (or its equivalent) if the net asset value of the investment (or its equivalent) is calculated in a manner consistent with the measurement principles of Topic 946 as of the reporting entity’s measurement date, including measurement of all or substantially all of the underlying investments of the investee in accordance with Topic 820. The amendments in this Update also require disclosures by major category of investment about the attributes of investments within the scope of the amendments in this Update, such as the nature of any restrictions on the investor’s ability to redeem its investments a the measurement date, any unfunded commitments (for example, a contractual commitment by the investor to invest a specified amount of additional capital at a future date to fund investments that will be make by the investee), and the investment strategies of the investees. The major category of investment is required to be determined on the basis of the nature and risks of the investment in a manner consistent with the guidance for major security types in U.S. GAAP on investments in debt and equity securities in paragraph 320-10-50-1B. The disclosures are required for all investments within the scope of the amendments in this Update regardless of whether the fair value of the investment is measured using the practical expedient. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.
22
HOTEL MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 2010
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In January 2010, the FASB issued the FASB Accounting Standards Update No. 2010-01 Equity Topic 505 – Accounting for Distributions to Shareholders with Components of Stock and Cash, which clarify that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in Earnings Per Share (“EPS”) prospectively and is not a stock dividend for purposes of applying Topics 505 and 260 EPS). Those distributions should be accounted for and included in EPS calculations in accordance with paragraphs 480-10-25- 14 and 260-10-45-45 through 45-47 of the FASB Accounting Standards codification. The amendments in this Update also provide a technical correction to the Accounting Standards Codification. The correction moves guidance that was previously included in the Overview and Background Section to the definition of a stock dividend in the Master Glossary. That guidance indicates that a stock dividend takes nothing from the property of the corporation and adds nothing to the interests of the stockholders. It also indicates that the proportional interest of each shareholder remains the same, and is a key factor to consider in determining whether a distribution is a stock dividend.
In January 2010, the FASB issued the FASB Accounting Standards Update No. 2010-02 Consolidation Topic 810 – Accounting and Reporting for Decreases in Ownership of a Subsidiary – a Scope Clarification, which provides amendments to Subtopic 810-10 and related guidance within U.S. GAAP to clarify that the scope of the decrease in ownership provisions of the Subtopic and related guidance applies to the following:
|
1
|
A subsidiary or group of assets that is a business or nonprofit activity
|
|
2
|
A subsidiary that is a business or nonprofit activity that is transferred to an equity method investee or joint venture
|
|
3
|
An exchange of a group of assets that constitutes a business or nonprofit activity for a non-controlling interest in an entity (including an equity method investee or joint venture).
|
The amendments in this Update also clarify that the decrease in ownership guidance in Subtopic 810-10 does not apply to the following transactions even if they involve businesses:
|
1
|
Sales of in substance real estate. Entities should apply the sale of real estate guidance in Subtopics 360-20 (Property, Plant, and Equipment) and 976-605 (Retail/Land) to such transactions.
|
|
2
|
Conveyances of oil and gas mineral rights. Entities should apply the mineral property conveyance and related transactions guidance in Subtopic 932-360 (Oil and Gas-Property, Plant, and Equipment) to such transactions.
|
If a decrease in ownership occurs in a subsidiary that is not a business or nonprofit activity, an entity first needs to consider whether the substance of the transaction causing the decrease in ownership is addressed in other U.S. GAAP, such as transfers of financial assets, revenue recognition, exchanges of nonmonetary assets, sales of in substance real estate, or conveyances of oil and gas mineral rights, and apply that guidance as applicable. If no other guidance exists, an entity should apply the guidance in Subtopic 810-10.
23
HOTEL MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 2010
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. However, the Company has no revenues as of April 30, 2010. The Company currently has negative working capital, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
NOTE 3 – INCOME TAXES
The provision for Federal income tax consists of the following:
|
April 30, 2010
|
April 30, 2009
|
|||||||
|
Refundable Federal income tax attributable to:
|
||||||||
|
Current operations
|
$ | 19,554 | $ | 15,146 | ||||
|
Less: valuation allowance
|
(19,554 | ) | (15,146 | ) | ||||
|
Net provision for Federal income taxes
|
$ | - | $ | - | ||||
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
|
April 30, 2010
|
April 30, 2009
|
|||||||
|
Deferred tax asset attributable to:
|
||||||||
|
Net operating loss carryover
|
$ | 34,700 | $ | 15,146 | ||||
|
Less: valuation allowance
|
(34,700 | ) | (15,146 | ) | ||||
|
Net deferred tax asset
|
$ | - | $ | - | ||||
At April 30, 2010, the Company had an unused net operating loss carryover approximating $102,000 that is available to offset future taxable income; it expires beginning in 2028. The use of the net operating losses may be limited if a change in ownership occurs, as defined by Section 382 of the Internal Revenue Code.
24
HOTEL MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 2010
NOTE 4 – COMMON STOCK
On April 24, 2008, the Company received $5,500 from its founders for 5,500,000 shares of its common stock. On June 23, 2008, the Company sold 1,500,000 shares of common stock for $0.01 per share for total proceeds of $15,000. During the year ended April 30, 2009, $5,729 of the Company’s expenses were paid by a related party and the payment was recorded as contributed capital.
On March 24, 2010, the Company declared an 8.6 to 1 stock dividend with an effective date of April 2, 2010. Weighted average shares outstanding and loss per share have been retroactively restated to reflect this stock dividend.
As of April 30, 2010, a total of 67,200,001 shares were issued and outstanding.
NOTE 5 – SOFTWARE LICENSE AGREEMENT
On April 24, 2008, the Company entered into a software license for hotel management software known as “Hotel Management Tool.” The software is non royalty paying and can be cancelled by either party at any time.
NOTE 6 – COMMITMENTS
The Company neither owns nor leases any real or personal property. An officer has provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
NOTE 7 – SUBSEQUENT EVENTS
On May 7, 2010, a Share Exchange Agreement (the “Share Exchange Agreement”) was entered into by and among Hotel Management Systems, Inc., a Nevada corporation (the “Company”), TouchIT Technologies, an Istanbul, Turkey corporation (“TouchIT Tech”), the stockholders of TouchIT Tech, TouchIT Education, an Istanbul, Turkey corporation (“TouchIT Ed” and together with TouchIT Tech, “TouchIT”), and the stockholders of Touch Ed. The closing of the transaction (the “Closing”) also took place on May 7, 2010 (the “Closing Date”).
Pursuant to the terms of the Share Exchange Agreement, we issued a total of 48,330,000 shares of our common stock, par value $0.001 per share (the “Common Stock”), to the shareholders of TouchIT Tech and Touch Ed in exchange for the transfer of 100% of the shares of TouchIT Tech and TouchIT Ed to us. This exchange transaction resulted in TouchIT Tech and TouchIT Ed becoming our wholly-owned subsidiaries and the stockholders of TouchIT owning approximately 78.93% of the Company’s issued and outstanding stock, prior to any financing.
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HOTEL MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 2010
NOTE 7 – SUBSEQUENT EVENTS (CONTINUED)
Simultaneously with the closing of the Share Exchange Agreement, on May 7, 2010, we entered into a Subscription Agreement (the “Subscription Agreement”) with certain investors for the sale of up to $1,500,000 (the “Purchase Price”) of principal amount convertible promissory notes of the Company (“Note” or “Notes”) and share purchase warrants (the “Warrants”) to purchase shares of Common Stock (the “Warrant Shares”). The Notes accrue interest at a rate of eight percent (8%) per annum and mature on May 7, 2015. Additionally, the Notes are convertible into Common Stock at a price of $0.125 per share. The Warrants expire five (5) years from the date of issuance and have an exercise price of $0.08 per share, subject to adjustment as described in the Warrants. Additionally, the Warrants have a cashless exercise provision where if the value of the Common Stock is greater than the exercise price, then the holder may exercise the Warrants on a cashless basis.
Prior to the Closing, one investor had extended three separate bridge notes to TouchIT in the aggregate principal amount of $200,000. At Closing, the $200,000 in bridge notes loaned to TouchIT were included in the Purchase Price and the bridge notes were deemed satisfied in full. Accordingly, the investor received Notes in the amount of $200,000 and Warrants exercisable into 1,600,000 shares of common stock in exchange for the satisfaction of the bridge notes issued by TouchIT.
Additionally, $750,000 of the Purchase Price is a future obligation of one of the investors. Accordingly, at Closing, the investor delivered to the Company two notes (the “Purchase Notes”). The first note obligates the investor to invest an additional $250,000 into the Company within 90 days of Closing. The second note obligates the investor to invest an additional $500,000 into the Company within 180 days of Closing. The investor will not receive Warrants for their $750,000 pursuant to the terms of the Purchase Notes but will only receive the Notes for the amount invested. Lastly, if the additional obligations are not met, the investor will be required to retire the Warrants they received at Closing and the conversion price under the Notes will increase to $0.16 per share.
In the event that all Notes are converted, including those that are to be issued pursuant to the Purchase Notes, and Warrants are exercised, the Company will have issued and outstanding a total of 79,230,000 Common Stock. Of this amount, 60.99% will be held by management which changed in connection with the Closing.
On the Closing Date, pursuant to the Share Exchange Agreement, the shareholders of TouchIT exchanged 100% of the stock of TouchIT Tech and TouchIT Ed for 48,330,000 newly issued shares of the Company’s Common Stock, which represented 78.93% of the Company’s issued and outstanding common stock prior to the financing.
Additionally, pursuant to the terms of the Share Exchange Agreement, John Baumbauer resigned from his position as the sole officer and director of the Company and agreed to cancel all his 47,300,000 shares of Common Stock. As consideration for the cancellation of his shares, Mr. Baumbauer received compensation in the amount of $20,000.
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HOTEL MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 2010
NOTE 7 – SUBSEQUENT EVENTS (CONTINUED)
As a result of the Share Exchange Agreement, we ceased operations of our original business and assigned the assets to John Baumbauer.
Upon completion of the transactions contemplated under the Share Exchange Agreement, we are a manufacturer of touch-based visual communication products for the education and corporate worldwide marketplaces. Our mission is to design and manufacture high quality technology products. We manufacture a large range of touch screen and touch board products to suite all types of application from pen input wireless tablets, to large enameled steel touch-sensitive interactive whiteboards and large interactive LCD displays. Our products stand out from the competition in terms of their design, functionality and price offering. Our customers seek our products as they provide them a different point of entry to the market in terms of price, quality of design and margin. Currently, demand for our products is exceeding our ability to supply.
We designed, manufactured, launched and sold 4 new products as well as establishing the business from scratch and equipping a factory. We have positive indicators from current market data that this industry will continue to grow substantially over the next 5 years and beyond.
The Company has analyzed its operations subsequent to April 30, 2010 through August 12, 2009, the date these financial statements were issued, and has determined that it does not have any additional material subsequent events to disclose in these financial statements.
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