BTCS Inc. - Quarter Report: 2011 March (Form 10-Q)

f10q0311_touchit.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _________ to _____________

Commission file number 333-151252

TouchIT Technologies, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		26-2477977
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Istanbul Trakya Serbest Bölgesi Atatürk Bulvari Ali Riza Efendicd., A4 Blok Çatalca, Istanbul Turkey

(Address of Principal Executive Offices) (Zip Code)

00 90 212 786 6304

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Larger accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	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 ¨ No x

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 64,549,419 shares of common stock outstanding as of May 16, 2011.

TOUCHIT TECHNOLOGIES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011

INDEX

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements.	3

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	50

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	59

Item 4.	Controls and Procedures.	59

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.	60

Item 6.	Exhibits.	60

Signature		61

EXPLANATORY NOTE

TouchIT Technologies, Inc. (the “Company”) was incorporated in the State of Nevada as “Hotel Management Systems, Inc.” On May 7, 2010, the Company entered into a share exchange agreement, with TouchIT Technologies Koll Sti (“TouchIT Tech KS”), TouchIT Education Koll Sti (“TouchIT Ed”)(“TouchIT Ed” and together with TouchIT Tech KS, “TouchIT”), and the stockholders of TouchIT Tech KS and Touch Ed. Both TouchIT Tech KS and TouchIT Ed are corporations formed under the laws of Turkey and are based in Istanbul, Turkey. The closing of the transaction (the “Closing”) took place on May 7, 2010 (the “Closing Date”), all as disclosed on Form 8-K filed by the Company with the Securities and Exchange Commission on May 24, 2010. See “Recent Developments”. Subsequently, the Registrant amended its Articles of Incorporation to change its name to TouchIT Technologies, Inc., as disclosed on Form 8-K filed by the Registrant with the Securities and Exchange Commission on May 24, 2010.

Unless otherwise specified or required by context, as used in this Quarterly Report on Form 10-Q, the terms “we,” “our,” “us” and the “Company” refer collectively to (i) TouchIT Technologies, Inc., a Nevada corporation (“TouchIT”), (ii) TouchIT Tech KS and TouchIT Ed, both being wholly-owned subsidiaries of TouchIT. In this Quarterly Report on Form 10-Q, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the shares of our common stock, $0.001 par value per share. All financial information presented is for the combined entity TouchIT, which comprises of TouchIT Tech KS and TouchIT Ed. They have not been consolidated and inter-company transactions, although not significant, do exist.

CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q (this “Quarterly Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in such forward looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Readers are cautioned not to place undue reliance on these forward looking statements, which reflect management’s opinions only as of the date thereof.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “proposed,” “intended” or “continue” or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other forward-looking information. Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, growth rates, and levels of activity, performance or achievements. There may be events in the future that we are not able to accurately predict or control.

All forward-looking statements included in this Quarterly Report are based on information available to us on the date of this Quarterly Report. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this Quarterly Report.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

TOUCHIT TECHNOLOGIES KS & TOUCH IT EDUCATION TECHNOLOGIES KS

COMBINED BALANCE SHEETS

FOR THE PERIODS ENDED 31 MARCH 2011 & 2010 AND YEARS ENDED 31 DECEMBER 2010 & 2009

(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)

CURRENT ASSETS	31/03/2011			31/12/2010			31/03/2010		31/12/2009

Cash and cash equivalents		27,954			50,556			52,383		54,845
Trade receivables, net		365,234			705,225			426,491		274,802
Due from related parties		484,459			863,395			357,013		130,594
Due from Shareholders		49,827			50,585			21,399		-
Inventories		612,991			365,643			243,783		259,883
Other current assets		4,561			1,106			4,445		782

Total current assets		1,545,026			2,036,510			1,105,514		720,906

NON CURRENT ASSETS
										14,976
Property, plant and equipment, net		64,051			64,495			27,446		29,872
Intangible assets, net		33,403			25,145			-		-
Rights		-			-			12,855
Other non current assets		153			3,555			92		3,725

Total non current assets		97,607			93,195			40,393		48,573

										-
TOTAL ASSETS		1,642,633			2,129,705			1,145,907		769,479


CURRENT LIABILITIES
Borrowings		587			2,351			11,317		11,282
Trade payables		205,295			124,745			61,328		70,619
Due to shareholders		60,448			47,257			68,469		75,584
Due to related parties		807,120			1,145,992			814,323		670,976
Other current liabilities		54,209			73,233			302,326		120,619

Total current liabilities		1,127,659			1,393,578			1,257,763		949,080


NON CURRENT LIABILITIES
Borrowings		-			-			597		2,321
Employee termination benefits		1,373			-			-		-
Reserve for retirement pay		-			1,842			493		1,041
Share purchase advances		750,000			750,000			-		-

Total non current liabilities		751,373			751,842			1,090		3,362


COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Share capital		127,570			127,570			35,500		125,500
Retained earnings		(143,285	)		(308,463	)		111,009		(46,285	)
Net income / (loss) for the period		(220,684	)		173,899			78,675		(262,178	)

Total shareholders’ equity		(236,399	)		(7,004	)		225,184		(182,963	)

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY		(1,642,633	)		3,138,416			485,220		769,479

TOUCHIT TECHNOLOGIES KS & TOUCH IT EDUCATION TECHNOLOGIES KS

COMBINED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE PERIODS ENDED 31 MARCH 2011 AND 2010 & YEARS ENDED 31 DEC 2010 & 2009

(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)

	31/03/2011			31/12/2010			31/03/2010			31/12/2009

NET SALES		773,658			3,577,881			1,046,011			2,029,074
COST OF SALES		(556,766	)		(2,502,037	)		(719,035	)		(1,742,047	)
Gross profit		216,892			1,075,844			326,976			287,027
MARKETING AND SELLING EXPENSE		(293,399	)		(504,329	)		(179,608	)		(409,386	)
GENERAL AND ADMINISTRATIVE EXPENSES		(86,852	)		(479,064	)		(75,100	)		(140,121	)
Profit from operations		(163,359	)		92,451			72,268			(262,480	)
OTHER INCOME AND EXPENSES, net		(46,836	)		24,094			(233	)		6,621
FINANCIAL INCOME AND EXPENSES, net		(1,449	)		(8,294	)		(2,237	)		(8,741	)
Profit Loss before taxation and currency translation gain/(loss)		(211,644	)		60,063			69,798			(264,600	)
TAXATION CHARGE		--			--			--			--
Taxation current		--			--			--			--
Deferred		--			--			--			--
CURRENCY TRANSLATION GAIN/(LOSS)		(9,039	)		60,063			219			2,422
Net income/(loss) for the year		(211,644	)		105,115			70,017			(262,178	)
OTHER COMPREHENSIVE INCOME		--			--			--			--
Total comprehensive income		(220,683	)		165,178			70,236			(262,178	)

TOUCHIT TECHNOLOGIES KS & TOUCH IT EDUCATION TECHNOLOGIES KS

COMBINED STATEMENTS OF CASH FLOW

FOR THE PERIODS ENDED 31 MARCH 2011 & 2010 AND YEARS ENDED 31 DECEMBER 2010 & 2009

(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)

	31/03/2011			31/12/2010			31/03/2010			31.12.2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		(220,683	)		165,178			70,017		(262,178	)
Adjustments to reconcile net income to net cash provided
By operating activities:
Depreciation and amortisation		7,431			17,516			4,547		17,133
Provision for employee benefit		(469	)		801			(548	)	727


Changes in operating assets and liabilities
Trade receivables, net		339,990			(430,428	)		(151,689	)	(189,816	)
Due from shareholders		(33,340	)		(773,544	)		(72,113	)	12,258
Due from related parties		379,679						(238,293	)	203,282
Inventories		(217,422	)		(17,620	)		74,942		22,993
Other current assets		3,376			98,467			3,716		3,896
Other non current assets					331					(3,725	)
Trade payables		92,934			54,126			(9,291	)	(272,925	)
Due to shareholders		(336,735	)		54,413			(7,115	)	30,430
Due to related parties		(1,330	)		392,276			143,347		386,729
Other current liabilities		(19,024	)		(47,386	)		181,707		95,332
Share Purchase Advances					750,000

Net cash generated from (used for) operating activities		(5,593	)		67,197			(773	)	44,136

CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(decrease) in short-term borrowings		(1,764	)		(8,931	)		35		6,815
Increase/(decrease) in long-term borrowings		--						(1,724	)	(2,797	)
Dividends paid

Net cash (used for) provided from financing activities		(1,764	)		(8,931	)		(1,689	)	4,018


CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment and intangible assets		(15,245	)		(62,304	)		0		(17,324	)
Share capital increase

Net cash used for investing activities		(15,245	)		(62,304	)		0		(17,324	)

NET INCREASE / (DECREASE) IN CASH AND BANKS		(22,602	)		(4,289	)		(2,462	)	30,830

CASH AND BANKS AT BEGINNING OF THE YEAR		50,556			54,845			54,845		24,015

CASH AND BANKS AT END OF THE PERIOD		27,954			50,556			52,383		54,845

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

FINANCIAL STATEMENTS

AS OF 31 MARCH 2011

TOGETHER WITH INDEPENDENT AUDITORS’ REPORT

DENGE BAĞIMSIZ DENETİM SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.

Hürriyet Mah. Dr. Cemil Bengü Cad. İş Merkezi No:2 K:1-2 Çağlayan 34403 Kağıthane/İSTANBUL

Tel: (0212) 296 51 00 (pbx) Fax: (0212) 296 51 99 Tic. Sic. No: 262368-209940 www.mazarsdenge.com.tr denge@mazarsdenge.com.tr

INDEPENDENT AUDITORS REPORT

To the Board of Directors of

Touch IT Technologies Kollektif Şirketi

Ronald George Murphy ve Ortakları

Report on the Financial Statements

We have reviewed the accompanying financial statements of Touch IT Technologies Kollektif Şirketi Ronald George Murphy ve Ortakları (“the Company”) which comprise the financial position as of 31 March 2011 and statements of comprehensive income, changes in equity and cash flows for the period then ended, and a summary of significant accounting policies and other explanatory notes.

Management Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Generally Accepted Accounting Principles in the United States of America. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Scope of Review

Our responsibility is to express a conclusion on these financial statements based on our review. We conducted our review in accordance with International Standards on Auditing. These standards require that we comply with ethical requirements and plan and perform the review to obtain reasonable assurance whether the financial statements are free from material misstatement. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information does not give a true and fair view of the financial position of the Company as at 31 March 2011, and of its financial performance and its cash flows for the three months period then ended in accordance with Accounting Principles Generally Accepted in the United States of America.

DENGE BAĞIMSIZ DENETİM SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.

Hürriyet Mah. Dr. Cemil Bengü Cad. İş Merkezi No:2 K:1-2 Çağlayan 34403 Kağıthane/İSTANBUL

Tel: (0212) 296 51 00 (pbx) Fax: (0212) 296 51 99 Tic. Sic. No: 262368-209940 www.mazarsdenge.com.tr denge@mazarsdenge.com.tr

We would like to draw your attention to the following matters:

The accompanying financial statements of the Company have been prepared on a going concern basis. However, in the accompanying financial statements, the Company’s current liabilities exceed its current assets by an amount of USD 341,535 and the total equity shows a negative balance amounting to USD 258,120 as of March 31, 2011. Accordingly, the continuity of the Company’s operations is dependent on the profitability of future operations and the existence of necessary financial support by shareholders and other creditors.

Istanbul, 12 May 2011

DENGE BAĞIMSIZ DENETİM

SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.

Member of MAZARS

Gökhan Almacı

Partner

DENGE BAĞIMSIZ DENETİM SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.

Hürriyet Mah. Dr. Cemil Bengü Cad. İş Merkezi No:2 K:1-2 Çağlayan 34403 Kağıthane/İSTANBUL

Tel: (0212) 296 51 00 (pbx) Fax: (0212) 296 51 99 Tic. Sic. No: 262368-209940 www.mazarsdenge.com.tr denge@mazarsdenge.com.tr

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

STATEMENT OF FINANCIAL POSITION AS OF 31 MARCH 2011 AND 31 DECEMBER 2010

(All amounts are expressed in US Dollars (USD) in full, unless otherwise indicated)

	Notes		31.03.2011	31.12.2010
ASSETS
Cash and cash equivalents		5	13,448	47,282
Trade receivables, net		6	355,128	669,937
Due from shareholders		7	40,000	40,743
Inventories, net		8	207,581	174,226
Other current assets		9	4,315	885

Total current assets			620,472	933,073

Property, plant and equipment, net		10	64,051	64,495
Intangible assets, net		11	20,584	11,833
Other non-current assets		12	153	3,555

Total non-current assets			84,788	79,883

Total assets			705,260	1,012,956

LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term bank loans	13	587		2,351
Trade payables	14	175,971		58,150
Due to shareholders	7	37,688		37,494
Due to related parties	7	703,757		1,041,105
Other current liabilities	15	44,004		25,232

Total current liabilities		962,007		1,164,332

Employee termination benefits	16	1,373		1,842

Total long-term liabilities		1,373		1,842

Shareholders' Equity:
Share capital	17	90,000		90,000
Accumulated deficit		(243,218	)	(419,472	)
Net profit / (loss) for the period		(104,902	)	176,254

Total shareholders’ equity		(258,120	)	(153,218	)

Total liabilities and shareholders’ equity		705,260		1,012,956

The accompanying notes form an integral part of these financial statements.

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE MONTHS PERIOD ENDED AS OF 31 MARCH 2011 AND 2010

(All amounts are expressed in US Dollars (USD) in full, unless otherwise indicated)

	Notes		31.03.2011		31.03.2010

Sales		18	470,451		739,356
Cost of sales		19	(337,707	)	(517,730	)

Gross profit			132,744		221,626

Marketing and selling expenses		20	(178,406	)	(164,564	)
General and administrative expenses		21	(41,290	)	(67,163	)

Total operating loss			(86,952	)	(10,101	)

Financial expenses		23	(1,449	)	(1,668	)
Other income / (expense), net		22	(13,597	)	(417	)

Loss before provision for taxation			(101,998	)	(12,186	)

Provision for taxation
- Current			--		--
- Deferred			--		--

Net loss for the period			(101,998	)	(12,186	)

Other comprehensive income
Currency translation differences			(2,904	)	3,528

Total comprehensive income / (loss) for the period			(104,902	)	(8,658	)

The accompanying notes form an integral part of these financial statements.

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

STATEMENT OF CASH FLOWS AS OF 31 MARCH 2011 AND 2010

(All amounts are expressed in US Dollars (USD) in full, unless otherwise indicated)

	31.03.2011		31.03.2010
Cash flow from operating activities
Net loss for the period	(104,902	)	(8,658	)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation	6,938		2,426
Provision for employee termination benefit	(469	)	367

Net loss adjusted to non-cash items	(98,433	)	(5,865	)

Changes in operating assets and liabilities:
Change in trade receivables	314,808		(97,959	)
Change in due from shareholders	743		(11,874	)
Change in inventories	(33,355	)	(62,588	)
Change in other current assets	(3,429	)	(3,746	)
Change in other non current assets	3,402		3,633
Change in trade payables	117,821		(16,228	)
Change in due to shareholders	194		12,809
Change in due to related parties	(337,348	)	150,704
Change in other current liabilities	18,772		902

Net cash used for operating activities	(16,825	)	(30,212	)

Cash flows from investing activities:
Purchased of property and equipment	(15,245	)	--

Net cash outflows from investing activities	(15,245	)	--

Cash flows from financing activities:
Increase in short-term borrowings	(1,764	)	35
Decrease in long-term borrowings	--		(1,724	)

Cash outflows generated by financing activities	(1,764	)	(1,689	)

Net decrease in cash and cash equivalents	(33,834	)	(31,901	)

Cash and cash equivalents at the beginning of the period	47,282		52,641

Cash and cash equivalents at the end of the period	13,448		20,740

The accompanying notes form an integral part of these financial statements.

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

STATEMENT OF CHANGES IN EQUITY AS OF 31 MARCH 2011 AND 31 DECEMBER 2010

(All amounts are expressed in US Dollars (USD) in full, unless otherwise indicated)

	Share capital		Accumulated deficit			Net loss for the year/ period			Total Shareholders' Equity

Opening balance as of 1 January 2010		90,000		(100,028	)		(319,444	)		(329,472	)

Transfer to accumulated deficit		--		(319,444	)		319,444			--

Net profit (loss) for the year 2010		--		--			176,254			176,254

Balances at 31 December 2010		90,000		(419,472	)		176,254			(153,218	)

Transfer to accumulated deficit		--		176,254			(176,254	)		--

Net profit / (loss) for the three months period of 2011		--		--			(104,902	)		(104,902	)

Balances at 31 March 2011		90,000		(243,218	)		(104,902	)		(258,120	)

The accompanying notes form an integral part of these financial statements.

1.	OPERATIONS OF THE COMPANY:

General

The Company established as a form of partnership (kollektif şirket). In Turkey, partnership is the association of two or more people who co-own a business for trading goods under a trade name. The co-owners have unlimited responsibility to their creditors. This form of companies does not have minimum capital requirements.

Nature of activities

Touch IT Technologies Kollektif Sirketi Ronald George Murphy ve Ortakları (referred as“Touch IT Technologies”) was established in September 2008. Touch IT Technologies engages primarily in production and trade of technological blackboard run by infrared system.

The Company has an operating license in Trakya, Istanbul free zone area for 15 years which commenced on 9 September 2008.

On May 7, 2010, Touch IT Education, Touch IT Technologies and their stockholders (“Touch IT Turkey”) entered into a Share Exchange Agreement with Hotel Management Systems, Inc (“Hotel Management”), a Nevada corporation.

Pursuant to the terms of the Share Exchange Agreement, Hotel Management issued a total of 48,330,000 shares of their common stock, par value USD 0.001 per share (the “Common Stock”), to the shareholders of Touch IT Technology and Touch IT Education in exchange for the transfer of 100% of the shares of TouchIT Tech and Touch IT Education to Hotel Management. This exchange transaction resulted in Touch IT Technologies and Touch IT Education becoming Hotel Management. The wholly-owned subsidiaries and the stockholders of Touch IT Turkey own approximately 78.93% of the Hotel Management’s issued and outstanding stock, prior to any financing.

Simultaneously with the closing of the Share Exchange Agreement, on May 7, 2010, Hotel Management entered into a Subscription Agreement (the “Subscription Agreement”) with investors for the sale of shares up to the value of USD 1,500,000 (the “Purchase Price”). As a result, USD 750,000 of the Purchase Price has been recognized in Touch IT Education’s balance sheet as a future obligation to one of the investors.

No changes in the shareholder structure of Touch IT Turkey have been made since the formal registration has not yet been completed.

Average number of employees of the Company as of 31 March 2010 is 11 while it was 10 as at December 31, 2010.

2.	IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2010, the FASB issued an amendment to ASC 820, “Fair Value Measurements and Disclosure”, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard is effective for interim and annual reporting periods beginning after 15 December 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after 15 December 2010, its adoption will not have a material impact on the Company’s financial statements.

3.	BASIS OF PRESENTATION

The Company maintains its books of account and prepares its statutory financial statements in accordance with accounting principles in the Turkish Commercial Code and tax legislation and the uniform chart of accounts issued by the Ministry of Finance. The accompanying US Dollar financial statements are based on the statutory records which are obtained under the historical cost convention, with adjustments and reclassifications, for the purpose of fair presentation in accordance with Generally Accepted Accounting Principles in the United States of America (US GAAP). The Company’s fiscal year ends on December 31.

Change in Accounting Estimates;

In previous period the depreciation expense was presented under both in marketing & selling expense and administrative expense rather than administrative expense. The administrative personnel wages was presented under the direct labor cost rather than administrative expenses.

The change in accounting estimates had the following impact on the opening figures;

	Administrative expense		Marketing expense			Cost of Sales
Balances as reported at 31 March 2010		59,818		165,485			524,154
Classification		7,345		(921	)		(6,424	)
Restated balance at 31 March 2010		67,163		164,564			517,730

4.	SIGNIFICANT ACCOUNTING POLICIES

Cash and cash equivalents

Cash equivalents consist of highly liquid investments, which are readily convertible into cash, with original maturities of three months or less.

Revenue recognition

The company recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurred or services are rendered, the sales price is determinable, and collectability is reasonably assured. Revenue typically is recognized at time of shipment. Sales are recorded net of discounts, rebates and returns.

Inventories

Inventories are stated at the lower of cost or market. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories held by the method most appropriate to the particular class of inventory being valued on the weighted average basis.

Related parties

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making the financial and operating decisions. For the purpose of these financial statements shareholders are referred to as related parties. Related parties also included individuals that are principle owners, management and members of the Company’s Board of Directors and their families.

Property, plant and equipment

Property, plant and equipment are stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the assets. Assets are reviewed for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. If the fair value is less than the carrying amount of the asset, a loss is recognized for the difference.

The ranges of estimated useful lives are as follows:

Machinery and equipments	2-6 years
Motor vehicles	4 years
Furniture, fixtures and office equipments	4-5 years

Intangible assets

Intangible assets and related amortization: Intangible fixed assets are carried at cost and are depreciated by using straight-line method over three years.

4.	SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Borrowing costs

The historical cost of acquiring an asset includes the costs necessarily incurred to bring it to the condition and location necessary for its intended use. If an asset requires a period of time in which to carry out the activities necessary to bring it to that condition and location, the interest cost incurred during that period as a result of expenditures for the asset is a part of the historical cost of acquiring the asset.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

Taxation

Partnerships (kollektif şirket) are incorporated body according to Turkish Commercial Code; however, partnerships are not recognized as an incorporated body by income tax act. This fact results in paying individual income tax by partnerships, instead of being subject to corporate income tax. Moreover, services rendered by the Company in free zone area is excluded from paying both value added tax and individual income tax. The Company has Operating License for the exemption of income tax which has been taken from Undersecretariat of The Prime Ministry for Foreign Trade, numbered TRY-469, dated on 9 September 2008 and period of validation is 15 years.

Foreign currency transactions

The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated, using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate income and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

Following period rates are applicable as of 31 March 2011 and 31 December 2010:

	31.03.2011	31.12.2010

USD	1.5483	1.5460
EURO	2.1816	2.0491
GBP	2.4845	2.3886

Average USD	1.5741	1.4991

Comprehensive income

In June 1997, the Financial Accounting Standard Board issued SFAS No. 130, “Reporting Comprehensive Income”. SFAS 130 is effective for years beginning after 15 June 1997. This statement provides reporting standards of comprehensive income and its components and requires that all components of comprehensive income be reported in the financial statements in the period in which they are recognized. The Company has adopted the provisions of SFAS No. 130 in its financial statements and adoption of this statement did not have any effect.

4.	SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Financial instruments

Pursuant to ASC 820, “Fair Value Measurements and Disclosures”, and ASC 825, “Financial Instruments”, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, trade receivables and payables, borrowings and amount due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. It is assumed that carrying amounts of financial instruments approximate their current fair values in line with their short term nature.

5.	CASH AND CASH EQUIVALENTS

As of 31 March 2011 and 31 December 2010 cash and cash equivalents comprised of the followings:

	31.03.2010	31.12.2010

Cash in hand	981	1,196
Banks	12,467	46,086

Total	13,448	47,282

6.	TRADE RECEIVABLES

As of 31 March 2011 and 31 December 2010 trade receivables comprised of followings:

	31.03.2011	31.12.2010

Proformance Products	275,384	526,077
Others ( less than USD 60,000)	79,744	143,860

Total	355,128	669,937

7.	RELATED PARTY TRANSACTIONS

Due from shareholders has been presented as follows:

Due from shareholders	31.03.2011	31.12.2010

Recep Tanışman	40,000	40,743

Total	40,000	40,743

Due to related parties and shareholders has been presented as follows:

Due to related parties	31.03.2011	31.12.2010

Emko Emaye ve Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	336,172	417,709
Touch IT Educations Technologies Dış. Tic. Koll. Şirketi	319,497	587,308
Kamron Inc	36,088	36,088
International RT	12,000	0

Total	703,757	1,041,105

Due to shareholders	31.03.2011	31.12.2010

Ali Rıza Tanışman	22,516	22,549
Andrew Brabian Stuart	14,795	14,566
Recep Tanışman	377	379

Total	37,688	37,494

7.	RELATED PARTY TRANSACTIONS (CONTINUED)

In the course of conducting its business, the Company conducted various business transactions with related parties on commercial terms

Major purchases and service provided from related parties have been presented as follows:

Major purchases from related parties

Trade goods	31.03.2011	31.03.2010

Emko Emaye ve Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	139,583	--
Touch IT Educations Technologies Dış. Tic. Koll. Şirketi	78,225	123,968

Total	217,808	123,968



Services provided	31.03.2011	31.03.2010

Kamron Inc.	--	--
Emko Emaye ve Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	372	--
International TR	36,000	--
Total	36,372	--

Major sales to related parties have been presented as follows:

	31.03.2011	31.03.2010

Touch IT Educations Technologies Dış. Tic. Koll. Şirketi	57,211	--
Emko Emaye ve Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	271	99,896

	57,482	99,896

8.	INVENTORIES:

As of 31 March 2011 and 31 December 2010 inventories comprised of the followings:

	31.03.2011		31.12.2010

Raw material and supplies	250,255		196,971
Finished goods	201		1,534
Advances given for purchases	4,868		11,232
Other inventories	3,008		2,738
Provision for damaged and slow moving stock (-)	(50,751	)	(38,249	)
Total	207,581		174,226

The insurance on the inventories as of 31 March 2011 and 31 December 2010 is USD 600,000.

9.	OTHER CURRENT ASSETS:

As of 31 March 2011 and 31 December 2010 other receivables and assets comprised of the followings:

	31.03.2011	31.12.2010

Prepaid insurance expense	3,429	--
Deposits and Guarantees given	400	400
Other	485	485

Total	4,314	885

10.	PROPERTY, PLANT AND EQUIPMENT, NET

The movement of property, plant and equipment, net as of 31 March 2011 and 31 December 2010 is as follows;

	1 January 2010			Additions			31 December 2010			Additions			31 March 2011

Cost
Machinery and equipment		3,655			1,483			5,139			0			5,139
Vehicles		29,455			--			29,455			0			29,455
Furniture and fixtures		6,302			46,165			52,467			4,013			56,480


Total		39,412			47,648			87,061			4,013			91,074

Depreciation
Machinery and equipment		(1,194	)		(1,113	)		(2,308	)		(205	)		(2,513	)
Vehicles		(6,828	)		(5,883	)		(12,711	)		(1,630	)		(14,341	)
Furniture and fixtures		(1,518	)		(6,029	)		(7,547	)		(2,622	)		(10,169	)


Total		(9,540	)		(13,025	)		(22,566	)		(4,457	)		(27,023	)

Net book value		29,872						64,495						64,051

The insurance on property, plant and equipment as of 31 March 2011 and 31 December 2010 is USD 10,000.

11.	INTANGIBLE ASSETS, NET

The movement of intangible assets, net as of 31 March 2011 and December 2010 is as follows;

	1 January 2010		Additions			31 December 2010			Additions			31 March 2011

Cost
Rights		--		10,774			10,774			11,232			22,006
Other tangible assets		--		3,885			3,885			--			3,885

Total		--		14,659			14,659			11,232			25,891

Depreciation
Rights		--		(2,394	)		(2,394	)		(1,834	)		(4,228	)
Other tangible assets		--		(432	)		(432	)		(647	)		(1,079	)

Total		--		(2,826	)		(2,826	)		(2,481	)		(5,307	)

Net book value		--					11,833						20,584

12.	OTHER NON CURRENT ASSETS:

As of 31 March 2011 and 31 December 2010 non-current assets comprised of the prepaid expenses of USD 153 and USD 3,555 respectively.

13.	BANK LOANS

As of 31 March 2011 and 31 December 2010 bank loans comprised the followings:

	31. 03.2011	31.12.2010

Short term borrowings
TRY bank loans	587	2,351

Sub total	587	2,351

Long term borrowings
TRY bank loans	--	--

Sub total	--	--

Total	587	2,351

Analysis of bank loans’ repayments is as follows:

	31.03.2011	31.12.2010

Within one year	587	2,351
Between one to two years	--	--

Total	587	2,351

Bank Loans arise from purchases of two motor vehicles.

14.	TRADE PAYABLES

As of 31 March 2011 and 31 December 2010, trade payables comprised the followings:

	31.03.2011	31.12.2010

Suppliers	175,971	58,150
Other trade payables	--	--

Total	175,971	58,150

15.	OTHER CURRENT LIABILITIES

As of 31 March 2011 and 31 December 2010 other current liabilities comprised the followings:

	31.03.2011	31.12.2010

Social security premiums & withholding taxes payable	5,447	6,010
Due to personnel	7,644	7,056
Accrued expenses	1,625	1,350
Advances received	29,248	10,776
Other liabilities	40	40

Total	44,004	25,232

16.	RESERVE FOR EMPLOYEE TERMINATION BENEFITS

The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying financial statements as at 31 March 2011, the provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. The anticipated rate of forfeitures is considered. As the maximum liability is revised semi annually, the maximum amount of TRY 2,623 effective from 1 January 2011 has been taken into consideration in calculation of provision from employment termination benefits (2010: TRY 2,517).

The principal actuarial assumptions used at the statement of financial position s dates are as follows:

	31.03.2011		31.12.2010
Discount rate	10.00	%	10.00	%
Expected rates of salary / limit increases	5.1	%	5.1	%

17.	SHARE CAPITAL

The shareholders and their participation percentages as of 31 March 2011 and 31 December 2010 are as follows:

	31.03.2011					31.12.2010
	Shareholding					Shareholding
	Amount		%			Amount		%
Ali Rıza Tanışman		2,676		2.97	%		2,676		2.97	%
Andrew Stuart Brabin		30,324		33.70	%		30,324		33.70	%
Recep Tanışman		26,757		29.73	%		26,757		29.73	%
Ronald George Murphy		29,432		32.70	%		29,432		32.70	%
Cansın Tanışman		811		0.90	%		811		0.90	%
		90,000		100.00	%		90,000		100.00	%

18.

SALES

The composition of sales by principal operation for the period ended as at 31 March 2011 and 2010 can be summarized as follows:

	31.03.2011	31.03.2010

Clever board	337,124	240,674
Triumph board 78 inch	--	135,378
Touch it board 78 inch	73,514	68,779
Touch it board 80 inch	--	58,354
Triumph board 80 inch	--	52,123
Touch it board 90 inch	1,911	48,654
Touch it board 50 inch	3,242	20,989
Triumph board 50 inch	--	1,216
Electronic circuit	53,678	96,169
Others	982	17,020

Returns (-)	--	--

Total	470,451	739,356

19.	COST OF SALES

The composition of cost of sales by principal operations for the period ended as at 31 March 2011 and 2010 can be summarized as follows:

	31.03.2011		31.03.2010

Direct material cost	238,013		491,248
Direct labor cost	18,869		6,512
General production overheads	27,129		23,451
Ending inventory (trade goods)	(2,304	)	(4,649	)
Depreciation	1,835		1,168

Cost of Good Sold	283,542		517,730
Cost of Raw Materials Sold	54,165		--
Total Cost of Sales	337,707		517,730

20.	MARKETING AND SELLING EXPENSES

The composition of marketing and selling expenses by principal operations for the period ended as at 31 March 2011 and 2010 can be summarized as follows:

	31.03.2011	31.03.2010

Export expenses	31,384	126,947
Sales & marketing expenses of shareholders	--	14,593
Commission expense received from Proforma	53,494	--
Consultancy received regarding selling and marketing activities	84,968	--
Cargo expenses	1,284	2,115
Software expense	2,100	--
Others	5,176	20,909

Total	178,406	164,564

21.	GENERAL AND ADMINISTRATIVE EXPENSES

The composition of general and administrative expenses by principal operations for the period ended as at 31 March 2011 and 2010 can be summarized as follows:

	31.03.2011	31.03.2010

Shareholders expenses	--	46,447
Consulting expenses	10,470	11,051
Personnel expense	18,615	6,424
Retirement pay liability	--	367
Depreciation	5,103	1,258
Tax and duties	121	333
Food expenses	1,720	145
Other	5,261	1,138

Total	41,290	67,163

22.	OTHER INCOME AND (EXPENSES), NET

The composition of other income and (expenses), net for the period ended as at 31 March 2011 and 2010 can be summarized as follows:

	31.03.2011		31.03.2010

Provision for impairment of inventory	(12,502	)	--
Non tax deductable expenses	(309	)	(649	)
Other, net	(786	)	232

Total	(13,597	)	(417	)

23.	FINANCIAL EXPENSES

The composition of financial income / (expenses), net for the period ended at 31 March 2011 and 2010 can be summarized as follows:

	31.03.2011		31.03.2010

Interest expenses	(91	)	(657	)
Other banking expenses	(1,358	)	(1,011	)

Total	(1,449	)	(1,668	)

24.	FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Capital risk management

The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance.

The capital structure of the Company consists of debt, which includes the borrowings, cash and cash equivalents and equity, comprising issued capital, reserves and retained earnings.

31 March 2011	Financial assets at amortized cost	Loans and receivables		Financial liabilities at amortized cost		Carrying value		Fair value		Note

Financial assets
Cash and cash equivalents			13,448				13,448		13,448		5
Trade receivables			355,128				355,128		355,128		6

Financial liabilities
Borrowings					587		587		587		13
Trade payables (including related parties)			879,728				879,728		879,728		7-14

31 December 2010	Financial assets at amortized cost		Loans and receivables		Financial liabilities at amortized cost		Carrying value		Fair value		Note

Financial assets
Cash and cash equivalents		--		47,282		--		47,282		47,282		5
Trade receivables		--		669,937		--		669,937		669,937		6

Financial liabilities
Borrowings		--		--		2,351		2,351		2,351		13
Trade payables (including related parties)		--		1,099,255		--		1,099,255		1,099,255		7-14

24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

Financial risk factors

The Company’s activities expose it to variety of financial risks; market risk, credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets seeks to minimize potential adverse effects on the Company’s financial performance.

Market risk

The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates.

Foreign currency risk management

The Company undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. Foreign currency position, net for the period ended at 31 March 2011 and for the years ended 31 December 2010 can be summarized as follows:

	31.03.2011		31.12.2010
F/C	Foreign		Foreign
Type	Currency	TRY	Currency	TRY

Banks	USD	8,166	12,643	45,538	70,401
	EUR	2,864	6,247	78	160
Trade receivables	USD	355,128	549,845	669,937	1,035,723
Due from shareholders	USD	40,000	61,932	31,302	48,393

Trade payables	USD	(133,623)	(206,888)	(23,829)	(36,839)
Due to related parties	USD	(699,282)	(1,082,698)	(1,039,944)	(1,607,753)
	EUR	(1,000)	(2,182)	-	-
Due to shareholders	USD	(9,556)	(14,795)	(9,170)	(14,177)
Other current liabilities	USD	(29,247)	(45,284)	(10,776)	(16,660)

Net F/C Assets and Liabilities			(721,179)		(520,752)

24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

Credit risk management

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties. The Company’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.

Liquidity risk management

Liquidity risk arises from the fact that the Company may not receive funds from its counterparties at the expected time. This risk is managed by maintaining a balance between continuity of funding and flexibility through the use of overdrafts and trade receivables.

The following tables details the Company’s remaining contractual maturity for its non derivative financial liabilities. The tables have drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay.

	Current		Noncurrent		Total
31 March 2011

Borrowings		587		--		587
Trade payables		175,971		--		175,971
Due to related parties		703,757		--		703,757

31 December 2010

Borrowings		2,351		--		2,351
Trade payables		58,150		--		58,150
Due to related parties		1,041,105		--		1,041,105

25.	SUBSEQUENT EVENTS

There is no subsequent event has occurred which might affect the financial statements.

TOUCH IT EDUCATION TECHNOLOGIES

DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

FINANCIAL STATEMENTS

AS OF 31 MARCH 2011

TOGETHER WITH INDEPENDENT AUDITORS’ REPORT

DENGE BAĞIMSIZ DENETİM SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.

Hürriyet Mah. Dr. Cemil Bengü Cad. İş Merkezi No:2 K:1-2 Çağlayan 34403 Kağıthane/İSTANBUL

Tel: (0212) 296 51 00 (pbx) Fax: (0212) 296 51 99 Tic. Sic. No: 262368-209940 www.mazarsdenge.com.tr denge@mazarsdenge.com.tr

INDEPENDENT AUDITORS REPORT

To the Board of Directors of

Touch It Education Technologies

Dış Ticaret Kollektif Şirketi Andrew Stuart Brabin ve Ortağı

Report on the Financial Statements

We have reviewed the accompanying financial statements of Touch IT Education Technologies Dış Ticaret Kollektif Şirketi Andrew Stuart Brabin ve Ortağı (“the Company”) which comprise the financial position as of 31 March 2011 and statements of comprehensive income, changes in equity and cash flows for the period then ended, and a summary of significant accounting policies and other explanatory notes.

Management Responsibility for the Financial Statements

Scope of Review

Conclusion

DENGE BAĞIMSIZ DENETİM SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.

Hürriyet Mah. Dr. Cemil Bengü Cad. İş Merkezi No:2 K:1-2 Çağlayan 34403 Kağıthane/İSTANBUL

Tel: (0212) 296 51 00 (pbx) Fax: (0212) 296 51 99 Tic. Sic. No: 262368-209940 www.mazarsdenge.com.tr denge@mazarsdenge.com.tr

We would like to draw your attention to the following matters:

According to Turkish Tax Legislation, service invoices issued abroad are subject to withholding tax with a rate of 20%, provided that the service has been received in Turkey. During our review of 2011, we have determined significant amount of such invoices under the name of consultant fee and expenses totally amounting to USD 101,791. However, the Company Management does not foresee any risk on the basis of the interpretation that those consultancy services have been received abroad; the Company may face possible tax risk in case of a different interpretation by the tax office.

Istanbul, 12 May 2011

DENGE BAĞIMSIZ DENETİM

SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.

Member of MAZARS

Gökhan Almacı

Partner

DENGE BAĞIMSIZ DENETİM SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.

Hürriyet Mah. Dr. Cemil Bengü Cad. İş Merkezi No:2 K:1-2 Çağlayan 34403 Kağıthane/İSTANBUL

Tel: (0212) 296 51 00 (pbx) Fax: (0212) 296 51 99 Tic. Sic. No: 262368-209940 www.mazarsdenge.com.tr denge@mazarsdenge.com.tr

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUARTBRABIN VE ORTAĞI

STATEMENT OF FINANCIAL POSITION AS OF 31 MARCH 2011 AND 31 DECEMBER 2010

(All amounts are expressed in US Dollars (USD) in full, unless otherwise indicated)

	Notes		31.03.2010	31.12.2010
ASSETS
Cash and cash equivalents		5	14,506	3,274
Trade receivables, net		6	10,106	35,288
Due from related parties		7	484,459	863,395
Due from shareholders		7	9,827	9,842
Inventories		8	405,410	191,417
Other current assets		9	247	221

Total current assets			924,555	1,103,437

Rights, net		10	12,819	13,312

Total non-current assets			12,819	13,312

Total assets			937,374	1,116,749

LIABILITIES AND SHAREHOLDERS' EQUITY
Trade payables	11	29,324		54,211
Due to shareholders	7	22,760		22,147
Due to related parties	7	103,363		104,887
Other current liabilities	12	10,205		48,001

Total current liabilities		165,652		229,246

Share purchase advances	1	750,000		750,000
Employee termination benefits	13	--		--

Total long-term liabilities		750,000		750,000

Shareholders' Equity:
Share capital	14	37,570		37,570
Retained Earnings		99,933		111,009
Net income / (loss) for the period		(115,781	)	(11,076	)

Total shareholders’ equity		21,722		137,503

Total liabilities and shareholders’ equity		937,374		1,116,749

The accompanying notes form an integral part of these financial statements.

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

STATEMENTS OF INCOME FOR THE THREE MONTHS PERIOD ENDED AS OF 31 MARCH 2011 AND 2010

(All amounts are expressed in US Dollars (USD) in full, unless otherwise indicated)

	Notes		31.03.2011		31.03.2010

Sales		15	303,207		306,655
Cost of sales		16	(219,059	)	(194,881	)

Gross profit			84,148		111,774

Marketing and selling expenses		17	(129,880	)	(14,123	)
General and administrative expenses		18	(30,675	)	(15,282	)

Total operating income			(76,407	)	82,369

Financial income / (expense), net			--		(569	)
Other income / (expense), net			(33,239	)	184

Loss before provision for taxation			(109,646	)	81,984

Provision for taxation
- Current			--		--
- Deferred			--		--

Net income for the period			(109,646	)	81,984

Other comprehensive income
Currency translation differences			(6,135	)	(3,309	)

Total comprehensive income / (loss) for the period			(115,781	)	78,675

The accompanying notes form an integral part of these financial statements.

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

STATEMENT OF CASH FLOW AS OF 31 MARCH 2011 AND 2010

(All amounts are expressed in US Dollars (USD) in full, unless otherwise indicated)

	31.03.2011		31.03.2010

Cash flow from operating activities
Net income for the period	(115,781	)	78,675

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation	493		2,121
Provision for employee termination benefit	--		(915	)

Net income adjusted to non-cash items	(115,288	)	79,881

Changes in operating assets and liabilities:
Change in trade receivables	25,182		(53,730	)
Change in due from related parties	378,936		(226,419	)
Change in due from shareholders	15		(9,525	)
Change in inventories	(213,993	)	78,688
Change in other current assets	(26	)	83
Change in trade payables	(24,887	)	6,937
Change in due to related parties	(1,524	)	(19,924	)
Change in due to shareholders	613		(7,357	)
Change in other current liabilities	(37,796	)	180,805

Net cash provided from operating activities	11,232		29,439

Cash flows from investing activities:
Purchased of property and equipment	--		--

Net cash provided from investing activities			--

Cash flows from financing activities:
Increase/(decrease) in short-term borrowings	--		--
Increase/(decrease) in long-term borrowings	--		--

Cash flows provided by financing activities	--		--

Net decrease in cash and cash equivalents	11,232		29,439

Cash and cash equivalents at the beginning of the period	3,274		2,204

Cash and cash equivalents at the end of the period	14,506		31,643

The accompanying notes form an integral part of these financial statements.

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

STATEMENT OF CHANGES IN EQUITY AS OF 31 MARCH 2011 AND 31 DECEMBER 2010

(All amounts are expressed in US Dollars (USD) in full, unless otherwise indicated)

	Share capital		Retained Earnings			Net income for the year / period			Total Shareholders' Equity

Balances at 1 January 2010		35,500		53,743			57,266			146,509

Share capital increase		2,070		--			--			2,070

Transfer to retained earnings		--		57,266			(57,266	)		--

Net income for the year		--		--			(11,076	)		(11,076	)

Balances at 31 December 2010		37,570		111,009			(11,076	)		137,503

Transfer to retain earnings				(11,076	)		11,076			0

Net profit / (loss) for the three months period							(115,781	)		(115,781	)

Balances at 31 March 2011		37,570		99,933			(115,781	)		21,722

The accompanying notes form an integral part of these financial statements.

1.	OPERATIONS OF THE COMPANY:

General

Nature of Activities

Touch IT Education Technologies Dıs Ticaret Kollektif Sirketi Andrew Stuart Brabin ve Ortağı, formerly RT Lojistik Dıs Ticaret Kollektif Sirketi Recep Tanısman ve Ortağı (referred as “Touch ITEducation”) was established on 27 August 2007 with a ‘‘Share Transfer of Open Company andAmendment Agreement’’. Touch IT Education primarily engages in sales and purchases of theinteractive writing board and all educational equipment.

On May 7, 2010, Touch IT Education, Touch IT Technologies and their stockholders (“Touch ITTurkey”) entered into a Share Exchange Agreement with Hotel Management Systems, Inc (“HotelManagement”), a Nevada corporation.

Pursuant to the terms of the Share Exchange Agreement, Hotel Management issued a total of 48,330,000 shares of their common stock, par value USD 0.001 per share (the “Common Stock”), tothe shareholders of Touch IT Technology and Touch IT Education in exchange for the transfer of100% of the shares of TouchIT Tech and Touch IT Education to Hotel Management. This exchange transaction resulted in Touch IT Technologies and Touch IT Education becoming Hotel Management. The wholly-owned subsidiaries and the stockholders of Touch IT Turkey own approximately 78.93% of the Hotel Management’s issued and outstanding stock, prior to any financing.

Simultaneously with the closing of the Share Exchange Agreement, on May 7, 2010, Hotel Management entered into a Subscription Agreement (the “Subscription Agreement”) with investorsfor the sale of shares up to the value of USD 1,500,000 (the “Purchase Price”). As a result, USD750,000 of the Purchase Price has been recognized in Touch IT Education’s balance sheet as a future obligation to one of the investors.

No changes in the shareholder structure of Touch IT Turkey have been made since the formal registration has not yet been completed

Average number of employees of the Company as of 31 March 2011 is 9 while it was 6 as at December 31, 2010.

2.	IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

3.	BASIS OF PRESENTATION

4.	SIGNIFICANT ACCOUNTING POLICIES:

Cash and cash equivalents

Cash equivalents consist of highly liquid investments, which are readily convertible into cash, with original maturities of three months or less.

Revenue recognition

The Company recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurred or services are rendered, the sales price is determinable, and collectability is reasonably assured. Revenue typically is recognized at time of shipment. Sales are recorded net of discounts, rebates and returns.

Inventories

Related parties

Rights

Rights are stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the assets. Assets are reviewed for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. If the fair value is less than the carrying amount of the asset, a loss is recognized for the difference.

Taxation

Partnerships (kollektif şirket) are incorporated body according to Turkish Commercial Code; however, partnerships are not recognized as an incorporated body by income tax act. This fact results in paying individual income tax by partnerships, instead of being subject to corporate income tax. Moreover, services rendered by the Company in free zone area is excluded from paying both value added tax and individual income tax. The Company has Operating Licence for the exemption of income tax which is taken from Undersecretariat of The Prime Ministry for Foreign Trade, numbered TRY-149, dated 1 November 2001 and period of validation is 15 years.

Retirement pay provision

Under Turkish laws, lump sum payments are made to employees retiring or involuntarily leaving the Company. Such payments are considered as being part of defined retirement benefit plan.

The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses.

4.	SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign currency transactions

Following period rates are applicable as of 31 March 2011 and 31 December 2010:

	31.03.2011	31.12.2010

USD	1.5483	1.5460
EURO	2.1816	2.0491
GBP	2.4845	2.3886

Average USD	1.5741	1.4991

Leasing - the Company as lessee

Leases are classified as capital leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Comprehensive income

Financial Instruments

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

4.	SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Financial Instruments (continued)

Level 2

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, trade receivables and payables, borrowings and amounts due from and due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets.

5.	CASH AND CASH EQUIVALENTS

As of 31 March 2011 and 31 December 2010 cash and cash equivalents comprised of the followings:

	31.03.2011	31.12.2010

Cash in hand	179	695
Banks	14,327	2,579

Total	14,506	3,274

6.	TRADE RECEIVABLES

As of 31 March 2011 and 31 December 2010 trade receivables comprised of followings:

	31.03.2011		31.12.2010

Trade receivables	63,249		54,829
Provision for doubtful receivables (-)	(53,143	)	(19,541	)

Total	10,106		35,288

The provision has been booked for the receivables from Proformance Product and Truimphboard S.R.O.

7.	RELATED PARTY TRANSACTIONS:

In the course of conducting its business, the Company conducted various business transactions with related parties on commercial terms.

Related parties and shareholders balances and transactions have been presented as follows:

Due from related parties	31.03.2011	31.12.2010

Emko Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	321,494	587,308
Touch IT Technologies Koll. Şti.. Ronald George Murphy ve Ortakları	162,965	276,087

Total	484,459	863,395

Due from shareholders	31.03.2011	31.12.2010

Andrew Stuart Brabin	9,827	9,842

Total	9,827	9,842

Due to related parties	31.03.2011	31.12.2010

Kamron Inc	53,014	50,467
ASB Trading	50,349	54,420

Total	103,363	104,887

Due to shareholders	31.03.2011	31.12.2010

Ali Rıza Tanışman	22,760	22,147

Total	22,760	22,147

Major purchases from related parties have been presented as follows:

Major purchases from related parties	31.03.2011	31.12.2010
Touch It Technologies Koll. Şti. Ronald George Murphy ve Ortakları	57,211	166,309
Total	57,211	166,309

Major sales to related parties	31.03.2011	31.12.2010
Emko Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	101,918	660,520
Touch IT Technologies Koll. Şti. Ronald George Murphy ve Ortakları	78,225	255,201
Total	180,143	915,721

7.	RELATED PARTY BALANCES AND TRANSACTIONS (COUNTINUED):

Service provided by	31.03.2011	31.12.2010

Kamron Inc.	49,578	115,101
Andrew Stuart Brabin	52,213	103,527

Total	101,791	218,628

8.	INVENTORIES

As of 31 March 2011 and 31 December 2010 inventories comprised of the followings:

	31.03.2010	31.12.2010

Trade goods	200,108	109,261
Advances given for purchases(*)	205,302	82,156

Total	405,410	191,417

(*) The majority of the balance comprise of advance given to Songtian Orient Corporation amounting USD 122,602 (in 2010 USD 36,960) for the purchase of LCD monitor and Xiamen Interactive Technology Co.,Ltd. amounting to USD 69,381 ( in 2010 USD 35,584) for the purchase of electronic circuit as of March 31, 2011.

The insurance on the inventories as of 31 March 2011 and 31 December 2010 is USD 100,000.

9.	OTHER CURRENT ASSETS:

As of 31 March 2011 and 31 December 2009 other receivables and assets comprised of prepaid expenses of USD 247 and 221 respectively.

10.	NON-CURRENT ASSETS

As of 31 March 2011 and 31 December 2010 non-current assets comprised of followings:

	31.03.2011		31.12.2010

License right	35,500		35,500
Depreciation allowance	(22,681	)	(22,188	)

Total	12,819		13,312

Rights represent the operating license obtained from Under secretariat of The Prime Ministry for Foreign Trade. The validation date of the licence has been extended from 10 year to 15 year in 2010.

11.	TRADE PAYABLES

As of 31 March 2011 and 31 December 2010 trade payables comprised as of the followings:

	31.03.2010	31.12.2010

Trade payables	29,324	54,211

Total	29,324	54,211

12.	OTHER CURRENT LIABILITIES

As of 31 March 2011 and 31 December 2010 other current liabilities comprised of the followings:

	31.03.2011	31.12.2010

Taxes and funds payable	1,568	2,471
Social security premiums and withholding taxes payable	2,470	1,439
Accrued expenses	1,625	1,250
Advances received	3,018	40,731
Due to personnel	1,524	2,110

Total	10,205	48,001

13.	RESERVE FOR EMPLOYMENT TERMINATION BENEFITS

14.	SHARE CAPITAL

The issued share capital of the Company is respectively for the period ended at 31 March 2011 and for the years ended 31 December 2010 comprised as follows;

	31.03.2011				31.12.2010
	Shareholding				Shareholding
	Amount		%		Amount		%

Andrew Stuart Brabin		27,050		72		27,050		72
Ali Rıza Tanışman		1,503		4		1,503		4
Recep Tanışman		7,515		20		7,515		20
Cansın Tanışman		751		2		751		2
Volkan Tanışman		751		2		751		2
		37,570		100		37,570		100

15.

SALES

The composition of sales by principal operation for the period ended as at 31 March 2011 and 2010 can be summarized as follows:

	31.03.2011	31.03.2010

Electronic set	288,162	165,271
Remote Control for classroom	4,345	76,304
Touch IT board	2,540	44,213
Others	8,160	20,867

Returns (-)	--	--

Total	303,207	306,655

16.	COST OF SALES

The composition of cost of sales by principal operations for the period ended as at 31 March 2011 and 2010 can be summarized as follows:

	31.03.2011		31.03.2010

Beginning inventory of trade goods	109,261		48,111
Purchases	309,906		161,517
Ending inventory of trade goods (-)	(200,108	)	(14747	)

Total	219,059		194,881

17.	MARKETING AND SELLING EXPENSES

The composition of marketing and selling expenses by principal operations for the period ended as at 31 March 2011 and 2010 can be summarized as follows:

	31.03.2011	31.03.2010

Export expenses	5,597	6,395
Consultancy expenses (*)	120,521	6,094
Other expenses	3,762	1,634

Total	129,880	14,123

(*) The vast majority of the balance comprises of consultancy invoices issued by Kamron and ASB.

18.	GENERAL AND ADMINISTRATIVE EXPENSES

The composition of general and administrative expenses by principal operations for the period ended as at 31 March 2011 and 2010 can be summarized as follows:

	31.03.2011	31.03.2010

Audit and consultancy expenses	4,550	6,427
Salaries	20,349	4,187
Rental expenses	3,300	3,211
Depreciation	493	--
Other expenses	1,983	1,457

Total	30,675	15,282

19. OTHER INCOME AND (EXPENSES), net:

The composition of other income and expenses for the years ended at 31 December 2010 and 2009 can be summarized as follows:

	31.03.2011		31.03.2010

Provision for doubtful receivables	(33,145	)	--
Other expense	(94	)	--
Other income	--		184

Total	(33,239	)	184

19.	FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Capital risk management

The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance. The capital structure of the Company consists of debt, which includes the borrowings, cash and cash equivalents and equity, comprising issued capital, reserves and retained earnings.

31 March 2011	Financial assets at amortized cost	Loans and receivables	Financial liabilities at amortized cost	Carrying value	Fair value	Note

Financial assets
Cash and cash equivalents	--	14,506	--	14,506	14,506	5
Trade receivables (including related parties)	--	494,565	--	494,565	494,565	6-7

Financial liabilities
Trade payables (including related parties)	--	132,687	--	132,687	132,687	7-11

31 December 2010	Financial assets at amortized cost	Loans and receivables	Financial liabilities at amortized cost	Carrying value	Fair value	Note

Financial assets
Cash and cash equivalents	--	3,274	--	3,274	3,274	5
Trade receivables (including related parties)	--	898,683	--	898,683	898,683	6-7

Financial liabilities
Trade payables (including related parties)	--	159,098	--	159,098	159,098	7-11

Financial risk factors

Market risk

The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates.

19.	FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

Foreign currency risk management

		31.03.2011		31.12.2010
	F/C	Foreign	TRY	Foreign	TRY
	Type	Currency	TRY	Currency	TRY

Banks	USD	14,062	21,772	2,138	3,306
	EUR	22	47	19	38

Due from related parties	USD	484,459	750,088	587,308	907,979

Trade receivables	USD	63,249	97,928	34,731	53,694

Advances given	USD	205,302	317,869	72,544	112,153
(Inventories)

Trade payables	USD	(21,867)	(33,857)	(43,480)	(67,220)

Advances received	USD	(3,018)	(4,673)	(40,731)	(62,970)
(Other current liabilities)

Due to related parties	USD	(103,363)	(160,037)	(104,887)	(162,155)

Share purchase advances	USD	(750,000)	(1,161,225)	(750,000)	(1,159,500)


Net F/C Assets / (Liabilities)			(172,087)		(374,675)

20.	FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

Credit risk management

Liquidity risk management

	Current		Noncurrent		Total
31 March 2011

Trade payables (including related parties)		132,687		--		132,687

31 December 2010

Trade payables (including related parties)		159,098		--		159,098

21.	SUBSEQUENT EVENTS

There is no subsequent event has occurred which might affect the financial statements.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this Quarterly Report. This discussion and analysis may contain forward-looking statements based on assumptions about our future business. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this Quarterly Report.

Forward-Looking Statements

This Quarterly Report contains forward-looking statements. The forward-looking statements are contained principally in, but not limited to, the sections entitled “Risk Factors,” “Management’s Discussion and Analysis or Plan of Operation,” “Business” and those listed in our other Securities and Exchange Commission filings. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “ongoing,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking.

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Our actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in the section entitled “Risk Factors” in this Report. Accordingly, you should not unduly rely on these forward-looking statements, which speak only as of the date of this Report.

Unless required by law, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Report or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this Report.

Management cautions that these statements are qualified by their terms and/or important factors, many of which are outside of our control, and involve a number of risks, uncertainties and other factors that could cause actual results and events to differ materially from the statements made, including, but not limited to, the following:

● actual or anticipated fluctuations in our quarterly and annual operating results;

● actual or anticipated product constraints;

● decreased demand for our products resulting from changes in consumer preferences;

● product and services announcements by us or our competitors;

● loss of any of our key executives;

● regulatory announcements, proceedings or changes;

● announcements in the touch technology community;

● competitive product developments;

● intellectual property and legal developments;

● mergers or strategic alliances in the touch technology industry;

● any business combination we may propose or complete;

● any financing transactions we may propose or complete; or

● broader industry and market trends unrelated to its performance.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

Plan of Operation

The ability of our Company to achieve our business objectives is contingent upon our success in raising additional capital until adequate revenues are realized from operations.

We are a manufacturer of touch based visual communication products for 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 liquid crystal displays ("LCD"). 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 with 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.

In the past three years, we have designed, manufactured, launched, developed and sold four new products as well as established the business from scratch and equipped a factory.

COMPANY OVERVIEW

We manufacture touch-based visual communication products for education and corporate worldwide marketplaces. Our products stand out from our 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.

In our first year of trading, we exceeded revenues of $2 million USD having designed, manufactured, launched and sold four new products as well as established the business and equipped a factory. Our second full year of trading saw 176% growth as we expanded into world-wide markets.

On January 10, 2011, we forecasted our 2011 revenue projections to be $9 million. However, having had a slow first quarter this year, our ability to hit this target will depend upon whether we may obtain a large number of tender opportunities.

Our keys to success are:

1. Establish and maintain working relationships and contractual agreements with distribution and original equipment manufacturer ("OEM") customers;

2. Increase our profit margin by lowering the import and raw material costs by bulk purchasing from vendors;

3. By increasing our purchasing power, we can increase our stock holding and lowering delivery times to customers thus enabling further sales growth; and

4. Effectively communicate with our current and potential customers, through targeted efforts, our position as a differentiated provider of the highest quality of margin laden touch-based communication products.

Recent Developments

On May 7, 2010, we (which at that time was called Hotel Management Systems, Inc.), entered into a Share Exchange Agreement with TouchIT Tech KS, the stockholders of TouchIT Tech KS, TouchIT Ed, and the stockholders of TouchIT Ed. Both TouchIT Tech KS and TouchIT Ed are corporations formed under the laws of Turkey and are based in Istanbul, Turkey. The Closing took place on May 7, 2010.

In connection 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"), which was represented by the convertible promissory notes of our Company (“Note” or “Notes”) and share purchase warrants (the “Warrants”) to purchase shares of Common Stock (the “Warrant Shares”). Due to the non-provision of the second $750,000 by certain investors, we cancelled the Notes for $250,000 and $500,000 including the underlying Warrant Shares.

On February 16, 2011, we borrowed Two Hundred Fifty Thousand Dollars ($250,000) (the "Advance") from TCA Global Credit Master Fund, LP (the "Lender") pursuant to a revolving credit facility evidenced by a Credit Agreement with an effective date as of November 30, 2010 (the "Credit Agreement").

The Credit Agreement evidences a revolving credit facility in the minimum principal amount of $250,000, which subject to Lender approval may be increased up to One Million Dollars ($1,000,000) (the "Loan"). Interest on the Advance accrues at the rate of eight percent (8%) per annum and the outstanding and accrued interest is due and payable on a bi-monthly basis. The outstanding principal amount is due on February 16, 2012 (the "Maturity Date").

The revolving loan is also evidenced by a Revolving Note (the "Note"). The Credit Agreement and Note are secured by, among other things, (i) the Security Agreement made by and between the Company and the Lender pursuant to which the Borrower has granted a security interest in all of the Borrower's assets to the Lender (the "Security Agreement"), (ii) a personal guaranty and validity guaranty executed by Andrew Brabin, Chief Financial Officer of our Company, and (iii) a personal guaranty and validity guaranty executed by Recep Tanisman, the Chief Executive Officer of our Company.

Pursuant to the Credit Agreement, on February 16, 2011, our Company issued to the Lender One Hundred Thousand (100,000) shares of our common stock, par value at $0.001 per share (the "Restricted Shares"), which have piggy back registration rights as part of any registration statement filed by our Company and full ratchet rights and anti-dilution rights during the six months following February 16, 2011. Furthermore, we also issued to Lender Twenty-Five Thousand (25,000) shares of our Company's Series A convertible preferred stock with a par value of $0.001, which such shares shall be converted into shares of common stock of our Company on February 16, 2012 upon the satisfaction of certain conditions (including if the value of the Restricted Shares is less than $45,000 on February 16, 2012 based on the average closing price for the 30 trading days prior thereto).

The Credit Agreement also includes customary representations and warranties and affirmative and negative covenants, including, among others, payment of certain customary fees and expenses (including commitment, monitoring and diligence fees), covenants relating to financial reporting, maintenance of property and insurance, incurrence of liens and/or other indebtedness. The Credit Agreement also contains customary provisions for events of default, remedies in circumstances of default, required notices, governing law and jurisdiction of governance.

Upon the occurrence of an event of default (as defined in the Credit Agreement), the Lender may, at its option, declare its commitments to us to be terminated and all obligation and commitments to be immediately due and payable. For all the terms and conditions of the Credit Agreement, the Security Agreement and the Note, reference is hereby made to such documents respectively filed as Exhibits 10.1, 10.2 and 10.3 as part of the Form 8-K filed with the Securities and Exchange Commission on February 23, 2011. All statements made herein concerning the foregoing document are qualified by reference to said Exhibits.

We have seen that the credit line has increased the liquidity of our business by improving cash flow and reducing the debtor days for an average of 45 down to less than 15. We expect to continue to use this Credit Facility for the foreseeable future. The decision to increase this line will be dependent on the increase of eligible receivables (those from the USA and UK) and management will make a decision based on sales history and forecasts from the customer base.

We have also signed a new distribution partner in South Africa and have shipped the first container of goods which should arrive with the customer in due course. We view South Africa as a new market where interactive product penetration is low and expects to see significant growth from the region.

We will continue to expand in the Middle East as sales in the region continue to grow. Our Sales Manager for the region is actively recruiting both new channel partners we well as distribution partners. Saudi Arabia continues to be the strongest country for sales and growth in the region.

We entered into discussions with Hitachi Solutions Europe Ltd. (“Hitachi”) as well as delegates from Japan for the OEM of the TouchIT Board under the Hitachi brand name for certain markets around the world. We are also in discussions with Hitachi for the production of one of their products in Europe. This would help Hitachi European manufactures by enabling them to supply their customer base with their products in a more timely manor and with cheaper freight prices. We will ship our first product to Hitachi in May.

We continue to develop a new range of Interactive LCD products which we plan to launch in the third quarter of 2011. These products will include a 42”, a 55”, and a 65” LCD. All of these products will be full high definition and touch-based, and may include options of multiple input “multi-touch” on these models. These models will replace the 57”. Our Company’s management took the decision to broaden the LCD range due to feedback and growing demand from the markets. We have shipped samples to various key customers around the world for analysis and feedback.

During the quarter, we have initiated an investor relations program by engaging Cooper Global Communications (“CGC”), which is based in New York. The program’s goal is to provide visibility to our Company in the investment community both in Europe and in the United States.

We will continue to look into the viability of an OEM offering of a content software that is suitable for both 7-11 and 11-16 age groups. If concluded, the software will be sold in conjunction with our existing products to strengthen the product portfolio.

We have also undertaken a product analysis of Interactive Projectors. Through a Chinese vendor, our Company’s management has evaluated the Interactive Projector market and has concluded that at this time, we will not be entering this market. This decision was made in conjunction with key customer feedback.

Last, we have undertaken significant research and development of surface materials for use on the interactive product line. This research will enable our Company to produce a lighter yet stronger interactive whiteboard surface in the future. This new product will be particularly pertinent to any OEM discussions with Hitachi Solutions Europe Ltd as the surface flatness tolerance imposed by their specifications can now be met as a result.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accompanying financial statements include the financial statements of TouchIT Tech KS and TouchIT Ed. Although not significant, it should be noted that inter-company transactions and balances do exist and have not been consolidated. TouchIT Tech KS and TouchIT Ed together are also referred to as the “Company.”

This management's discussion and analysis of our financial condition and results of operations are based on the financial statements of both TouchIT Tech KS and TouchIT Ed, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, we will evaluate these estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis:

Basis of presentation financial statements:

Our Company maintains our books of account and prepares our statutory financial statements in accordance with accounting principles in the Turkish Commercial Code and tax legislation. The accompanying financial statements are based on the statutory records, with adjustments and reclassifications, for the purpose of fair presentation in accordance with United States generally accepted accounting principles (“US GAAP”).

There are inter-company transactions that have not been consolidated on these financial statements.

Revenue recognition:

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for customer returns, rebates, and other similar allowances.

Inventories:

Inventories are stated at the lower of cost or net realizable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories held by the method most appropriate to the particular class of inventory being valued on the weighted average basis. Net realizable value represents the estimated selling price less all estimated costs of completion and costs necessary to deliver service.

Property, plant and equipment:

Property, plant and equipment are carried at cost less accumulated depreciation and any accumulated impairment losses, if any. Depreciation is charged so as to write off the cost of assets, other than land and construction in progress, over their estimated useful lives, using straight line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

The ranges of estimated useful lives are as follows:

-	Machinery and equipments: 2-6 years

-	Motor vehicles: 4 years

-	Furniture, fixtures and office equipments: 4-5 years

Shipping and handling:

Shipping and handling costs related to costs of the raw material purchased is included in cost of revenues.

Research and development costs:

Research and development costs are expensed as incurred. The costs of material and equipment that are acquired or constructed for research and development activities, and have alternative future uses, either in research and development, marketing, or sales, are classified as property and equipment or depreciated over their estimated useful lives.

Company reporting year end:

We use a calendar year as our fiscal year ending December 31.

RESULTS OF OPERATIONS

TOUCHIT TECH KS AND TOUCHIT ED COMBINED STATEMENTS OF COMPREHENSIVE INCOME FOR QUARTER ENDED MARCH 31, 2011 & 2010

(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)

	31/03/2011			31/03/2010

NET SALES		773,658			1,046,011
COST OF SALES		(556,766	)		(719,035	)
Gross profit		216,892			326,976
MARKETING AND SELLING EXPENSE		(293,399	)		(179,608	)
GENERAL AND ADMINISTRATIVE EXPENSES		(86,852	)		(75,100	)
Profit from operations		(163,359	)		72,268
OTHER INCOME AND EXPENSES, net		(46,836	)		(233	)
FINANCIAL INCOME AND EXPENSES, net		(1,449	)		(2,237	)
Profit Loss before taxation and currency translation gain/(loss)		(211,644	)		69,798
TAXATION CHARGE		--			--
Taxation current		--			--
Deferred		--			--
CURRENCY TRANSLATION GAIN/(LOSS)		(9,040	)		219
Net income/(loss) for the year		(211,644	)		70,017
OTHER COMPREHENSIVE INCOME		--			--
Total comprehensive income		(220,684	)		70,236

NET SALES (REVENUE) – For the first three months of the quarter ended March 31, 2010 as compared to quarter ended March 31, 2011, revenue has decreased by 26% or by $272,353 from $1,046,011 to $773,658. This decrease can be attributed to a slow down in the market due to uncertain budgetary commitments from certain of our customers. Management also notes that the first quarter in 2010 was abnormally high for this time of the year. Typically, the third and fourth quarters are the strongest quarters for our market. Our going forward sales activity, including the first quarter, also reflects our management’s plan of increasing focus on the development of recurring business in existing and new markets in lieu of non-recurring tender business. An example of this is our penetration into South Africa. Our management does anticipate that revenues will continue to grow for the balance of the year in light of the regular run rate business growth combined with our initiatives that we have recently made regarding the LCD product line.

GROSS PROFIT – For the first three months of the quarter ended March 31, 2011 as compared to quarter ended March 31, 2010, gross profit has decreased by 33% or $110,084 from $326,976 to $216,892. This is primarily due to the decrease in sales revenue; however, the percentage of profit over revenue has increased showing gross margins have increased.

	31/03/2011			31/03/2010			31/12/2009

NET SALES		773,658			1,046,011			2,029,074
COST OF SALES		(556,766	)		(719,035	)		(1,742,047	)
Cost of sales as a %		72	%		69	%		86	%

OPERATIONAL PROFIT – For the first three months of the quarter ended March 31, 2011 as compared to quarter ended March 31, 2010, operational profit has decreased from $72,268 to (163,359) a decrease of $235,627. This can be attributed to the maintenance of overhead coupled with a drop in sales. The operational costs do not decrease when revenue decreases.

	31/03/2011			31/03/2010			31/12/2009

MARKETING AND SELLING EXPENSE		(293,399	)		(179,608	)		(409,386	)
As a percentage of revenue		38	%		17	%		20	%
GENERAL AND ADMINISTRATIVE EXPENSES		(86,852	)		(75,100	)		(140,121	)
As a percentage of revenue		11	%		7	%		7	%

NET INCOME FOR THE PERIOD – For the first three months of the quarter ended March 31, 2011 as compared to the quarter ended March 31, 2010, net income for the period has decreased by $290,919 from $70,017 to (220,683). This decrease can be attributed to the decrease in revenue with an increase in expenditure as we put in place the marketing mechanisms for the business to grow.

TOUCHIT TECH KS AND TOUCHIT ED COMBINED BALANCE SHEETS AT MARCH 31, 2011 & 2010

(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)

CURRENT ASSETS	31/03/2011			31/03/2010

Cash and cash equivalents		27,954			52,383
Trade receivables, net		365,234			426,491
Due from related parties		484,459			357,013
Due from Shareholders		49,827			21,399
Inventories		612,991			243,783
Other current assets		4,561			4,445

Total current assets		1,545,026			1,105,514

NON CURRENT ASSETS

Property, plant and equipment, net		64,051			27,446
Intangible assets, net		33,403			-
Rights		-			12,855
Other non current assets		153			92

Total non current assets		97,607			40,393


TOTAL ASSETS		1,642,633			1,145,907


CURRENT LIABILITIES
Borrowings		587			11,317
Trade payables		205,295			61,328
Due to shareholders		60,448			68,469
Due to related parties		807,120			814,323
Other current liabilities		54,209			302,326

Total current liabilities		1,127,659			1,257,763


NON CURRENT LIABILITIES
Borrowings		-			597
Employee termination benefits		1,373			-
Reserve for retirement pay		-			493
Share purchase advances		750,000			-

Total non current liabilities		751,373			1,090


COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Share capital		127,570			35,500
Retained earnings		(143,285	)		111,009
Net income / (loss) for the period		(220,684	)		78,675

Total shareholders’ equity		(236,399	)		225,184

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY		(1,642,633	)		485,220

CURRENT ASSETS – For the first three months of the quarter ended March 31, 2011 as compared to the quarter ended March 31, 2010, total current assets have increased by 143% or $496,726. This increase is due to an increase in inventory holding, but also due to an increase in receivables from related parties, notably Emko Emaye. Trade receivables have decreased as we have improved the payment days on our collections.

NON-CURRENT ASSETS – For the first three months of the quarter ended March 31, 2011 as compared to the quarter ended March 31, 2010, total non-current assets have increased by $57,214. This is mainly due to an increase in intangible assets as the property, plant and equipment has increased by 233% in value from $27,446 to $64,051. This can be attributed to plant equipment in the factory where extra production stations have been created as the factory has continued to develop to meet the sales increase for future demand for the products. The intangible assets refer to the manufacturing and trading licenses held by TouchIT Tech KS and TouchIT Ed respectively.

TOTAL ASSETS – For the first three months of the quarter ended March 31, 2011 as compared to quarter ended March 31, 2010, total assets have increased by 143% or $496,726 from $1,145,907 to $1,643,633. The reason for the increase in assets can be attributed to the increase in monies owed from related parties. This is due to the sales of Electronic parts to Emko Emaye from TouchIT Ed that have not been consolidated against the purchases from Emko Emaye by TouchIT Tech KS. Secondly, the increase in assets can be attributed to the increase in inventory. Management took the decision to increase our inventory holding in anticipation of the sales pipeline that we have.

CURRENT LIABILITIES – For the first three months of the quarter ended March 31, 2011 as compared to the quarter ended March 31, 2010, total current liabilities have decreased by 10% or $130,104 from $1,257,763 to $1,127,659. Trade payables have increased by 335% or $143,967 which can be attributed to an increase in inventory. Our management made the decision to take on an increased inventory holding to fulfill a growing pipeline for subsequent quarters. Monies due to related parties have increased by 1% and other current liabilities have decreased by 82% or $248,117 as we have paid balances owed.

TOUCHIT TECH KS AND TOUCHIT ED COMBINED STATEMENTS OF CASH FLOW FOR QUARTERS ENDED MARCH 31, 2011 & 2010

(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)

	31/03/2011			31/03/2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		(220,683	)		70,017
Adjustments to reconcile net income to net cash provided
By operating activities:
Depreciation and amortisation		7,431			4,547
Provision for employee benefit		(469	)		(548	)


Changes in operating assets and liabilities
Trade receivables, net		339,990			(151,689	)
Due from shareholders		(33,340	)		(72,113	)
Due from related parties		379,679			(238,293	)
Inventories		(217,422	)		74,942
Other current assets		3,376			3,716
Other non current assets
Trade payables		92,934			(9,291	)
Due to shareholders		(336,735	)		(7,115	)
Due to related parties		(1,330	)		143,347
Other current liabilities		(19,024	)		181,707
Share Purchase Advances

Net cash generated from (used for) operating activities		(5,593	)		(773	)

CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(decrease) in short-term borrowings		(1,764	)		35
Increase/(decrease) in long-term borrowings		--			(1,724	)
Dividends paid

Net cash (used for) provided from financing activities		(1,764	)		(1,689	)


CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment and intangible assets		(15,245	)		0
Share capital increase

Net cash used for investing activities		(15,245	)		0

NET INCREASE / (DECREASE) IN CASH AND BANKS		(22,602	)		(2,462	)

CASH AND BANKS AT BEGINNING OF THE YEAR		50,556			54,845

CASH AND BANKS AT END OF THE PERIOD		27,954			52,383

NET CASH USED FOR OPERATING ACTIVITIES – For the first three months of the quarter ended March 31, 2011 as compared to the quarter ended March 31, 2011, net cash used for operating activities was $(5,593) compared to $(773) which is an increase of $4,820.

Cash flow in general has improved as we make use of the Credit Facility from our Lender. This has reduced the debtor days from an average of 45 to 15 or less on eligible accounts from the UK and USA. However, with sales being down, we have not been able to make full use of this facility. Our management expects to utilise the facility as the business grows in the UK and USA.

CASH FLOW FROM FINANCING ACTIVITES – For the first three months of the quarter ended March 31, 2011, cash flow from financing activities was $(8,132)

CASH POSITION. There was a net decrease in the cash and cash equivalents of $4,289 for the beginning of the period, compared to the same period in 2010. Cash and cash equivalents at the end of the period has decreased by $24,429 for quarter ended March 31, 2011 as compared to quarter ended March 31, 2011. This change in cash position can be attributed to the increase in “services” and “consulting work” which we have enlisted to ensure our continued growth. It is generally expected to pay these invoices on 30 days. We have increased our Sales Consultant expenses for the Middle East region, as well as enlisting the services of Buyers Bridge for supply chain management from the Far East and Cooper Global Communications for both public and investor relations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a “smaller reporting company” (as defined by Rule 12b-2 of the Exchange Act) and are not required to provide the information required under this item.

Item 4. Controls and Procedures.

(a) Disclosure Controls and Procedures

Regulations under the Securities Exchange Act of 1934 require public companies to maintain “disclosure controls and procedures,” which are defined to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the period covered by this Report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2011, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following three material weaknesses in our disclosure controls and procedures:

1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

3. We do not have review and supervision procedures for financial reporting functions. The review and supervision function of internal control relates to the accuracy of financial information reported. The failure to review and supervise could allow the reporting of inaccurate or incomplete financial information. Due to our size and nature, review and supervision may not always be possible or economically feasible. Management evaluated the impact of our significant number of audit adjustments and has concluded that the control deficiency that resulted represented a material weakness.

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

(b) Changes in internal control over financial reporting

During the three months ended March 31, 2011, our Company has not made any changes to internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results.

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

On May 7, 2010, we entered into a Share Exchange Agreement with TouchIT Tech KS, the stockholders of TouchIT Tech KS, TouchIT, and the stockholders of Touch Ed, pursuant to which we issued 48,330,000 shares of our Common Stock to the shareholders of TouchIT Tech KS and TouchIT Ed in exchange for all shares held by these shareholders in TouchIT Tech KS and TouchIT Ed. The issuance of these shares was exempted from registration pursuant to Section 4(2) of the Securities Act of 1933. The terms of the Share Exchange Agreement are discussed more fully in Item 1.01 and 2.01 on Form 8-K, filed with the SEC on May 12, 2010.

In connection 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 convertible into up to 6,000,000 shares of our Common Stock (“Note” or “Notes”) and share purchase warrants (the “Warrants”) to purchase up to 6,000,000 shares of our Common Stock. The terms of the Subscription Agreement, Notes and Warrants (including the terms of conversion and/or exercise of the Notes and Warrants) are discussed more fully in Item 1.01 and 2.01 on Form 8-K, filed with the SEC on May 12, 2010. The issuance of these securities was exempted from registration pursuant to Section 4(2) of the Securities Act of 1933.

Item 6. Exhibits.

(a) Exhibits

Exhibit

Number

Description of Exhibit


31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.

31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended.

32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Principal Executive Officer).

32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Principal Financial and Accounting Officer).

SIGNATURES

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

	TouchIT Technologies, Inc.

Dated: May 16, 2011	By:	/s/ Andrew Brabin
		Andrew Brabin Chief Financial Officer