BTCS Inc. - Quarter Report: 2012 June (Form 10-Q)
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 June 30, 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)
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Nevada
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26-2477977
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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100 West Big Beaver Road, Suite 200, Troy, MI, 48084, USA
(Address of Principal Executive Offices) (Zip Code)
248 680 6700 / 00 44 207 858 1045
(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):
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Larger accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer ¨
(Do not check if a smaller reporting company)
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Smaller reporting company x
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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: 74,189,419 shares of common stock outstanding as of August 1, 2012.
TOUCHIT TECHNOLOGIES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2012
INDEX
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PART I - FINANCIAL INFORMATION
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1 | |
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Item 1.
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Financial Statements.
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1 |
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations.
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17 |
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk.
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26 |
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Item 4.
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Controls and Procedures.
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26 |
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PART II - OTHER INFORMATION
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27 | |
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Item 1.
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Legal Proceedings.
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27 |
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Item 6.
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Exhibits.
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28 |
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Signature
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29 | |
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
TOUCHIT TECHNOLOGIES, INC
REVIEWED FINANCIAL STATEMENTS
(Unaudited)
June 30 2012
and
Comparative Periods
Edward Richardson Jr., CPA
15565 Northland Suite 508 West
Southfield, MI. 48075
To the Board of Directors
TouchIT Technologies, Inc.
100 West Beaver Road
Troy, MI.
I have reviewed the accompanying balance sheet of TouchIT Technologies, Inc. as of June 30, 2012, and the related statements of income and retained earnings and cash flows for the period then ended, and the accompanying supplementary information, which is presented only for supplementary analysis purposes, in accordance with the standards of the Public Company Accounting Oversight Board (United States). All information included is the representation of the Board of Directors of TouchIT Technologies.
A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an examination in accordance with US Generally Accepted Accounting Principles (“US GAAP”) standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with US GAAP standards.
My review was made for the purpose of expressing limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with US GAAP. The information in the accompanying statements and schedules is presented only for supplementary analysis purposes. Such information has been subject to the inquiry and analytical procedures applied in the review of the basic financial statements, and I am not aware of any material medications that should be made thereto.
/S/ Edward Richardson Jr., CPA
July 22, 2012
-2-
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TOUCHIT TECHNOLOGIES INC
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BALANCE SHEET
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FOR THE PERIODS ENDED 30 JUNE 2012 & 2011 AND YEARS ENDED 31 DECEMBER 2011 & 2010
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(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
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CURRENT ASSETS
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30/06/2012
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31/12/2011
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30/06/2011
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31/12/2010
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Cash and cash equivalents
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15,584 | 70,289 | 1,239 | 50,556 | ||||||||||||
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Trade receivables, net
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122,194 | 240,867 | 5,060 | 705,225 | ||||||||||||
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Due from related parties
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- | - | 655,135 | 863,395 | ||||||||||||
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Due from Shareholders
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- | - | 41,955 | 50,585 | ||||||||||||
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Inventories
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32,419 | 55,689 | 571,586 | 365,643 | ||||||||||||
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Other current assets
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4,223 | 1,106 | ||||||||||||||
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Total current assets
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170,196 | 366,845 | 1,279,198 | 2,036,510 | ||||||||||||
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NON CURRENT ASSETS
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Property, plant and equipment,net
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2,032 | 1,027 | 59,530 | 64,495 | ||||||||||||
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Intangible assets, net
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- | 18,426 | 25,145 | |||||||||||||
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Rights
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- | - | - | |||||||||||||
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Other non current assets
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400,000 | - | 12,763 | 3,555 | ||||||||||||
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Total non current assets
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402,032 | 1,027 | 90,719 | 93,195 | ||||||||||||
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TOTAL ASSETS
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572,228 | 367,872 | 1,369,917 | 2,129,705 | ||||||||||||
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CURRENT LIABILITIES
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Borrowings
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- | - | - | 2,351 | ||||||||||||
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Trade payables
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478,171 | 181,984 | 104,721 | 124,745 | ||||||||||||
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Due to shareholders
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- | - | 188,293 | 47,257 | ||||||||||||
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Due to related parties
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- | 265,318 | 878,822 | 1,145,992 | ||||||||||||
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Other current liabilities
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47,260 | 27,390 | 68,463 | 73,233 | ||||||||||||
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Total current liabilities
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525,431 | 474,692 | 1,240,299 | 1,393,578 | ||||||||||||
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NON CURRENT LIABILITIES
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Borrowings
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71,841 | 250,000 | - | - | ||||||||||||
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Employee termination benefits
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- | - | - | - | ||||||||||||
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Reserve for retirement pay
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- | - | - | 1,842 | ||||||||||||
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Share purchase advances
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- | - | 750,000 | 750,000 | ||||||||||||
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Total non current liabilities
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71,841 | 250,000 | 751,078 | 751,842 | ||||||||||||
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COMMITMENTS AND CONTINGENCIES
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SHAREHOLDERS' EQUITY
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Share capital
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544,303 | 127,570 | 127,570 | 127,570 | ||||||||||||
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Retained earnings
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(520,454 | ) | (137,698 | ) | (143,285 | ) | (308,463 | ) | ||||||||
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Net income / (loss) for the period
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(48,893 | ) | (346,692 | ) | (605,745 | ) | 173,899 | |||||||||
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Total shareholders’ equity
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(25,044 | ) | (356,820 | ) | (621,460 | ) | (7,004 | ) | ||||||||
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TOTAL LIABILITIES AND
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SHAREHOLDERS' EQUITY
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572,228 | 367,872 | 1,369,917 | 3,138,416 | ||||||||||||
-3-
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TOUCHIT TECHNOLOGIES INC
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STATEMENT OF COMPREHENSIVE INCOME
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FOR THE PERIODS ENDED 30 JUNE 2012 & 2011 AND YEARS ENDED 31 DECEMBER 2011 & 2010
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(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
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30/06/2012
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31/12/2011
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30/06/2011
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31/12/2010
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NET SALES
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505,685 | 1,595,943 | 914,867 | 3,577,881 | ||||||||||||
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COST OF SALES
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353,002 | (1,341,374 | ) | (832,401 | ) | (2,502,037 | ) | |||||||||
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Gross profit
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152,683 | 254,569 | 82,466 | 1,075,844 | ||||||||||||
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MARKETING AND SELLING EXPENSE
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37,458 | (578,887 | ) | (427,851 | ) | (504,329 | ) | |||||||||
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GENERAL AND ADMINISTRATIVE EXPENSES
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165,317 | (316,528 | ) | (123,057 | ) | (479,064 | ) | |||||||||
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Profit from operations
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(50,092 | ) | (640,847 | ) | (468,442 | ) | 92,451 | |||||||||
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OTHER INCOME AND EXPENSES,net
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1,200 | 294,154 | (46,344 | ) | 24,094 | |||||||||||
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FINANCIAL INCOME AND EXPENSES, net
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-- | -- | (28,433 | ) | (8,294 | ) | ||||||||||
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Profit Loss before taxation and currency translation gain/(loss)
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(48,892 | ) | (346,692 | ) | (605,745 | ) | 60,063 | |||||||||
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TAXATION CHARGE
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-- | -- | -- | -- | ||||||||||||
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Taxation current
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-- | -- | -- | -- | ||||||||||||
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Deferred
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-- | -- | -- | -- | ||||||||||||
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CURRENCY TRANSLATION GAIN/(LOSS)
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-- | -- | -- | 60,063 | ||||||||||||
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Net income/(loss) for the year
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(48,892 | ) | (346,692 | ) | (605,745 | ) | 105,115 | |||||||||
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OTHER COMPREHENSIVE INCOME
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-- | -- | -- | -- | ||||||||||||
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Total comprehensive income
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(48,892 | ) | (346,692 | ) | (605,745 | ) | 165,178 | |||||||||
-4-
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TOUCHIT TECHNOLOGIES INC
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STATEMENT OF CASH FLOW
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FOR THE PERIODS ENDED 30 JUNE 2012 & 2011 AND YEARS ENDED 31 DECEMBER 2011 & 2010
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(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
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30/06/2012
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31/12/2011
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30/06/2011
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31/12/2010
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net income
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(48,892 | ) | (346,692 | ) | (605,745 | ) | 165,178 | |||||||||
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Prior Period Adjustments
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(436,865 | ) | ||||||||||||||
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Adjustments to reconcile net income to net cash provided
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6,615 | -- | -- | |||||||||||||
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By operating activities:
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Depreciation and amortisation
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-- | -- | 14,357 | 17,516 | ||||||||||||
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Provision for employee benefit
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-- | -- | (764 | ) | 801 | |||||||||||
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Changes in operating assets and liabilities
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Trade receivables, net
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118,674 | 1,378,337 | 700,165 | (430,428 | ) | |||||||||||
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Due from shareholders
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-- | -- | 1,047 | (773,544 | ) | |||||||||||
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Due from related parties
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-- | -- | 215,844 | -- | ||||||||||||
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Inventories
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23,270 | 309,953 | (205,944 | ) | (17,620 | ) | ||||||||||
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Other current assets
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-- | 1,106 | (3,117 | ) | 98,467 | |||||||||||
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Other non current assets
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-- | -- | (3,117 | ) | 331 | |||||||||||
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Trade payables
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30,869 | 322,557 | (7,640 | ) | 54,126 | |||||||||||
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Due to shareholders
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-- | -- | 45,912 | 54,413 | ||||||||||||
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Due to related parties
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-- | -- | (184,430 | ) | 392,276 | |||||||||||
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Other current liabilities
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19,870 | (1,241,442 | ) | (4,770 | ) | (47,386 | ) | |||||||||
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Share Purchase Advances
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-- | -- | 750,000 | |||||||||||||
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Net cash generated from (used for) operating activities
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(293,074 | ) | 430,434 | (31,721 | ) | 67,197 | ||||||||||
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CASH FLOWS FROM FINANCING ACTIVITIES
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Increase/(decrease) in short-term borrowings
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-- | -- | (2,351 | ) | (8,931 | ) | ||||||||||
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Increase/(decrease) in long-term borrowings
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238,574 | (501,842 | ) | -- | -- | |||||||||||
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Dividends paid
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-- | -- | -- | -- | ||||||||||||
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Net cash (used for) provided from financing activities
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238,574 | (501,842 | ) | (2,351 | ) | (8,931 | ) | |||||||||
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CASH FLOWS FROM INVESTING ACTIVITIES
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Purchases of property, plant and equipment and
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(205 | ) | 91,141 | (15,245 | ) | (62,304 | ) | |||||||||
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intangible assets
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-- | -- | -- | |||||||||||||
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Share capital increase
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-- | -- | -- | |||||||||||||
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Net cash used for investing activities
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(205 | ) | 91,141 | (15,245 | ) | (62,304 | ) | |||||||||
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NET INCREASE / (DECREASE) IN CASH AND BANKS
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(54,705 | ) | 19,733 | (49,317 | ) | (4,289 | ) | |||||||||
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CASH AND BANKS AT BEGINNING OF THE YEAR
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70,289 | 50,556 | 50,556 | 54,845 | ||||||||||||
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CASH AND BANKS AT END OF THE PERIOD
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15,584 | 70,289 | 1,239 | 50,556 | ||||||||||||
-5-
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TOUCHIT TECHNOLOGIES INC
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STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY
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FOR THE PERIOD ENDED 30 JUNE 2012
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(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
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Total
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Retained
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Stockholder's
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Common Stock
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Preferred Stock
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Paid-in Capital
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Treasury Stock
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Earnings
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Equity
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Shares
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Amount
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Shares
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Amount
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Shares
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Amount
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Shares
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Amount
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Amount
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Amount
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Balance at January 1, 2012
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55,839,419 | $ | 127,570 | $ | - | $ | - | 55,839,419 | $ | 416,733 | - | $ | - | $ | (484,389 | ) | $ | 59,914 | ||||||||||||||||||||||
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Net Income
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- | - | - | - | - | - | - | - | (48,893 | ) | (48,893 | ) | ||||||||||||||||||||||||||||
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Capital Transactions
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18,350,000 | - | - | - | 18,350,000 | - | - | - | (36,065 | ) | (36,065 | ) | ||||||||||||||||||||||||||||
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Prior Period Adjustments
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- | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
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Balance at June 30, 2012
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74,189,419 | $ | 127,570 | $ | - | $ | - | 74,189,419 | $ | 416,733 | - | $ | - | $ | (569,347 | ) | $ | (25,044 | ) | |||||||||||||||||||||
-6-
TOUCHIT TECHNOLOGIES, INC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2012
1. OPERATIONS OF THE COMPANY:
General
The Company was established as a form of partnership. In Turkey, partnership is the association of two or people who co-own a business for trading goods under a trade name. The owners have unlimited responsibility to their creditors. This form of company does not have minimum capital requirements. On May 7, 2010, the company became TouchIT Technologies, Inc, a Nevada domiciled company in the United States of America by means of a reverse merge transaction detailed herewith.
Organization
TouchIT Education Technologies Dis Ticaret Killektik Sirketi Andrew Stuart Brabin ve Ortagi formerly RT Lojistik Dis Ticaret Recep Tanisman ve Ortagi (referred as “TouchIT Education”) was established on August 27, 2007 with a “Share Transfer of Open Company and amendment Agreement.”
On May 7, 2010 TouchIT Education, TouchIT Technologies and their stockholders (“TouchIT 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 01 per share (the “Common Stock”) to the shareholders of TouchIT Technologies and TouchIT Education in exchange for the transfer of 100% of the shares of TouchIT Tech and TouchIT Education to Hotel Management. This exchange transaction resulted in TouchIT Technologies and TouchIT Education becoming Hotel Management. The wholly-owned subsidiaries and the stockholders of TouchIT 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, 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 was recognized in TouchIT Education’s balance sheet as a future obligation to one of the investors.
The Turkish subsidiaries were officially closed in August 2011.
Average number of employees of the Company as of June 30, 2011 was twelve and June 30, 2012 is five.
Description of Business
TouchIT Technologies, Inc is a designer and manufacturer (via 3rd party) of Interactive Products, namely, Interactive Whiteboards and Interactive LCDs.
-7-
2. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In January 2010, the FASB issued an amendment to ASC, “Fair Value Measurements and Disclosure,” to require 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 periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair measures which are effective for fiscal years beginning after December 15, 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 financial statements in accordance with Generally Accepted Accounting Principles (GAAP) in the United States of America. The Company’s fiscal year ends on December 31.
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.
Basis of Accounting
The Company uses the accrual basis of accounting.
Accounts Receivable – Recognition of Bad Debt
The Corporation considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required. If amounts become uncollectible, they will be charged to operations when that determination is made.
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 terminable, and collectability is reasonably assure. Revenue typically is recognized at the 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 by the method most appropriate to the particular class of inventory being valued on the weighted average basis.
-8-
Related Parties
Parties are considered to be related if one parry 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 parities. Related parties are also included individuals that are principle owners, management and members of the Company’s Board of Directors and their families.
Capitalization
All costs incurred over $500 are capitalized. Costs which lengthen the life of a fixed asset are capitalized and depreciated over the extended life of the asset.
Depreciation
Depreciation is computed on the straight-line method over the estimated useful lives of the assets. Assets reviewed for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. If the fair value is less that the carrying amount of the asset, a loss is recognized for the difference.
Taxation
The Company has elected to be treated as a regular “C” corporation; therefore, the corporation , not the stockholders, will pay income taxes.
Retirement Pay Provision
Under Turkish laws, lump sum payments are made to employees retiring or involuntary leaving the Company. Such payments are considered as being part of a defined retirement benefit plan.
The retirement benefit obligation recognized in the balance sheet represents the present value of defined benefit obligation as adjusted for unrecognized actuarial gains and losses.
Leases
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
In June 1997, the Financial Accounting Standard Board issued SFAS No. 130, “Reporting Comprehensive Income.” SFAS No. 130 is effective for years beginning after June 15, 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.
-9-
Financial Instruments
Fair value is defined as the price that would be received to sell an assets or paid to transfer a a liability in an orderly transaction between participants at the measurement date (i.e., an exit price). The guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority
To unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1 – Quoted, active market prices for identical assets or liabilities. Level 1 also includes U.S. Treasury and federal agency securities and federal agency mortgage-backed securities, which are traded by dealers of brokers in active markets. Valuation are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. The Company did not have any Level 1 assets or liabilities.
Level 2 – Observable inputs other than Level 1, such as quoted market prices for similar assets or liabilities, quoted for identical or similar assets in inactive markets, and model derived valuations in which all significant inputs are observable in active markets. The Company did not have any Level 2 assets or liabilities.
Level 3 – Valuation techniques in which one or more significant inputs are observable in the marketable. The company did not have any Level 3 assets or liabilities.
5. CASH AND CASH EQUIVALENTS
As of June 30, 2012 and June 30, 2011, cash and cash equivalents comprised were comprised of the following:
| 30.06.2012 | 30.06.2011 | |||||||
|
Cash on Hand
|
$ | 0 | $ | 0 | ||||
|
Banks
|
$ | 15,584 | $ | 1,239 | ||||
|
Total
|
$ | 15,584 | $ | 1,239 |
-10-
6. TRADE RECEIVABLES
As of June 30, 2012 and June 30, 2011, trade receivables comprised were comprised of the following:
| 30.06.2012 | 30.06.2011 | |||||||
|
Trade Receivables
|
$ | 124,194 | $ | 5,060 | ||||
|
Provision for doubtful accounts
|
$ | (2,000 | ) | $ | (0 | ) | ||
|
Total
|
$ | 122,194 | $ | 5,060 |
7. RELATED PARTY TRANSACTIONS:
In the course of conducting its business, the Company conducted various business transactions with related parities on commercial terms.
Related parties and shareholders balances and transactions have been presented as follows:
|
Due from related parties
|
30.06.2012 | 30.06.2011 | ||||||
|
Emko Yazi Tahalari ve Egitim Gerecleri A.S.
|
$ | 0 | $ | 321,494 | ||||
|
TouchIT Technologies Koll. Sti.. Ronald George Murphy ve Ortaklari
|
$ | 0 | $ | 162,965 | ||||
|
Total
|
$ | 0 | $ | 655,135 |
|
Due from shareholders
|
30.06.2012 | 30.06.2011 | ||||||
|
Andrew Stuart Brabin
|
$ | 0 | $ | 41,955 | ||||
|
Recep Tanisman
|
$ | 0 | $ | 0 | ||||
|
Total
|
$ | 0 | $ | 41,955 |
|
Due to related parties
|
30.06.2012 | 30.06.2011 | ||||||
|
Kamron, Inc.
|
$ | 175,913 | $ | 94,427 | ||||
|
ASB Trading
|
$ | 148, 586 | $ | 64,123 | ||||
|
Emko Yazi Tahalari ve Egitim Gerecleri A.S.
|
$ | 0 | $ | 339,542 | ||||
|
TouchIT Education Koll. Sti
|
$ | 0 | $ | 468,965 | ||||
|
International RT
|
$ | 0 | $ | 12,000 | ||||
|
Other
|
$ | 0 | $ | 36,089 | ||||
|
Total
|
$ | 324,499 | $ | 1,014,876 |
|
Due to Shareholders
|
30.06.2012 | 30.06.2011 | ||||||
|
Total
|
$ | 0 | $ | 188,293 |
-11-
|
Major purchases from related parties
|
30.06.2012 | 30.06.2011 | ||||||
|
TouchIT Technologies Koll Sti
|
$ | 0 | $ | 58,451 | ||||
|
TouchIT Education Koll Sti
|
$ | 0 | $ | 152,822 | ||||
|
Emko Yazi Tahalari ve Egitim Gerecleri A.S
|
$ | 0 | $ | 139,908 | ||||
|
Total
|
$ | 0 | $ | 351,181 |
|
Major sales to related parties
|
30.06.2012 | 30.06.2011 | ||||||
|
Emko Yazi Tahalari ve Egitim Gerecleri A.S
|
$ | 0 | $ | 102,290 | ||||
|
TouchIT Technologies Koll. Sti
|
$ | 0 | $ | 152,822 | ||||
|
TouchIT Education Koll Sti
|
$ | 0 | $ | 58,451 | ||||
|
TouchIT Technologies USA LLC
|
$ | 0 | $ | 66 622 | ||||
|
Total
|
$ | 0 | $ | 380,185 |
|
Service provided by
|
30.06.2012 | 30.06.2011 | ||||||
|
Kamron, Inc.
|
$ | 175,913 | $ | 98,991 | ||||
|
Andrew Stuart Brabin
|
$ | 148,586 | $ | 0 | ||||
|
ASB Trading
|
$ | 0 | $ | 68,987 | ||||
|
Other
|
$ | 0 | $ | 36,372 | ||||
|
Total
|
$ | 324,499 | $ | 204,350 |
8. INVENTORIES
| 30.06.2012 | 30.31.2011 | |||||||
|
Trade goods
|
$ | 32,419 | $ | 571,586 | ||||
|
Total
|
$ | 32,419 | $ | 571,586 |
9. OTHER CURRENT ASSETS
As of June 30, 2012 and June 30, 2011, other receivables comprised of the following:
| 30.06.2012 | 30.06.2011 | |||||||
|
Prepaid Expense
|
$ | 0 | $ | 4,223 | ||||
|
Total
|
$ | 0 | $ | 4,223 |
-12-
10. NON-CURRENT ASSETS
As of June 30, 2012 and June 30, 2011, non-currents comprised of the following:
| 30.06.2012 | 30.06.2011 | |||||||
|
Fully Reporting Public Shell
|
$ | 400,000 | $ | 0 | ||||
|
Other
|
$ | 0 | $ | 12,763 | ||||
|
Total
|
$ | 400,000 | $ | 12,763 |
11. TRADE PAYABLES
As of June 30, 2012 and June 30, 2011, trade payables were comprised of the following:
| 30.06.2012 | 30.06.2011 | |||||||
|
Trade payables
|
$ | 153,672 | $ | 104,721 | ||||
|
Total
|
$ | 153,672 | $ | 104,721 |
12. OTHER CURRENT LIABILITIES
As of June 30, 2012 and June 30, 2011, other current liabilities of the following:
| 30.06.2012 | 30.06.2011 | |||||||
|
Social Security & Withheld Taxes Payable
|
$ | 10,871 | $ | 0 | ||||
|
Due to personnel
|
$ | 0 | $ | 0 | ||||
|
Accrued Expenses
|
$ | 0 | $ | 0 | ||||
|
Advances received
|
$ | 0 | $ | 0 | ||||
|
Other Liabilities
|
$ | 36,389 | $ | 68,463 | ||||
|
Total
|
$ | 47,260 | $ | 68,463 |
13. RESERVE FOR EMPLOYMENT 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 June 30, 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 semiannually, the maximum amount of TRY 2,623 effective from January 1, 2011 has been taken into consideration in calculation of provision from employment termination benefits (2010: TRY 2,517)
| 30.06.2012 | 30.06.2011 | |||||||
|
Reserve for Employment Termination
|
$ | 0 | $ | 0 | ||||
|
Total
|
$ | 0 | $ | 0 |
-13-
14. CAPITAL STOCK
The issued share capital of the Company is respectively for the period ended at June 30, 2012 and 2011 is comprised of the following:
| 30.06.2012 | 30.06.2011 | |||||||
|
Insider
|
Insider
|
|||||||
|
Holdings
|
Holdings
|
|||||||
|
Andrew Stuart Brabin
|
23,610,000 | 16,110,000 | ||||||
|
Ronald George Murphy
|
23,610,000 | 16,110,000 | ||||||
|
Recep Tanisman
|
0 | 16,110,000 | ||||||
|
Total Insider Holdings
|
47,220,000 | 48,330,000 | ||||||
|
Total Outstanding
|
74,189,419 | 64,549,419 | ||||||
15. SALES
The composition of sales by principal for the periods ended June 30, 2012 and 2011 can be summarized as follows:
| 30.06.2012 | 30.06.2011 | |||||||
|
CleverBoard
|
$ | 31,925 | $ | 337,124 | ||||
|
Document Camera
|
$ | 1,824 | $ | 0 | ||||
|
Electronic Parts
|
$ | 0 | $ | 416,336 | ||||
|
LCD Duo 32"
|
$ | 2,998 | $ | 0 | ||||
|
LCD Duo 42"
|
$ | 15,343 | $ | 0 | ||||
|
LCD Duo 55"
|
$ | 56,782 | $ | 0 | ||||
|
LCD Duo 65"
|
$ | 90,561.74 | $ | 0 | ||||
|
LCD Duo Pro 55"
|
$ | 7,998 | $ | 0 | ||||
|
LCD Duo Pro 65"
|
$ | 5,999 | $ | 0 | ||||
|
Stand IWB (Manual)
|
$ | 5,362 | $ | 0 | ||||
|
Stand LCD (Man)
|
$ | 3,521.25 | $ | 0 | ||||
|
Total Tablet
|
$ | 2,455 | $ | 5,500 | ||||
|
TouchIT Board 50"
|
$ | 2,256 | $ | 9,639 | ||||
|
TouchIT Board 78"
|
$ | 127,862 | $ | 119,122 | ||||
|
TouchIT Board 80"
|
$ | 53,365 | $ | 39,446 | ||||
|
TouchIT Board 90"
|
$ | 41,316 | $ | 22,811 | ||||
|
TouchIT Fusion 42"
|
$ | 4,999 | $ | 0 | ||||
|
TouchIT Fusion 55"
|
$ | 5,499 | $ | 0 | ||||
|
TouchIT Stand
|
$ | 675 | $ | 0 | ||||
|
Wall Mount 42" 55"
|
$ | 645 | $ | 0 | ||||
|
Wall Mount 65" to 70"
|
$ | 2,985 | $ | 0 | ||||
|
Voting
|
$ | 0 | $ | 4,738 | ||||
|
Other
|
$ | 41314.01 | $ | 6,764 | ||||
|
Returns
|
$ | 0 | $ | (46,613 | ) | |||
| $ | 505,685 | $ | 914,867 |
-14-
16. COST OF SALES
The composition of cost of sales by principal for the periods ended June 30, 2012 and 2011 can be summarized as follows:
| 30.06.2012 | 30.06.2011 | |||||||
|
Purchases
|
$ | 353,002 | $ | 832,401 | ||||
|
Total
|
$ | 353,002 | $ | 832,401 |
17. MARKETING AND SELLING EXPENSES
The composition of marketing and selling expenses by principal for the periods ended June 30, 2102 and 2011 are summarized as follows:
| 30.06.2012 | 30.06.2011 | |||||||
|
Marketing and Selling Expenses
|
$ | 37,458 | $ | 427,851 | ||||
|
Total
|
$ | 37,458 | $ | 427,851 |
18. GENERAL AND ADMINISTRACTIVE EXPENSES
The composition of general and administrative expenses by the principal operations for the periods ended June 30, 2012 and 2011 are as follows:
| 30.06.2012 | 30.06.2011 | |||||||
|
General and Administrative Expenses
|
$ | 165,317 | $ | 123,057 | ||||
|
Total
|
$ | 165,317 | $ | 123,057 |
-15-
19. OTHER INCOME AND (EXPENSES), net
The composition of other income and expenses for the years June 30, 2011 and 2012 can be summarized as follows:
| 31.06.2012 | 31.06.2011 | |||||||
|
Other Income and Expenses
|
$ | 1,200 | $ | (46,344 | ) | |||
|
Total
|
$ | 1,200 | $ | (46,344 | ) |
20. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Financial risk factors
The Company’s activities expose it to a variety of financial risks, 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. However, the main transaction currency is USD, United States Dollar.
Credit risk management
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a financial loss to the company. The Company has adopted a policy of only dealing with creditworthy counterparties. Theny’s exposure and the credit ratings of it 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.
-16-
|
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.
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 “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. 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.
-17-
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 (via 3rd party contract manufacture) 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 our competition in terms of our 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 four years, we have designed, manufactured, launched, developed and sold four new products as well as established the business from scratch.
COMPANY OVERVIEW
We manufacture touch-based visual communication products for the education and corporate worldwide marketplaces. Our products stand out from our competition in terms of 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.
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 April 11, 2012, we borrowed Two Hundred Fifty Thousand Dollars ($250,000) (the “Advance”) from Bibby International Trade Finance (the “Lender”) pursuant to a revolving credit facility evidenced by a Master Purchase Agreement with an effective date of April 11, 2012 (the “MPA”).
The MPA evidences a revolving credit facility for the purchase of the Company’s accounts receivable up to the principal amount of $250,000, which subject to Lender approval, may be increased. The outstanding principal amount is due on April 11, 2013.
The Advance is secured by, among other things, (i) the MPA made by and between our 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 Executive Officer of our Company.
The MPA also includes customary representations and warranties and affirmative and negative covenants, including, among others, payment of certain customary fees and expenses, covenants relating to financial reporting, maintenance of property and insurance, incurrence of liens and/or other indebtedness. The MPA also contains customary provisions for events of default, remedies in circumstances of default, required notices, governing law and jurisdiction of governance.
-18-
We have now completed the development and the establishment of a production line in Taiwan for a new range of Interactive LCD products. These products include Interactive LCDs, with and without an embedded PC in sizes from 32” to 82”. The unique feature for the range of LCDs is that they do not require a driver to be installed, nor do they require any form of calibration by the user. These are true plug and play devices. All of these products are full high definition and touch-based and include options of multiple input “multi-touch”. We have also launched the TouchIT Fusion which is six interactive products in one. An Interactive LCD, and Interactive Easel and an Interactive Table. This is a revolutionary product as it takes us into new group collaboration markets.
We have seeded units into the United States, Australia and the Middle East for the new LCD product line. The company has received excellent feedback on these models and Management expects that by Quarter 4 2012, the LCD range will be 40% of revenue. The LCD range represents a higher ticket item which will impact revenues and also presents a greater margin opportunity which Management believes will have a positive impact on profits.
We have continued our efforts of expanding our product line through the K thru 12 markets as well as the higher Educational market. We are working on opportunities in Pennsylvania, Michigan, Mississippi, and higher educational institutions in Upstate NY and NJ.
We have expanded our reseller base with Demco, PCMall.gov, Cascade, US Markerboard and look to expand further into the Canadian and South American marketplaces with several interested parties looking at the TouchIT product lines.
We have had additional interest from the US government on our interactive boards and Interactive LCD. Subsequently, the US Government has purchased sample units of the new TouchIT LCD Duo.
We have targeted the retail marketplace and partnered with the Sales and Marketing Team, Berberian Associates Group covering New England, Florida, Midwest and the South in order to take TouchIT Technologies' product line to the retail, online, educational and enterprise channels. Established for over 30 years, Berberian Associates have a wealth of experience in Sales and Marketing of technology products. They represent a host of brands and have the necessary infrastructure to help grow businesses. Berberian Associates completed sales training on the products and began the product introductions to some of the largest retailers in the USA. Companies that have expressed initial interest are Tech Depot, Tiger Direct and Sam’s Club. We have singed initial vendor agreements with Costco and Sam’s Club. Sam’s Club are currently uploading the products into their online portfolio ready for resale in Q3 2012.
We have signed a vendor agreement with Office Max in the United States of America. Office Max is currently undergoing a training program and the product line is being loaded into their website. We expect Office Max to begin selling the products in September 2012. We have also committed to being in the Office Max Maxi Catalogue which is released in Q4 2012 ready for 2013.
We entered the Australian market place by partnering with Ingram Micro PTY late in 2011. Ingram Micro is currently working on several large projects which encompass both the Interactive Whiteboard and the LCD product lines. Through one of the company’s resellers, our products have been chosen for the Western Australian Government Supply Contract for the next four years. Procurement from which begins in September 2012. This includes both the TouchIT Board and the TouchIT LCD Duo range.
We have signed a new distribution partner for the Italian market place, Satnet SRL. Satnet have now received their initial product and are beginning to sell into the Italian Market.
We have continued our expansion into the Middle East and are currently tendering our product in various government and private tenders. The outcomes of which we expect to be received before the end of calendar year 2012.
We continue to grow in the South African market. We officially launched the TouchIT LCD Duo range of LCD products in July and reseller training will take place in September 2012 in Johannesburg.
We have developed during Q2 a new product called TouchIT WebCast. This product is at final prototype stage and is expected to be launch 1st September 2012 in Europe, with a World-Wide roll-out before the end of the year. TouchIT WebCast is a media presentation system that allows you to stream your synchronized multimedia and video presentations over the Internet from a single location, a lecture theater or boardroom for example. You can then make the presentations available to multiple viewers on cross platform devices either live or on demand anywhere in the world. TouchIT WebCast is a combination of hardware and software that when used in conjunction with our cloud storage and streaming services, allows you to capture, stream and store lectures, training presentations or corporate updates for example.
-19-
We will generate revenue from the sale of the Recorder Box, the Cloud Services Package and the Accessories. The accessories are still being finalized and one will be the HD Camera as well as a lapel microphone to enable the Company to offer the complete package. The Cloud Services are an annual subscription so enables the company to have a reoccurring revenue model which we have not had before.
Last, we have undertaken and completed significant research and development of new technologies for a low cost interactive whiteboard. We have launched for the purpose of low cost tenders an Electromagnetic Interactive Whiteboard. This is a low cost product that will enable the Company to compete in large tenders that are particularly price sensitive in markets such as the Middle East.
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 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 its books of account and prepares its statutory financial statements in accordance with accounting principles in the United States of America 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.
-20-
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 TECHNOLOGIES, INC STATEMENTS OF COMPREHENSIVE INCOME
FOR QUARTER ENDED JUNE 30, 2012 & 2011
(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
|
30/06/2012
|
30/06/2011
|
|||||||
|
NET SALES
|
505,685 | 914,867 | ||||||
|
COST OF SALES
|
353,002 | (832,401 | ) | |||||
|
Gross profit
|
152,683 | 82,466 | ||||||
|
MARKETING AND SELLING EXPENSE
|
37,458 | (427,851 | ) | |||||
|
GENERAL AND ADMINISTRATIVE EXPENSES
|
165,317 | (123,057 | ) | |||||
|
Profit from operations
|
(50,092 | ) | (468,442 | ) | ||||
|
OTHER INCOME AND EXPENSES,net
|
1,200 | (46,344 | ) | |||||
|
FINANCIAL INCOME AND EXPENSES, net
|
-- | (28,433 | ) | |||||
|
Profit Loss before taxation and currency translation gain/(loss)
|
(48,892 | ) | (605,745 | ) | ||||
|
TAXATION CHARGE
|
-- | -- | ||||||
|
Taxation current
|
-- | -- | ||||||
|
Deferred
|
-- | -- | ||||||
|
CURRENCY TRANSLATION GAIN/(LOSS)
|
-- | -- | ||||||
|
Net income/(loss) for the year
|
(48,892 | ) | (605,745 | ) | ||||
|
OTHER COMPREHENSIVE INCOME
|
-- | -- | ||||||
|
Total comprehensive income
|
(48,892 | ) | (605,745 | ) | ||||
-21-
NET SALES (REVENUE) – For the first six months of the year, quarter ended June 30, 2012, as compared to the six months ended June 30, 2011, revenue has decreased by 45% or by $409,182 from $914,867 to $505,685. This decrease can be attributed firstly, to a slow down in the market due to uncertain budgetary commitments from certain of our customers. Our going forward sales activity reflects our management’s plan of increasing focus on the development of recurring business in existing and new markets for the new Interactive LCD Line. We are also looking to break into the retail market (Business to Business Divisions) of some of the larger retailers in the USA. The introduction of the TouchIT WebCast product in Q3 2012 will also add reoccurring sales revenue to the Company. Our management does anticipate that revenues will continue to grow for the balance of the year due to the LCD product line which represents a much larger value ticket item which will drive revenues higher.
GROSS PROFIT – For the first six months of the year, quarter ended June 30, 2012, as compared to the six months ended June 30, 2011, gross profit has increased by $70,217 from $82,466 to $152,683. This is primarily due to the restructuring of the business over the last three quarters and the closure of the Turkish manufacturing facilities. Our management does anticipate gross profits to continue to rise for the balance of the year.
OPERATIONAL PROFIT – For the first six months of the year, quarter ended June 30, 2012, as compared to the six months ended June 30, 2011, operational profit has increased from $(123,057) to $(50,092) an increase of $418,350. This can be attributed to the Management’s focus on reducing overhead costs to maximize profitability when revenues increase.
|
30/06/2012
|
30/06/2012
|
|||||||
|
MARKETING AND SELLING EXPENSE
|
$ | 37,458 | $ | 427,851 | ||||
|
As a percentage of revenue
|
7 | % | 47 | % | ||||
|
GENERAL AND ADMINISTRATIVE EXPENSES
|
$ | 165,317 | $ | 123,057 | ||||
|
As a percentage of revenue
|
33 | % | 4 | % | ||||
NET INCOME FOR THE PERIOD – For the first six months of the year, quarter ended June 30, 2012, as compared to the six months ended June 30, 2011, NET income for the period has increased by $556,853 from $(605,745) to $(48,892). This can be attributed to the Management’s focus on reducing overhead costs to maximize profitability when revenues increase.
-22-
TOUCHIT TECHNOLOGIES, INC BALANCE SHEET AT JUNE 30, 2012 & 2011
(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
|
CURRENT ASSETS
|
30/06/2012
|
30/06/2011
|
||||||
|
Cash and cash equivalents
|
15,584 | 1,239 | ||||||
|
Trade receivables, net
|
122,194 | 5,060 | ||||||
|
Due from related parties
|
- | 655,135 | ||||||
|
Due from Shareholders
|
- | 41,955 | ||||||
|
Inventories
|
32,419 | 571,586 | ||||||
|
Other current assets
|
4,223 | |||||||
|
Total current assets
|
170,196 | 1,279,198 | ||||||
|
NON CURRENT ASSETS
|
||||||||
|
Property, plant and equipment,net
|
2,032 | 59,530 | ||||||
|
Intangible assets, net
|
18,426 | |||||||
|
Rights
|
- | |||||||
|
Other non current assets
|
400,000 | 12,763 | ||||||
|
Total non current assets
|
402,032 | 90,719 | ||||||
|
TOTAL ASSETS
|
572,228 | 1,369,917 | ||||||
|
CURRENT LIABILITIES
|
||||||||
|
Borrowings
|
- | - | ||||||
|
Trade payables
|
143,672 | 104,721 | ||||||
|
Due to shareholders
|
- | 188,293 | ||||||
|
Due to related parties
|
324,499 | 878,822 | ||||||
|
Other current liabilities
|
47,260 | 68,463 | ||||||
|
Total current liabilities
|
525,431 | 1,240,299 | ||||||
|
NON CURRENT LIABILITIES
|
||||||||
|
Borrowings
|
71,841 | - | ||||||
|
Employee termination benefits
|
- | - | ||||||
|
Reserve for retirement pay
|
- | - | ||||||
|
Share purchase advances
|
- | 750,000 | ||||||
|
Total non current liabilities
|
71,841 | 751,078 | ||||||
|
COMMITMENTS AND CONTINGENCIES
|
||||||||
|
SHAREHOLDERS' EQUITY
|
||||||||
|
Share capital
|
544,303 | 127,570 | ||||||
|
Retained earnings
|
(520,454 | ) | (143,285 | ) | ||||
|
Net income / (loss) for the period
|
(48,893 | ) | (605,745 | ) | ||||
|
Total shareholders’ equity
|
(25,044 | ) | (621,460 | ) | ||||
|
TOTAL LIABILITIES AND
|
||||||||
|
SHAREHOLDERS' EQUITY
|
572,228 | 1,369,917 | ||||||
-23-
CURRENT ASSETS – For the first six months of the year, quarter ended June 30, 2012, as compared to the six months ended June 30, 2011, total current assets have decreased by 1,109,002 or 87%. This decrease is due to a decrease in its inventory holding moving to a ‘just in time’ supply rather than overstocking which in turn helps cash flow. Monies owed from related parties and from shareholders has also decreased representing a reduction in assets of $697,090
NON-CURRENT ASSETS – For the first six months of the year, quarter ended June 30, 2012, as compared to the six months ended June 30, 2011, total non-current assets have increased by $311,313. This is mainly due to the recognition of the value of the Full Reporting Public Shell on the Company’s balance sheet.
TOTAL ASSETS – For the first six months of the year, quarter ended June 30, 2012, as compared to the six months ended June 30, 2011, total assets have decreased by $797,689 from $1,369,917 to $572,228. The reason for the decrease in assets can be attributed to the decrease dues from related parties and shareholders and the move of production from Turkey to Taiwan.
CURRENT LIABILITIES – For the first six months of the year, quarter ended June 30, 2012, as compared to the six months ended June 30, 2011, total current liabilities have decreased by $714,868 from $1,240,299 to $525,431, a 58% decrease. Trade payables have increased by 27% or $38,951, which can be attributed to the trade credit that is being offered to the Company from the LCD supplier.
NON-CURRENT LIABILITIES - For the first six months of the year, quarter ended June 30, 2012, as compared to the six months ended June 30, 2011 they have decreased by $679,237 from $751,078 to $71,841. This can be attributed to the Share Purchase Advance brought forward on TouchIT Education’s balance sheet not being shown on TouchIT Technologies Inc now the subsidiary has been closed.
-24-
TOUCHIT TECHNOLOGIES, INC STATEMENT OF CASH FLOW FOR QUARTERS ENDED
JUNE 30, 2012 & 2011
(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
|
30/06/2012
|
30/06/2011
|
|||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
|
Net income
|
(48,892 | ) | (605,745 | ) | ||||
|
Prior Period Adjustments
|
(436,865 | ) | ||||||
|
Adjustments to reconcile net income to net cash provided
|
-- | |||||||
|
By operating activities:
|
||||||||
|
Depreciation and amortisation
|
-- | 14,357 | ||||||
|
Provision for employee benefit
|
-- | (764 | ) | |||||
|
Changes in operating assets and liabilities
|
||||||||
|
Trade receivables, net
|
118,674 | 700,165 | ||||||
|
Due from shareholders
|
-- | 1,047 | ||||||
|
Due from related parties
|
-- | 215,844 | ||||||
|
Inventories
|
23,270 | (205,944 | ) | |||||
|
Other current assets
|
-- | (3,117 | ) | |||||
|
Other non current assets
|
-- | (3,117 | ) | |||||
|
Trade payables
|
30,869 | (7,640 | ) | |||||
|
Due to shareholders
|
-- | 45,912 | ||||||
|
Due to related parties
|
-- | (184,430 | ) | |||||
|
Other current liabilities
|
19,870 | (4,770 | ) | |||||
|
Share Purchase Advances
|
-- | |||||||
|
Net cash generated from (used for) operating activities
|
(293,074 | ) | (31,721 | ) | ||||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
|
Increase/(decrease) in short-term borrowings
|
-- | (2,351 | ) | |||||
|
Increase/(decrease) in long-term borrowings
|
238,574 | -- | ||||||
|
Dividends paid
|
-- | -- | ||||||
|
Net cash (used for) provided from financing activities
|
238,574 | (2,351 | ) | |||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
|
Purchases of property, plant and equipment and
|
(205 | ) | (15,245 | ) | ||||
|
intangible assets
|
-- | |||||||
|
Share capital increase
|
-- | |||||||
|
Net cash used for investing activities
|
(205 | ) | (15,245 | ) | ||||
|
NET INCREASE / (DECREASE) IN CASH AND BANKS
|
(54,705 | ) | (49,317 | ) | ||||
|
CASH AND BANKS AT BEGINNING OF THE YEAR
|
70,289 | 50,556 | ||||||
|
CASH AND BANKS AT END OF THE PERIOD
|
15,584 | 1,239 | ||||||
-25-
NET INCOME FOR THE PERIOD – For the first six months of the year, quarter ended June 30, 2012, as compared to the six months ended June 30, 2011, NET income for the period has increased by $556,853 from $(605,745) to $(48,892). This can be attributed to the Management’s focus on reducing overhead costs to maximize profitability when revenues increase.
NET CASH GENERATED FOR OPERATING ACTIVITIES – For the first six months of the year, quarter ended June 30, 2012, as compared to the six months ended June 30, 2011, NET cash generated for operating activities was $(293,074) compared to $(31,721) which is an increase of $261,353. This can be attributed primarily in the decrease of accrued liabilities which were cancelled following the closure of the Turkish Subsidiaries and a decrease in trade receivables.
Cash flow in general has improved as we make use of the Credit Facility from our Lender. Our management expects to utilize the facility to its full extent as our business grows.
CASH FLOW FROM FINANCING ACTIVITES – For the first six months of the year, quarter ended June 30, 2012, as compared to the six months ended June 30, 2011, cash flow from financing activities was $238,574 compared to $(2,351) at June 30, 2011. This is due to an increase in long term borrowings.
CASH POSITION. There was a NET decrease in the cash and cash equivalents of $66,645 from the beginning of the period through June 30, 2012. This change in cash position can be attributed to being normal in course of regular business We generally pay our suppliers on 30 day terms.
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 June 30, 2012, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.
-26-
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 six 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 six months ended June 30, 2012, 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 its 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 with certain investors for the sale of up to $1,500,000 of principal amount convertible promissory notes of the Company convertible into up to 6,000,000 shares of our Common Stock and share purchase 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.
-27-
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).
|
| 101.INS | tucn-20120630.xml XBRL Instance Document |
| 101.SCH | tucn-20120630.xsd XBRL Taxonomy Extension Schema Document |
| 101.CAL | tucn-20120630_cal.xml XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | tucn-20120630_def.xml XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | tucn-20120630_lab.xml XBRL Taxonomy Extension Labels Linkbase Document |
| 101.PRE | tucn-20120630_pre.xml XBRL Taxonomy Extension Presentation Linkbase Document |
-28-
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.
|
||
|
By:
|
/s/ Andrew Brabin
|
|
|
Andrew Brabin
Chief Executive Officer
Dated: August 1st 2012
|
||
-29-