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EXCEL - IDEA: XBRL DOCUMENT - BTCS Inc.Financial_Report.xls
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER - BTCS Inc.f10k2012a2ex32i_touchit.htm
EX-31.1 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER - BTCS Inc.f10k2012a2ex31i_touchit.htm
EX-31.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER - BTCS Inc.f10k2012a2ex31ii_touchit.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  
FORM 10-K/A
Amendment Number 2
 
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Fiscal Year Ended December 31, 2012
 
OR
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 333-151252
 
TouchIT Technologies, Inc.
(Exact Name of Registrant as Specified in its Charter)
 
Nevada
 
26-2477977
(State of Incorporation)
 
(I.R.S. Employer Identification Number)
 
101 West Big Beaver Road, Suite 1400, Troy, MI 48084
(Address of Principal Executive Offices, Including Zip Code)
 
Registrant’s telephone number: 248 764 1084
 
Securities registered pursuant to Section 12(b) of the Act:
 
None
 
Not Applicable
(Title of each class)
 
(Name of each exchange on which registered)
 
Securities registered pursuant to Section 12(g) of the Act:  None.
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x
 
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  o
 
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  o    No  o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Yes  x   No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
     Large Accelerated Filer   o
Accelerated Filer   o
Non-accelerated Filer   o
(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 Act).   Yes  ¨    No  x
 
The aggregate market value of the voting common equity held by non-affiliates as of September 28, 2012, the last business day of the registrant’s most recently completed third fiscal quarter, was approximately $268 599.71
 
The number of shares outstanding of common stock as of March 26, 2012 was 76,064,419.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
N/A.
 


 
 

 
 
 
TABLE OF CONTENTS
 
     
 
Part I
 
     
Item 1.
Business.
4
Item 1A.
Risk Factors.
9
Item 2.
Properties.
13
Item 3.
Legal Proceedings.
13
Item 4.
Removed and Reserved.
13
     
 
Part II
 
     
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
14
Item 6.
Selected Financial Data.
16
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
16
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
24
Item 8.
Financial Statements and Supplementary Data.
24
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
24
Item 9A.
Controls and Procedures.
24
Item 9B.
Other Information.
25
  
   
 
Part III
 
     
Item 10.
Directors, Executive Officers and Corporate Governance.
25
Item 11.
Executive Compensation.
27
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
28
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
29
Item 14.
Principal Accounting Fees and Services.
29
     
 
Part IV
 
     
Item 15.
Exhibits, Financial Statement Schedules.
30
     
 
Signatures
32
 
 
 

 

PART I

Item 1.   Business

Business Development
 
TouchIT Technologies, Inc. was incorporated in the State of Nevada as “Hotel Management Systems, Inc.” (“HMSI”) in 2008.  After HMSI's fiscal year end of April 30, 2010, we entered into a Share Exchange Agreement, dated May 7, 2010 (“Share Exchange”) with TouchIT Technologies Koll Sti (“TouchIT Tech KS”),  the stockholders of TouchIT Tech KS,  TouchIT Education Koll Sti (“TouchIT Ed”), and the stockholders of TouchIT Ed whereby HMSI effectively ceased doing business as HMSI.  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”).

In connection with the closing of the Share Exchange Agreement, on May 7, 2010, we entered into various subscription agreements (each “Subscription Agreement,” and collectively the “Subscription Agreements”) with certain investors for the sale of up to $1,500,000 of principal amount convertible promissory notes issued by our Company (“Note” or “Notes”) and share purchase warrants (the “Warrants”) to each subscriber to purchase shares of our Common Stock.  

In connection with a breach of two promissory notes associated with the Share Exchange, we cancelled the Warrants related to those promissory notes.

In connection with the Share Exchange, we changed our fiscal year end from April 30 to December 31 and amended our Articles of Incorporation to change our name to TouchIT Technologies, Inc.  This report shall cover the period of January 1 to December 31, 2010 and the description of the business and financial information provided herein will be the business and financials of TouchIT Technologies, Inc. and not HMSI, as the business was prior to the Share Exchange. 

Unless the context indicates otherwise, as used herein the terms, the “Company”, “Registrant”, “we”, “our” and “us” refer to TouchIT Technologies, Inc.

Overview

We design, produce via third party and market touch-based visual communication products. Our mission – the design and manufacture of high quality technology products under the TouchIT Technologies™ brand name. We manufacture a large range of touch screen and touch board products to suit all types of application from small interactive whiteboard displays to large liquid crystal display (“LCD”) touch-screens and Light Emitting Diode (“LED”) displays. To date, our revenues have come primarily from the sale of our Interactive Whiteboard products which we began shipping in 2009 to the worldwide market place. Most of our sales have been of the 78" TouchIT Board and original equipment manufacturer (“OEM”) equivalents that are suitable for use with almost any computer and data projector. However, we are seeing a shift in the marketplace and expect the sales of our LCD and LED products to overtake that of the Interactive Whiteboards as time progresses.

We plan to capitalize on the corporate vertical for boardroom and meeting room applications and also in the education market as there are an estimation of over a billion classrooms in the world that may develop a need for our products. In response to increased demand for interactive LCD displays, we have invested resources to expand our product line to include touch-based LCD/LEDs in 32”, 42", 46”, 55”, 65", 70”, 80” & 82”. We  undertake OEM and original design manufacturer (“ODM”) work for partners all over the world with 3rd party contract manufacturing facilities in Taiwan & China.

How We Generate Revenue

We generate revenue from the sales of goods under the TouchIT Technologies brand name manufactured through 3rd party OEM contract manufacturers in China and Taiwan.
 
 
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We also generate revenue from OEM manufacture facilities. This is where we take our existing products and rebrand them for a third party with differing degrees of customization.
 
Lastly, we generate revenue by charging for product design work where our team designs a new product for a customer that incorporates our technology. There is then repeat sales from this model as the customer engages the company to build its products.

Products or Services and their Markets

We offer a range of products that are designed for the education and the corporate government vertical markets.

TouchIT Interactive Whiteboard

TouchIT Board™ works in conjunction with a data projector and a computer to create a touch-based interactive whiteboard where the user obtains full control of a computer from the board. The TouchIT Board™ functions similar to a mouse allowing both left and right click functionality at the board. The TouchIT Board is supplied with Wizteach annotation software. The Wizteach annotation software is a 3rd party software that we purchase from Quizdom Uk Ltd based in Northern Ireland.

TouchIT LCD & LED Duo

The TouchIT LCD & LED range of products combine a HD display with IR or Camera Tracking multi-touch technology to create an integrated, large format touch screen finished with a 4mm or 5mm tempered glass for screen protection. The TouchIT LCD & LED range has a very small parallax enabling a much improved user experience when compared to traditional overlay products.

TouchIT Tablet

TouchIT Tablet™ is a Radio Frequency (RF) wireless tablet that enables the user to control his/her computer from a distance with the tablet acting like a mouse.

TouchIT WebCast

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, all accessible from a regular internet browser.

Distribution Methods of the Products or Services

We currently maintain various distribution channels for our products in countries throughout the world. We would normally select a master distributor for a particular country where its specialty would be either the Information Technology (“IT”) Education or Audio Visual (“AV”) verticals. These master distributors usually sell on a trade-only basis to reselling companies that, in turn, supply the end user.

Status of New Product or Service

We are currently evaluating new touch technologies such as charge-couple device (“CCD”) image sensors that could be a more cost effective alternative in the future to IR. We are also evaluating new panel manufacturers for the LCD & LED range of products. There has been the appearance of a number of new panel manufacturers in China. This will have the benefit of increased competition so will drive down our raw material costs. Our business strategy is to grow all three main areas of the business in tandem with the overall pursuit and development of new touch-based interactive products.

 
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TouchIT WIS was launched late 2012 and represents the link between cell phones, android and IOS tablets and a large format LED display. The TouchIT WIS allows control of the computer from the LED or indeed from any of the aforementioned devices. Across the world there are BYOD (Bring your Own Device) initiatives in place and Management have seen an increase in the demand for users wanting to combine the use of their cell phone or tablet devices with the LED – TouchIT WIS allows for just that. Management believes that TouchIT WIS is also the world’s first interactive LED to have an embedded access point to connect to cell phones and tablet devices without the need of any third party equipment. There are applications (Apps) on the market that demonstrate similar functionality, but they all rely on third party hardware. Management see that the competitive advantage in the marketplace for TouchIT WIS is that it is totally self-contained. Management expects the demand for TouchIT WIS to continue to grow throughout 2013.

TouchIT WebCast was introduced to the market late in 2012. The idea of this product is to bring together our existing presentation equipment, the IWBs, LCDs and LEDs that allow presenters or teachers to give a visual presentation to a class or an audience. With the addition of TouchIT WebCast, one can now broadcast live or on demand, these same presentations over the Internet. Furthermore, these presentations can then be saved onto the TouchIT Portal and archived for later viewing. All of this can take place with just a few simple clicks of the mouse. Management’s idea with this product is that the world of higher education is changing and that the traditional lecture will cease to be in operation. The benefit of having 200+ students in a lecture theatre listening to a lecturer is debatable. The real value is the smaller tutorial classes where the lecturer can debate the lecture with a smaller more involved group of students. Therefore, with TouchIT WebCast, the lecturer can record or broadcast live the lecture and the students can watch from the comfort of their own home. We see the pre-requisite to the tutorial being that the student has watched the lecture in someway shape or form, whether it be live on the internet or indeed on demand. This is a trend of “distance learning” that is becoming more prevalent in certain markets around the world. This chain of thought can also be applied to the corporate world where travel is increasingly expensive and having groups of executives in the same room for extended periods of training or presentations is costly to a business. TouchIT WebCast removes the need to do this and takes these presentations and training sessions onto the web.

With the addition of these two new products, the Company is positioning itself for more of a “solution sales strategy” rather than a “box-sell sales strategy” for 2013.

In 2013;

First, we hope to increase the growth of sales of our Company’s branded products through distribution partners on a worldwide basis. This involves the recruitment, training and support of the distribution partner and its resellers. 

Second, we aim to grow the OEM side of the business. This involves the recruitment, product customization and rebranding, technical support and training of new OEM partners on a worldwide basis.

Third, we aim to work with a wider selection of ODM partners that recruit our services for the design and manufacture of new products under the client’s own brand name.

Fourth, the company is evaluating the addition of a 7-10” Android Tablet device to its product portfolio, which could be sold into its existing retail channels of the desired price point can be met. Initial prototypes have been procured and initial discussions have taken place with customers such as OfficeMax and Ingram Micro.

Fifth, we have added two extra Interactive Whiteboard models to the range to address markets that are particularly price sensitive where we are uncompetitive with the existing TouchIT Board. These are low-cost products and designed for the volume tender business. The TouchIT Board Lite is a touch-based CCD Camera technology product, and the TouchIT EM Board is an electromagnetic board that required a pen input. Management believes that these products will address the price gap the Company currently faces against Far Eastern competition in price sensitive tenders around the world.

Sixth, we will continue to increase the size of our demonstration fleet of equipment that is currently being made available to our USA-based customers to use for their demonstrations to end-users. This facility has been particularly well used by OfficeMax amongst others.
 
 
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Business Organization

We manage our business on a central basis with all customers being supplied either directly from the third part manufacturing facilities in China and Taiwan, or from our warehouse located in Troy, MI USA.

Markets & Trends In Our Business

Information from FutureSource Consulting Uk ltd.

One Million Interactive Whiteboards and Flat Panel Displays Sales in 2012, Up 15%.

For calendar year 2012, sales of interactive whiteboards and interactive flat panel displays in the education and corporate sectors are up 15% annually, to nearly 1 million displays. The following information provides key highlights from the market report.

The Global Perspective. The total market of display technologies of Interactive whiteboards, Interactive flat panels and Interactive projectors is forecast to reach 1.16 million devices by 2017.  However, the adoption rates of the three products are very different by country and even by region. Futuresource has compared all three technologies in eight regions / countries.
 
Asia: Best Ever Year for Sales. Asia has, by far, achieved its largest ever quarter, with 69% annual growth.  China, for the first year the biggest country market in the world, attained a significant sales volume. Futuresource expectations are that the huge education tenders will continue. India also experienced a substantial quarter, with more than 100% increase in the year.
 
EMEA: Strong Growth.
EMEA experienced its largest annual of sales, achieving 24% annual growth. Sales in Russia were huge almost doubling their 2011 levels.

UK: First Growth in Seven Years.
The UK, ended up with an annual growth of 7%, this is significant as it was after six years of decline, from the peak in 2005. Interactive flat panel displays are starting to take market share from interactive whiteboards and some of the first replacement boards are being purchased, with schools tending to buy the same brands again. Although the BSF (Building Schools for the Future) programme was abandoned there is still significant new school construction due to the rise of academies, as well as substantial rebuilding programmes within existing schools.
 
The scale of the opportunity in the corporate space is colossal, with over 67 million meeting rooms worldwide - this segment of the corporate market alone is twice the scale of school classrooms. However, there is currently no adoption of any specific product, so the market is open to be taken. The corporate market is forecast to be the fastest growing sector, increasing to 30% by 2017. This growth will be in the more developed markets like the USA, UK, Germany and Sweden.
  
Competition

We echo the sentiments of Futuresource and feel that our competitors, the Chinese brands that are selling outside of China and India, are a reducing threat in the developed EMEA and U.S. markets.  They are making little headway because while their products are on the low-cost end of the spectrum, they are not engaged in important deals and transactions, and are only getting peripheral businesses in the industry. Furthermore, the Chinese brands are also pushing their way into developing markets such as South America and Africa; however, these developing markets offer very little opportunities for the visual communication companies.
 
While the examples provided above do not appear to place our Company in a competitive business situation, there are also exceptions to the Chinese brands. For instance, Julong Educational Technology Co., Ltd, which is an OEM, has a large U.S. operation and has successfully worked its way into the U.S. market.
 
 
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Our greatest competitor is probably Interactive Projectors.  We are aware that they have already obtained some contracts in preference to IWBs (Finland, Estonia, Russia).  In some countries, Interactive Flat panels are also emerging.

Despite the competition we face, our Company is in a strong position to capitalize on emergence of Interactive Flat Panels with the new LCD & LED range. The Competition does not have the range of models and sizes that we are able to offer our competitors, which puts the Company in strong position.

Supply of Components

Although most components essential to our Company’s business are generally available from multiple sources, certain key components including but not limited to aluminum, plastics, LCDs, certain optical infrared technology (“IR”), and integrated circuits (“ICs”) are currently obtained by our Company from single or limited sources, which subjects us to significant supply and pricing risks.
 
Many of these and other key components that are available from multiple sources are subject at times to industry-wide shortages and significant commodity pricing fluctuations. In addition, we have entered into certain agreements for the supply of key components, including, but not limited to aluminum, plastics, LCDs, certain optical IR technology, and ICs at favorable pricing. However, there is no guarantee that we  will be able to extend or renew these agreements on similar favorable terms, or at all, upon expiration or otherwise obtain favorable pricing in the future. Therefore, we remain subject to significant risks of supply shortages and/or price increases that can materially adversely affect its financial condition and operating results.

All our products, including the printed circuit boards (“PCBs”) are assembled or are manufactured by outsourcing partners, primarily in various parts of Asia. The loss of supply from any of these suppliers or vendors, whether temporary or permanent, could materially adversely affect our business and financial condition.

Dependence on one or a few major customers

We recognize that we have a reliance on a few major customers. Most notably, Ingram Micro PTY in the Australia. We do however, expect to increase our customer base in line with our sales plan, strategy and forecast, most notably in the United States of America through key partners such as OfficeMax.

Patents and Trademark Licenses

We do not hold any granted patents or trademarks for our technology. We recognize this does pose a risk to the business in that our products could potentially be copied by third parties.

Environmental Laws

As a third party manufacturer of visual communication products, we have not incurred or have been subject to environmental laws and expenses.

Employees

During the year, we had an average of 5 employees over the 12 month period.

Available Information

The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are filed with the U.S. Securities and Exchange Commission (the “SEC”). Such reports and other information filed by the Company with the SEC are available free of charge on the Company’s website at www.touchittechnologies.com when such reports are available on the SEC website.
 
 
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The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The contents of these websites are not incorporated into this filing. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.
 
Item 1A.   Risk Factors.

Risks Relating to Our Business

WE HAVE A LIMITED OPERATING HISTORY THAT YOU CAN USE TO EVALUATE US, AND THE LIKELIHOOD OF OUR SUCCESS MUST BE CONSIDERED IN LIGHT OF THE PROBLEMS, EXPENSES, DIFFICULTIES, COMPLICATIONS AND DELAYS FREQUENTLY ENCOUNTERED BY A SMALL DEVELOPING COMPANY.
 
We were incorporated in Nevada in April 2008, under HMSI. Following the transactions described herein, we are now a manufacturer of touch based communication products for the education and corporate marketplaces.  As such, we have a limited operating history, and historical operating results may not provide a meaningful basis for evaluating the business, financial performance and prospects. We have limited assets or financial resources and/or limited operating history. Therefore, the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company starting a new business enterprise and the highly competitive environment in which we will operate. 
 
WE NEED TO MANAGE GROWTH IN OPERATIONS TO MAXIMIZE OUR POTENTIAL GROWTH AND ACHIEVE OUR EXPECTED REVENUES AND OUR FAILURE TO MANAGE GROWTH WILL CAUSE A DISRUPTION OF OUR OPERATIONS RESULTING IN THE FAILURE TO GENERATE REVENUE.
 
In order to maximize potential growth in our current and potential markets, we believe that we must expand our marketing operations. This expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating procedures, and management information systems. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth will disrupt our operations and ultimately prevent us from generating the revenues we expect.

In order to achieve the above mentioned targets, our general strategy is to maintain and search for hard-working employees who have innovative initiatives; on the other hand, we will also keep a close eye on expanding opportunities.

IF WE NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS. 
 
If adequate additional financing is not available on favorable terms or we are unable to secure additional financing, we may not be able to undertake expansion, continue our marketing efforts and we would have to modify our business plans accordingly. There is no assurance that additional financing will be available to us or financing on favorable terms.
 
In connection with our growth strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs.
 
 
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Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.
 
NEED FOR ADDITIONAL EMPLOYEES.
 
The Company’s future success also depends upon its continuing ability to attract and retain highly qualified personnel. Expansion of our business and the management and operation of the Company will require additional managers and employees with industry experience, and the success of our Company will be highly dependent on our ability to attract and retain skilled management personnel and other employees. Competition for such personnel is intense. There can be no assurance that we will be able to attract or retain highly qualified personnel.
 
Competition for skilled personnel in our industry is significant. This competition may make it more difficult and expensive to attract, hire and retain qualified managers and employees. Our inability to attract skilled management personnel and other employees as needed could have a material adverse effect on our business, operating results and financial condition. Our arrangement with our current employees is at will, meaning its employees may voluntarily terminate their employment at any time. We anticipate that the use of stock options, restricted stock grants, stock appreciation rights, and phantom stock awards will be valuable in attracting and retaining qualified personnel. However, the effects of such plan cannot be certain.
 
OUR FUTURE SUCCESS IS DEPENDENT, IN PART, ON THE PERFORMANCE AND CONTINUED SERVICE OF OUR MANAGEMENT TEAM.

We are presently dependent to a great extent upon the experience, abilities and continued services of Andrew Brabin and Ronald Murphy, our management team.  The loss of services of Mr. Brabin or Mr. Murphy, could have a material adverse effect on our business, financial condition or results of operation.

WE ARE IN AN INTENSELY COMPETITIVE INDUSTRY AND THERE CAN BE NO ASSURANCE THAT WE WILL BE ABLE TO COMPETE WITH OUR COMPETITORS WHO MAY HAVE GREATER RESOURCES.

We could face strong competition from our competitors in the touch technology industry who could duplicate our model.  These competitors may have substantially greater financial resources and marketing, development and other capabilities than we have.    In addition, there are very few barriers to enter into the market for our products.  There can be no assurance; therefore, that any of our competitors, many of whom have far greater resources will not independently develop products that are substantially equivalent or superior to our products.  Therefore, an investment in our Company is very risky and speculative due to the competitive environment in which we intend to operate.

 OUR ABILITY TO CONTINUE TO DEVELOP AND EXPAND OUR PRODUCT OFFERINGS TO ADDRESS EMERGING CONSUMER DEMANDS AND TECHNOLOGICAL TRENDS WILL IMPACT OUR FUTURE GROWTH. IF WE ARE NOT SUCCESSFUL IN MEETING THESE BUSINESS CHALLENGES, OUR RESULTS OF OPERATIONS AND CASH FLOWS WILL BE MATERIALLY AND ADVERSELY AFFECTED.

Our ability to implement solutions for our customers incorporating new developments and improvements in technology which translate into productivity improvements for our customers and to develop product offerings that meet the current and prospective customers’ needs are critical to our success. The markets we serve are highly competitive. Our competitors may develop solutions or products which make our offerings obsolete. Our ability to develop and implement up to date solutions utilizing new technologies which meet evolving customer needs in touch technology solutions will impact our future revenue growth and earnings.
 
 
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OUR FUTURE SUCCESS IS DEPENDENT UPON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY.

We may not be able to protect unauthorized use of our intellectual property and take appropriate steps to enforce our rights.  Although management does not believe that our products infringe on the intellectual rights of others, there is no assurance that we may not be the target of infringement or other claims.  Such claims even if not true, could result in significant legal and other costs associated and may be a distraction to management.  We plan to rely on a combination of copyright, trade secret, trademark laws and non-disclosure and other contractual provisions to protect our proprietary rights.  We use and intend to use the trademark “TouchIT Technologies” name and logo.  We intend to file federal trademark applications for “TouchIT Technologies” and to secure the Internet trade domain “Touchittechnologies.com” and related logo. There can be no assurance that the registrations applied for will be accepted.  Because the policing of intellectual and intangible rights may be difficult and the ideas and other aspects underlying our business model may not in all cases be protectable under intellectual property laws, there can be assurance that we can prevent competitors from marketing the same or similar products and services.
 
Risks Associated with Our Shares of Common Stock
 
BROAD DISCRETION OF MANAGEMENT TO USE OF PROCEEDS FROM FINANCING.

Our management will have broad discretion with respect to the expenditure of the net proceeds from the financing that closed in connection with the Share Exchange Agreement. Accordingly, Subscribers will be entrusting their funds to our management, upon whose judgment they must depend, with limited information concerning the specific working capital requirements and general corporate purposes to which the funds will be ultimately applied 

THE SECURITIES BEING ISSUED IN CONNECTION WITH AND FOLLOWING THE SHARE EXCHANGE AGREEMENT ARE RESTRICTED SECURITIES AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION OR THE AVAILABILITY OF A RESALE EXEMPTION.
 
The shares of Common Stock, Notes and Warrants being issued in connection with the Share Exchange Agreement and financing described herein are being issued in reliance on an exemption from the registration requirements of the Securities Act under Section 4(2) of the Securities Act and Regulation D promulgated under the Securities Act. Consequently, these securities will be subject to restrictions on transfer under the Securities Act and may not be transferred in the absence of registration or the availability of a resale exemption. In particular, in the absence of registration, such securities cannot be resold to the public until certain requirements under Rule 144 promulgated under the Securities Act have been satisfied, including certain holding period requirements. Furthermore, we are under no obligation to file a resale registration statement with respect to those securities except in connection with an unrelated secondary offering. As a result, a purchaser who receives any such securities issued in connection with the Share Exchange Agreement or the financing may be unable to sell such securities at the time, or at the price or upon such other terms and conditions, as the purchaser desires, and the terms of such sale may be less favorable to the purchaser than might be obtainable in the absence of such limitations and restrictions.

RESTRICTED SECURITIES; LIMITED TRANSFERABILITY.

Purchase of the Securities should be considered a long-term, illiquid investment. The Securities have not been registered under the Act, are being offered by reason of a specific exemption from registration and are “restricted securities” under Rule 144 promulgated under the Act, and cannot be sold without registration under the Act or any exemption from registration. In addition, the Securities will not be registered under any state securities laws that would permit their transfer. Because of these restrictions and the absence of a trading market for the Securities, a Subscriber will likely be unable to liquidate an investment even though other personal financial circumstances would dictate such liquidation.

OUR COMMON STOCK IS QUOTED ON THE OTC BULLETIN BOARD WHICH MAY HAVE AN UNFAVORABLE IMPACT ON OUR STOCK PRICE AND LIQUIDITY.

Our common stock is quoted on the OTC Bulletin Board (the “OTCBB”). The OTC Bulletin Board is a significantly more limited market than the New York Stock Exchange or Nasdaq system. The quotation of our shares on the OTC Bulletin Board may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.
 
 
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IF WE FAIL TO ESTABLISH AND MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL, WE MAY NOT BE ABLE TO REPORT OUR FINANCIAL RESULTS ACCURATELY OR TO PREVENT FRAUD.  ANY INABILITY TO REPORT AND FILE OUR FINANCIAL RESULTS ACCURATELY AND TIMELY COULD HARM OUR REPUTATION AND ADVERSELY IMPACT THE TRADING PRICE OF OUR COMMON STOCK.
 
Effective internal control over financial reporting is necessary for us to provide reliable financial reports and prevent fraud.  If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed.  As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital.  We have not performed an in-depth analysis to determine if in the past un-discovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.

OUR SHARES OF COMMON STOCK ARE VERY THINLY TRADED, AND THE PRICE MAY NOT REFLECT OUR VALUE AND THERE CAN BE NO ASSURANCE THAT THERE WILL BE AN ACTIVE MARKET FOR OUR SHARES OF COMMON STOCK EITHER NOW OR IN THE FUTURE.

Our shares of common stock are very thinly traded, and the price if traded may not reflect our value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. The market liquidity will be dependent on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the price may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms may not be willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such shares of common stock as collateral for any loans.

THERE IS CURRENTLY NO LIQUID TRADING MARKET FOR OUR COMMON STOCK AND WE CANNOT ENSURE THAT ONE WILL EVER DEVELOP OR BE SUSTAINED.

To date there has been no liquid trading market for our common stock.  We cannot predict how liquid the market for our common stock might become.  We anticipate having our common stock continue to be quoted for trading on the OTC Bulletin Board, however, we cannot be sure that such quotations will continue.  We currently do not satisfy the initial listing standards, and cannot ensure that we will be able to satisfy such listing standards or that our common stock will be accepted for listing on any such exchange.  Should we fail to satisfy the initial listing standards of such exchanges, or our common stock is otherwise rejected for listing and remain listed on the OTC Bulletin Board or suspended from the OTC Bulletin Board, the trading price of our common stock could suffer and the trading market for our common stock may be less liquid and our common stock price may be subject to increased volatility.

Furthermore, for companies whose securities are traded in the OTC Bulletin Board, it is more difficult (1) to obtain accurate quotations, (2) to obtain coverage for significant news events because major wire services generally do not publish press releases about such companies, and (3) to obtain needed capital.

In addition, the price at which our common stock may be sold is very unpredictable because there are very few trades in our common stock. Because our common stock is so thinly traded, a large block of shares traded can lead to a dramatic fluctuation in the share price.
 
 
12

 

OUR STOCK PRICE MAY BE VOLATILE.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

-
limited “public float” following the Share Exchange, in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;
   
-
sales of our common stock; and

-
our ability to execute our business plan.

Our shares of common stock are very thinly traded, and the price may not reflect our value and there can be no assurance that there will be an active market for our shares of common stock either now or in the future. Our shares of common stock are very thinly traded, only a small percentage of our common stock is available to be traded and is held by a small number of holders and the price, if traded, may not reflect our actual or perceived value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. The market liquidity will be dependent on the perception of our operating business, among other things.  We will take certain steps including utilizing investor awareness campaigns, press releases, road shows and conferences to increase awareness of our business and any steps that we might take to bring us to the awareness of investors may require we compensate consultants with cash and/or stock. There can be no assurance that there will be any awareness generated or the results of any efforts will result in any impact on our trading volume. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business and trading may be at an inflated price relative to the performance of our company due to, among other things, availability of sellers of our shares. If a market should develop, the price may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms or clearing firms may not be willing to effect transactions in the securities or accept our shares for deposit in an account. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of low priced shares of common stock as collateral for any loans.
 
WE CURRENTLY HAVE A LIMITED PUBLIC FLOAT HELD BY A LIMITED NUMBER OF PERSONS.
 
Of our 76,064,419 issued and outstanding shares of common stock, only 28,842,419 shares are presently eligible for resale without further registration by the holders thereof or pursuant to an exemption from registration. In addition, these 28,842,419 shares are presently held by a limited number of shareholders. As a result of the relatively small size of our public float and its initial concentration in the hands of only a few people, the liquidity of the market for our common stock may be both severely limited and subject to high levels of volatility.  

Item 1B.   Unresolved Staff Comments.

Not Applicable.

Item 2.   Property.

We do not own any real property.  We rent approximately 50 square meters (m2) of office space in suite 1400 at 101 West Big Beaver Road, Troy, MI.

Item 3.   Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results.

Item 4.   (Removed and Reserved).
 
 
13

 
 
PART II

Item 5.    Market for Registrant’s Common Equity, and Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock is currently quoted on the OTC Bulletin Board (“OTCBB”), which is sponsored by FINRA. Our shares are quoted on the OTCBB under the symbol “TUCN.” The following table sets forth the calendar quarter indicated, the quarterly range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCBB.  Trading in our common stock in the over-the-counter market has become limited and sporadic and the quotations set forth below are not necessarily indicative of actual conditions. Further, the quotations mainly reflect the prices at which transactions were proposed, and do not necessarily represent actual transactions.

Fiscal Year Ending
 December 31, 2012
             
Quarter Ended
   
High $
   
Low $
 
March 31, 2012
    $ 0.019     $ 0.007  
June 30, 2012
    $ 0.0122     $ 0.0034  
September 30, 2012
    $ 0.027     $ 0.0021  
December 31, 2012
    $ 0.019     $ 0.001  
 
 
14

 
 
Penny Stock

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
 
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
 
 
15

 

These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.

Record Holders of Our Common Stock

As of December 30, 2012, there were over 500 stockholders of record of our common stock.

Dividends

There are no restrictions in our Articles of Incorporation or Bylaws that prevent us from declaring dividends.  The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:

1. We would not be able to pay our debts as they become due in the usual course of business, or;

2. Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.

Item 6.   Selected Financial Data.

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

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Plan of Operation – Executive Overview

We manufacture touch-based visual communication products for the education and corporate worldwide marketplaces specializing in Interactive Whiteboards and Interactive LCDs. Our products stand out from the competition in terms of their design, functionality and price offering. Our customers seek our products as they provide them a different point of entry to the market in terms of price, quality of design and margin. Currently, demand for our products is exceeding our ability to supply. 
 
 
16

 

From market data, we understand that the market for our products will continue to grow for the next five years and possibly beyond.

Interactive Whiteboard World Wide Market Overview

Data compiled by Futuresource Consulting UK Ltd, Report, author - Colin Messenger

One Million Interactive Whiteboards and Flat Panel Displays Sales in 2012, Up 15%.

For calendar year 2012, sales of interactive whiteboards and interactive flat panel displays in the education and corporate sectors are up 15% annually, to nearly 1 million displays. The following information provides key highlights from the market report.

The Global Perspective. The total market of display technologies of Interactive whiteboards, Interactive flat panels and Interactive projectors is forecast to reach 1.16 million devices by 2017.  However, the adoption rates of the three products are very different by country and even by region. Futuresource has compared all three technologies in eight regions / countries.
 
Asia: Best Ever Year for Sales. Asia has, by far, achieved its largest ever quarter, with 69% annual growth.  China, for the first year the biggest country market in the world, attained a significant sales volume. Futuresource expectations are that the huge education tenders will continue. India also experienced a substantial quarter, with more than 100% increase in the year.
 
USA: Market Continues Falling. In the USA volumes fell to 27% below 2011, as previously forecast by Futuresource. The education market is expected to continue to drop over the next few years; almost half of K-12 classrooms will have an interactive display and the early models sold into the market are not yet ready for replacement.

EMEA: Strong Growth.
EMEA experienced its largest annual of sales, achieving 24% annual growth. Sales in Russia were huge almost doubling their 2011 levels.

UK: First Growth in Seven Years.
The UK, ended up with an annual growth of 7%, this is significant as it was after six years of decline, from the peak in 2005. Interactive flat panel displays are starting to take market share from interactive whiteboards and some of the first replacement boards are being purchased, with schools tending to buy the same brands again. Although the BSF (Building Schools for the Future) programme was abandoned there is still significant new school construction due to the rise of academies, as well as substantial rebuilding programmes within existing schools.
 
The scale of the opportunity in the corporate space is colossal, with over 67 million meeting rooms worldwide - this segment of the corporate market alone is twice the scale of school classrooms. However, there is currently no adoption of any specific product, so the market is open to be taken.

The corporate market is forecast to be the fastest growing sector, increasing to 30% by 2017. This growth will be in the more developed markets like the USA, UK, Germany and Sweden.
 
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 referred to as the Company.
 
 
17

 

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:
 
We maintain our books of account and prepare its statutory financial statements in accordance with accounting principles in the United Stats of America. 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 equipment 2-6 years
   
-
Motor vehicles 4 years
   
-
Furniture, fixtures and office equipment 4-5 years
 
 
18

 
 
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:

Our company uses a calendar year as its fiscal year ending December 31.

Results of Operations for the years ended December 31, 2012 and December 31 2011.

   
31/12/2012
   
31/12/2011
 
             
NET SALES
    1,287,709       1,595,943  
COST OF SALES
    885,021       (1,341,374 )
Gross profit
    402,688       254,569  
MARKETING AND SELLING EXPENSE
    112,304       (578,887 )
GENERAL AND ADMINISTRATIVE  EXPENSES
    276,626       (316,528 )
Profit from operations
    13,758       (640,847 )
OTHER INCOME AND EXPENSES, net
    4,301       294,154  
FINANCIAL INCOME AND EXPENSES, net
    --       --  
Profit Loss before taxation and currency translation gain/(loss)
    18,059       (346,692 )
TAXATION CHARGE
    --       --  
Taxation current
    --       --  
Deferred
    --       --  
CURRENCY TRANSLATION GAIN/(LOSS)
    --       --  
Net income/(loss)  for the year
    18,059       (346,692 )
OTHER COMPREHENSIVE INCOME
    --       --  
Total comprehensive income
    18,059       (346,692 )

Net Sales
Net sales for the fiscal year ended December 31, 2012 were $1,287,709, a decrease of approximately $308,234 compared to the net sales for the year ended December 31, 2011. The decrease in our revenues from 2011 to 2012 was due primarily to a market slow down for the Interactive Whiteboard products. Management anticipated this slow down and had already begun the transition to LCD & LED product line where the Company’s focus now lies. The positive side to the product transition is that the LCD & LED are larger ticket items and also more profitable items for the company which will help the bottom line.

Cost of Sales
The cost of sales for the fiscal year ended December 31, 2012 was $885,021 compared to a cost of $1,341,374, for the cost of sales for the fiscal year ended December 31, 2011. The decrease in the cost of sales from 2011 to 2012 was due to the Management’s control on costs and focus on reducing overheads to turn the business round from being loss making to generating a profit in 2012. The percentage of cost of sales against NET sales has decreased by 15% year on year for the last two years. This is also due to Management’s focus on controlling costs.

   
31/12/2012
   
31/12/2011
 
             
NET SALES
   
1,287,709
     
1,595,943
 
COST OF SALES
   
(885,021
)
   
(1,341,374
)
As a percentage of sales
   
69
%
   
84
%
 
 
19

 
 
Marketing and Selling Expenses
Marketing and selling expenses for the fiscal year ended December 31, 2012 were a cost of $112,304 compared to a cost of $578,887 for the fiscal year ended December 31 2011. Marketing and selling expenses were down 58% from 2011 to 2012, which was primarily due to the aforementioned cost control of management. All unessential marketing spend was cut out of the budget for 2012
 
General and Administrative Expenses
General and administrative expenses for the fiscal year ended December 31, 2012 were a cost of $276,626, compared to a cost of $316,528 for the fiscal year ended December 31, 2011. General and administrative expenses decreased by 12% or $39,902 from 2011 to 2011. This decrease can be attributed to the maintenance of fixed overheads without the need for further expenditure in this area. Management expects these costs to rise in 2013 as a result of increased sales and thus a need to support these sales from an administrative point of view

   
31/12/2012
   
31/12/2011
 
             
MARKETING AND SELLING EXPENSE
   
(112,304
)
   
(578,887
)
As a percentage of revenue
   
9
%
   
36
%
GENERAL AND ADMINISTRATIVE  EXPENSES
   
(276,626
)
   
(316,528
)
As a percentage of revenue
   
21
%
   
20
%

Operational Profit
The operational loss for the fiscal year ended December 31, 2012 was $13,758, compared to a loss of $640,847 for the fiscal year ended December 31, 2011. Operational profit has increased by $654,605 from 2011 to 2012. Management has focused on moving the company’s revenue to products that deliver profit such as the LCD & LED range. We have also focused our sales efforts in countries where higher prices thus higher margins are more acceptable. Despite a drop in revenue, profits have improved, as the monthly overhead cost remained the same.

Other Income and Expenses, net
Other Income and Expenses, net has decreased by $289,853 from $294,154 for the fiscal year ended December 31, 2011 to $4,301 for the fiscal year ended December 31, 2012. This decrease can be attributed to the closure of the Turkish Subsidiaries and a subsequent equity gain through the cancellation of debt that the subsidiaries owed to suppliers and related parties that occurred in 2011.
 
 
20

 

Total Comprehensive Income
Our total comprehensive income has increased by $364,751 from $346,692 loss in 2011 to a $18,059 profit in 2012. This increase can be attributed to the change in direction of sales revenue to products that deliver profit such as the LCD & LED range and the focus on geographic sales efforts in countries where higher prices thus higher margins are more acceptable. Management expects this trend to continue in 2013
 
CURRENT ASSETS
 
31/12/2012
   
31/12/2011
 
             
Cash and cash equivalents
    6,413       70,289  
Trade receivables, net
    64,170       240,867  
Due from related parties
    -       -  
Due from Shareholders
    -       -  
Inventories
    111,461       55,689  
Other current assets
               
                 
Total current assets
    182,043       366,845  
                 
NON CURRENT ASSETS
               
                 
Property, plant and equipment, net
    6,076       1,027  
Intangible assets, net
            -  
Other non current assets
    400,000       -  
                 
Total non current assets
    406,076       1,027  
                 
TOTAL ASSETS
    588,119       367,872  
                 
CURRENT LIABILITIES
               
Borrowings
    -       -  
Trade payables
    274,352       181,984  
Due to shareholders
    -       -  
Due to related parties
    261,499       265,318  
Other current liabilities
    11,310       27,390  
                 
Total current liabilities
    547,161       474,692  
                 
NON CURRENT LIABILITIES
               
Borrowings
    -       250,000  
Employee termination benefits
    -       -  
Reserve for retirement pay
    -       -  
Share purchase advances
    -       -  
                 
Total non current liabilities
    -       250,000  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
SHAREHOLDERS' EQUITY
               
Share capital
    544,303       127,570  
Retained earnings
    (521,403 )     (137,698 )
Net income / (loss) for the period
    18,058       (346,692 )
                 
Total shareholders’ equity
    40,958       (356,820 )
                 
TOTAL LIABILITIES AND
               
SHAREHOLDERS' EQUITY
    588,119       367,872  
 
Cash and Equivalents
Cash and equivalents have decreased by $63,876 from $70,289 for the fiscal year ended December 31, 2011 compared to $6,413 for the fiscal year ended December 31, 2012. We believe a lack of working capital has hindered our growth this year and we are currently evaluating new finance facilities that should be in place in early 2013 to improve our cash situation.

Trade Receivables
Trade receivables for the fiscal year ended December 31, 2012 were $64,170, compared to $240,867 for the fiscal year ended December 31, 2012. Trade receivables have decreased by $176,697 from 2011 to 2012. This is the by-product of decreased revenues but also tighter control on credit in uncertain markets at present.
 
 
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Related Party Transactions
Related party transactions NET for the fiscal year ended December 31, 2012 were $(261,449) compared to $265,318 for the fiscal year ended December 31, 2011. Related party transactions have decreased. But only by 1%. The related party transactions are the salaries of our directors which remain unpaid due to cash restraints on the company’s finances.

   
31/12/2012
   
31/12/2011
 
             
Due from related parties
   
0
     
0
 
Due to related parties
   
261,449
     
265,318
 
NET Amount
   
(261,449
)    
(265,318
)
 
Inventories
Inventories for the fiscal year ended December 31, 2012 were $111,461, compared to $55,689 for fiscal year ended December 31, 2011. Inventories have increased from 2011 to 2012 by $55,772 or 100% reflecting our move to holding stock of the LCD & LED models for customers, notably in the USA, where we drop ship to the end user.

   
31/12/2012
   
31/12/2011
 
             
Total current assets
   
588,119
     
367,872
 

Trade Payables
Trade payables for the fiscal year ended December 31, 2012 were $274,352, compared to $181,984 for the fiscal year ended December 31, 2011. Trade Payables have increased by 51% or $92,368. This is due to the Company’s decision to move to third party manufacture and the extension of credit terms by the vendors.

Due to Related Parties
Due to related parties have decreased from 2011to 2012 by $3,819 from $265,318 for the fiscal year ended December 31, 2011 to $261,499 for the fiscal year ended December 31, 2012. Current related party transactions are with Kamron Inc which is Ronnie Murphy’s USA Tax entity and ASB Trading, which is Andrew Brabin’s UK Tax entity – both are used for payroll.

   
31/12/2012
   
31/12/2011
 
             
Due from related parties
   
0
     
0
 
Due to related parties
   
261,449
     
265,318
 
NET Amount
   
(261,449
)    
(265,318
)

NET Income
Our NET Income has increased by $364,751 from $346,692 loss in 2011 to a $18,059 profit in 2012. This increase can be attributed to the change in direction of sales revenue to products that deliver profit such as the LCD & LED range and the focus on geographic sales efforts in countries where higher prices thus higher margins are more acceptable. Management expects this trend to continue in 2013

   
31/12/2012
   
31/12/2011
 
             
Net income / (loss) for the period
   
18,059
     
(346,692
)
 
 
22

 
 
Liquidity and Capital Resources

   
31/12/2012
   
31/12/2011
 
CASH FLOWS FROM OPERATING  ACTIVITIES
           
Net income
    18,059       (346,692 )
Adjustments to reconcile net income to net cash provided
    (17,395 )     6,615  
By operating activities:
               
Depreciation and amortisation
    427       --  
Provision for employee benefit
    --       --  
                 
                 
Changes in operating assets and liabilities
               
Trade receivables, net
    176,698       1,378,337  
Due from shareholders
    --       --  
Due from related parties
    --       --  
Inventories
    (58,640 )     309,953  
Other current assets
    --       1,106  
Other non current assets
    --       --  
Trade payables
    (172,949 )     322,557  
Due to shareholders
    --       --  
Due to related parties
    --       --  
Other current liabilities
    (16,080 )     (1,241,442 )
Share Purchase Advances
    --       --  
                 
Net cash generated from (used for)  operating activities
    (69,880 )     430,434  
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Increase/(decrease) in short-term borrowings
    --       --  
Increase/(decrease) in long-term  borrowings
    11,499       (501,842 )
Dividends paid
    --       --  
                 
Net cash (used for) provided from  financing activities
    (506,705 )     (501,842 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchases of property, plant and equipment and intangible assets
    (5,495 )     91,141  
Share capital increase
            --  
                 
Net cash used for investing activities
    (5,495 )     91,141  
                 
NET INCREASE / (DECREASE) IN CASH AND BANKS
    (63,876 )     19,733  
                 
CASH AND BANKS AT BEGINNING OF THE YEAR
    70,289       50,556  
                 
CASH AND BANKS AT END OF THE PERIOD
    6,413       70,289  

NET Income
Our NET Income has increased by $364,751 from $346,692 loss in 2011 to a $18,059 profit in 2012. This increase can be attributed to the change in direction of sales revenue to products that deliver profit such as the LCD & LED range and the focus on geographic sales efforts in countries where higher prices thus higher margins are more acceptable. Management expects this trend to continue in 2013

Net Cash Generated from Operating Activities
For fiscal year ended December 31, 2012, when compared to the same period in 2011, NET cash generated from operating activities was $(69,880) compared to $430,434 for the same period in 2011. This is a decrease of $500,314. This decrease was due to the closure of the Turkish Subsidiaries in 2011 and the subsequent cancellation of the debt that they owed to Recep Tanisman and Emko Emaye which appears in the accounts for 2011.

Cash Flow Used Investing Activities
For fiscal year ended December 31, 2012, when compared to the same period in 2011, there was a NET cash flow decrease of $96,636 from $91,141 to $(5,495). This decrease was due to management controlling and thus reducing capital expenditure throughout 2011.
 
 
23

 

Cash Position
There was a net decrease in cash and cash equivalents of $63,876 for the beginning and the end of the period from $70,289 at the beginning of the period, to $6,413 for fiscal year ended December 31, 2012. The company’s cash position remains poor but Management is currently seeking to improve this for 2013.

Off Balance Sheet Arrangements

As of December 31, 2012, there were no off balance sheet arrangements.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.

A smaller reporting company is not required to provide the information required by this Item.

Item 8.   Financial Statements and Supplementary Data.

See the financial statements annexed to this annual report.

Item 9.   Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

No events occurred requiring disclosure under Item 304(b) of Regulation S-K during the fiscal year ending December 31, 2012.
 
Item 9A.  Controls and Procedures.

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2012 based on the COSO Evaluation Framework. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, Mr. Andrew Brabin.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2012, our disclosure controls and procedures are effective at the reasonable assurance level, but we did identify 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 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.
 
There have been no significant changes in our internal controls over financial reporting during the quarter ended December 31, 2012 that have materially affected or are reasonably likely to materially affect such controls.
 
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
 
 
24

 

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for the following:

establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), and
 
assessing the effectiveness of internal control over financial reporting.

The Company’s internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and affected by our board of directors, management and other personnel. It was designed to provide reasonable assurance to our management, our board of directors and external users regarding the fair presentation of financial statements in accordance with accounting principles generally accepted in the United States. Our internal control over financial reporting includes those policies and procedures that:
 
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets,
 
provide reasonable assurance that transactions are recorded as to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and board of directors, and
 
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
 
establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), and
 
assessing the effectiveness of internal control over financial reporting.
 
Changes to Internal Controls and Procedures Over Financial Reporting

We will regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

Item 9B.   Other Information.

None.
  
Item 10.  Directors, Executive Officers and Corporate Governance

The following information sets forth the names of our current directors and executive officers, their ages as of December 31, 2012 and their present positions.

Name
 
Age
 
Position(s) and Office(s) Held
Andrew Stuart Brabin
 
32
 
CEO, Chief Financial Officer, and Director, Secretary and Treasurer
         
Ronald George Murphy
 
49
 
Officer and Director

Set forth below is a brief description of the background and business experience of each of our current executive officers and directors.

Ronald Murphy has 15+ years of International Sales experience and is the former Head of World-Wide Sales for Zoom Technologies, Virtual Ink and Luidia (the two latter companies being Interactive Whiteboard Manufacturers). Ronald took all three of these companies from the low millions of revenues to the tens of millions in sales revenues in less than 4 years at each company. He also has 9 years experience in the IWB marketplace.
 
 
25

 

Mr. Murphy is President of World Wide Sales at our Company where he formulates sales strategy, actively seeks new partners, and manages the sales team. Mr. Murphy also has an active role in new product development providing the requirements from feedback he receives from the markets.

Andrew Brabin has 10 years of International Sales experience and is the former Head of European Sales for Luidia, manufacturer of the eBeam IWBs. Aside from a strong technical and product design background, Mr. Brabin is also a multi-linguist. Andrew assumed the role of CEO in October 2011 and was instrumental in the reverse merge transaction detailed in the Form 8K filed with the SEC on the 12th of May 2010.

Mr. Brabin is the CEO, CFO and President of World Wide Operations of our Company. He formulates financial, product, marketing and purchasing strategy whilst managing the activities at the 3rd party production facilities in Taiwan and China. Mr. Brabin also manages the public side of the business liaising with corporate council, the auditors and the investment community.

Directors
 
Our Bylaws authorize no less than one (1) director.  We currently have two Directors.

Term of Office

Our Directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our Bylaws.  Our officers are appointed by our Board of Directors and hold office until removed by the board.

Family Relationships

There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers 
  
Involvement in Certain Legal Proceedings

To the best of our knowledge, during the past five years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

Audit Committee

We do not have a separately-designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and

Code of Ethics

As of December 31, 2012, we have adopted a Code of Ethics for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our Code of Ethics have been posted and may be found on our Company’s website at www.touchittechnologies.com.
 
 
26

 

Item 11.  Executive Compensation

Compensation Discussion and Analysis

We presently have employment agreements with all of our named executive officers and have established a system of executive compensation. Due to financial constraints typical of those faced by a company in this stage of its growth, we have not paid the officers in full for the year 2012. These costs reside in the related party transactions (as monies owed) of our financial statements. Our Company officers draw on these monies owed when we our in a position to pay them.

As our business and operations expand and mature, we expect to be able to pay our Company officers their monthly compensation in full.

Summary Compensation Table

The table below summarizes all compensation awarded to, earned by, or paid to each named executive officer for our last two completed fiscal years for all services rendered to us.
 
SUMMARY COMPENSATION TABLE
                                     
Name and
principal position
 
Year
   
Salary
($)
   
Bonus
($)
   
Stock
Awards
($)
   
Option
Awards
($)
   
Non-Equity
Incentive Plan
Compensation
($)
   
Non-qualified
Deferred
Compensation
Earnings ($)
   
All Other
Compensation
($)
   
Total
($)
 
                                                       
Ronald George Murphy,
Officer and Director
 
2008
2009
2010
     
0
0
144,000
     
0
0
 0
     
0
0
0
     
0
0
  0
     
0
 0
  0
     
0
 0
  0
     
0
 0
  0
     
0
 0
 144,000
 
    2011       144,000       0       0       0       0       0       0       144,000  
    2012       144,000       0       0       0       0       0       0       144,000  
                                                                       
Andrew Stuart Brabin,
CEO, CFO and Director
 
2008
2009
2010
     
0
0
 144,000
     
0
 0
  0
     
0
0
  0
     
0
0
  0
     
0
 0
  0
     
0
 0
  0
     
0
0
  0
     
0
0
 144,000
 
    2011       144,000       0       0       0       0       0       0       144,000  
    2012       144,000       0       0       0       0       0       0       144,000  

Narrative Disclosure to the Summary Compensation Table
 
In 2008 and 2009, the officers and directors did not draw salaries and only out of pocket business expenses were paid. Due to financial constraints typical of those faced by a company in this stage of its growth, we have not paid the officers in full for the year 2012. These costs reside in the related party transactions (as monies owed) of our financial statements. Our Company officers draw on these monies owed when we our in a position to pay them.
 
Employment Agreements with Executive Officers
Mr. Brabin, and Mr. Murphy have entered into employment agreements with our Company effective May 10, 2010. The agreements provide for a three year term with an automatic renewal for an additional year unless either party provides a written notice of non-renewal.
 
 
27

 

Andrew Brabin
The agreement provides for an annual base salary of $144,000.00. In addition, Mr. Brabin is entitled to receive an annual bonus determined by the Board of Directors along with vacation days and reimbursement for all reasonable business expenses. In the event that Mr. Brabin’s employment is terminated without cause (as defined in the agreement), change of control (as defined in the agreement), disability, or by the employee for good reason, then Mr. Brabin is entitled to an amount equal to his base salary as of his last day of employment for a period of 36 months from the date of termination. In the event that Mr. Brabin’s employment is terminated for cause or other than for good reason, he is entitled to any base salary earned but not paid through the date of termination, plus any accrued vacation time, and any other monies owed to him by the Company.

Ronald Murphy
The agreement provides for an annual base salary of $144,000.00. In addition, Mr. Murphy is entitled to receive an annual bonus determined by the Board of Directors along with vacation days and reimbursement for all reasonable business expenses. In the event that Mr. Murphy’s employment is terminated without cause (as defined in the agreement), change of control (as defined in the agreement), disability, or by the employee for good reason, Mr. Murphy is entitled to an amount equal to his base salary as of his last day of employment for a period of 36 months from the date of termination. In the event that Mr. Murphy’s employment is terminated for cause or other than for good reason, he is entitled to any base salary earned but not paid through the date of termination, plus any accrued vacation time, and any other monies owed to him by the Company.

Grants of Plan Based Award
None.

Outstanding Equity Awards At Fiscal Year-end Table
None.

Compensation of Directors Table

The table below summarizes all compensation paid to our directors for our last completed fiscal year.

DIRECTOR COMPENSATION
                   
 
 
 
 
Name
 
Fees Earned
or
Paid in
Cash
($)
   
 
 
Stock
Awards
($)
   
 
 
Option Awards
($)
   
Non-Equity
Incentive
Plan
Compensation
($)
   
Non-Qualified
Deferred
Compensation
Earnings
($)
   
 
All
Other
Compensation
($)
   
 
 
 
Total
($)
 
Andrew Brabin
    144,000       0       0       0       0       0     $ 144,000  
Ronald Murphy
    144,000       0       0       0       0       0     $ 144,000  

Narrative Disclosure to the Director Compensation Table

Due to financial constraints typical of those faced by a company in this stage of its growth, the company has not paid the officers in full for 2012. These costs reside in the related party transactions (as monies owed) of our financial statements. The company officers draw on these monies owed when the company is in a position to pay them.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Securities Authorized for Issuance Under Equity Compensation Plans
None.
 
 
28

 

Security Ownership of Certain Beneficial Owners
The following table sets forth, as of December 31, 2012, the beneficial ownership of our common stock by each executive officer and director, by each person known by us to beneficially own more than 5% of the our common stock and by the executive officers and directors as a group. Except as otherwise indicated, all shares are owned directly and the percentage shown is based on 76,064,419 shares of common stock issued and outstanding on December 31, 2012.

 
Title of class
 
 
Name of beneficial owner
 
Amount of
beneficial
ownership
   
Percent
of class*
 
                 
Common
 
Andrew Brabin, UK
    23,610,000       31.04 %
Common
 
Ronald Murphy, USA
    23,610,000       31.04 %
Common
 
Total all executive officers and directors
    47,220,000       62.08 %
                     
Common
 
5% Shareholders
 
None
   
None
 
     
As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date.
 
The persons named above have full voting and investment power with respect to the shares indicated.  Under the rules of the Securities and Exchange Commission, a person (or group of persons) is deemed to be a "beneficial owner" of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security.  Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our common stock.

Item 13.   Certain Relationships and Related Transactions, and Director Independence.

None of the following parties has, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:

Any of our directors or officers;

Any person proposed as a nominee for election as a director;

Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock;

Any of our promoters; and

Any relative or spouse of any of the foregoing persons who has the same house address as such person.
 
Item 14.   Principal Accounting Fees and Services

Below is the table of Audit Fees (amounts in US$) billed by our auditor in connection with the audit of the Company’s annual financial statements for the years ended:

Financial Statements for the
Year Ended December 31
 
Audit Services
   
Audit Related Fees
   
Tax Fees
   
Other Fees
 
                         
2012
  $ 10,000     $       $ 0     $ 0  
2011
  $ 12,000     $       $ 0     $ 0  
2010
  $ 16,600     $       $ 0     $ 0  
2009
  $ 0     $       $ 0     $ 0  
 
We did not incur audit costs until 2010 with the preparation for the reverse merger transaction detailed in the Form 8K filed with the SEC on May 12th 2010.
 
 
29

 

PART IV

Item 15.   Exhibits, Financial Statements Schedules

(a) Documents Filed. The following documents are filed as part of this Annual Report Form 10-K or incorporated by reference as indicated:

1.           Financial Statements. The financial statements of TouchIT Technologies, Inc.
 
Report of Independent Registered Public Accounting Firm for TouchIT Technologies, Inc
F-1
   
TouchIT Technologies, Inc Statement of Financial Position as of December 31, 2012, 2011, 2010 and 2009
F-2
   
TouchIT Technologies, Inc Statement of Income as of December 31, 2012, 2011, 2010 and 2009
F-3
   
TouchIT Technologies, Inc Statement of Cash Flow as of December 31, 2012, 2011, 2010 and 2009
F-4
   
TouchIT Technologies, Inc Statement of Changes in Equity as of December 31, 2012
F-5
   
Notes to TouchIT Technologies, Inc Financial Statements
F-6
 
2.           Exhibits and Exhibit Index. See the Exhibit Index included as the last part of this Annual Report on Form 10-K, which is incorporated herein by reference.
 
 
30

 
 
EXHIBIT INDEX
 
The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:
 
Exhibit
Number  
 
Description
     
3.1  
 
Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 2.1 of Form 8-K filed on May 12, 2010)
     
3.2
 
Bylaws of TouchIT Technologies, Inc. (incorporated by reference to Exhibit 3.2 of Form S-1 filed May 29, 2008)
     
10.1
 
Share Exchange Agreement (incorporated by reference to Exhibit 2.1 of Form 8-K filed on May 12, 2010)
     
10.2
 
The Credit Agreement (incorporated by reference to Exhibit 10.1 of Form 8-K filed February 23, 2011)
     
31.1*
 
Certification of Principal Executive Officer
     
31.2*
 
Certification of Principal Financial Officer
     
32.1*
 
Certification of Chief Executive Officer and Chief Financial Officer
     
* Filed herewith
 
 
31

 
 
Edward Richardson Jr., CPA
 
15565 Northland Drive Suite 508 West
 
Southfield, MI. 48075
 
248-559-4514
 
Independent Auditor's Report
 
March 22, 2012
 
Board of Directors
 
TouchIT Technologies, Inc.
101 West Beaver Road, Suite 1400
Troy, MI. 48084
 
I have audited the accompanying balance sheets of TouchIT Technologies, Inc. as of December 31, 2012 and 2011 and the related statements of income, retained earnings, changes in stockholder’s equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audit.
 
I conducted my audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
 
In my opinion, the financial statements referred to above present fairly, in all material aspects, the statement of financial position of TouchIT Technologies as of December 31, 2012 and 2011 and the statement of activities, changes in stockholder’s equity, and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
 
/S/ Edward Richardson Jr., CPA
 
 
F-1

 
 
TOUCHIT TECHNOLOGIES, INC
BALANCE SHEETS
FOR THE PERIODS ENDED 31 DECEMBER 2012, 2011 
(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
 
   
12/31/2012
   
12/31/2011
 
CURRENT ASSETS
           
   
 
   
 
 
Cash and cash equivalents
    6,413       70,289  
Trade receivables, net
    64,170       240,867  
Due from related parties
    -       -  
Due from Shareholders
    -       -  
Inventories
    111,461       55,689  
Other current assets
               
                 
Total current assets
    182,043       366,845  
                 
NON CURRENT ASSETS
               
                 
Property, plant and equipment, net
    6,076       1,027  
Intangible assets, net
            -  
Other non current assets
    400,000       -  
                 
Total non current assets
    406,076       1,027  
                 
TOTAL ASSETS
    588,119       367,872  
                 
CURRENT LIABILITIES
               
Borrowings
    -       -  
Trade payables
    274,352       181,984  
Due to shareholders
    -       -  
Due to related parties
    261,499       265,318  
Other current liabilities
    11,310       27,390  
                 
Total current liabilities
    547,161       474,692  
                 
NON CURRENT LIABILITIES
               
Borrowings
    -       250,000  
Employee termination benefits
    -       -  
Reserve for retirement pay
    -       -  
Share purchase advances
    -       -  
                 
Total non current liabilities
    -       250,000  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
SHAREHOLDERS' EQUITY
               
Share capital
    544,303       127,570  
Retained earnings
    (521,403 )     (137,698 )
Net income / (loss) for the period
    18,058       (346,692 )
                 
Total shareholders’ equity
    40,958       (356,820 )
                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
    588,119       367,872  
  
 
F-2

 
 
TOUCHIT TECHNOLOGIES, INC
COMBINED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE PERIODS ENDED 31 DECEMBER 2012, 2011
(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
 
   
12/31/2012
   
12/31/2011
 
         
 
 
NET SALES
    1,287,709       1,595,943  
COST OF SALES
    885,021       (1,341,374 )
Gross profit
    402,688       254,569  
MARKETING AND SELLING EXPENSE
    112,304       (578,887 )
GENERAL AND ADMINISTRATIVE  EXPENSES
    276,626       (316,528 )
Profit from operations
    13,758       (640,847 )
OTHER INCOME AND EXPENSES, net
    4,301       294,154  
FINANCIAL INCOME AND EXPENSES, net
    --       --  
Profit Loss before taxation and currency translation gain/(loss)
    18,059       (346,692 )
TAXATION CHARGE
    --       --  
Taxation current
    --       --  
Deferred
    --       --  
CURRENCY TRANSLATION GAIN/(LOSS)
    --       --  
Net income/(loss)  for the year
    18,059       (346,692 )
OTHER COMPREHENSIVE INCOME
    --       --  
Total comprehensive income
    18,059       (346,692 )
 
 
F-3

 
 
TOUCHIT TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE PERIOD ENDED DECEMBER 31, 2012
 
                                                         
Total
 
                                                   
Retained
   
Stockholder's
 
   
Common Stock
   
Preferred Stock
   
Paid-in Capital
   
Treasury Stock
   
Earnings
   
Equity
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Amount
   
Amount
 
                                                             
Balance at January 1, 2012
   
47,220,000
   
$
127,570
   
$
-
   
$
-
     
47,220,000
   
$
416,733
     
-
   
$
-
   
$
(484,389
)
 
$
59,914
 
                                                                                 
Net Income
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
18,059
     
18,059
 
                                                                                 
Capital Transactions
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
                                                                                 
Prior Period Adjustments
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(37,015
)
   
(37,015
)
                                                                                 
Balance at December 31, 2012
   
47,220,000
   
$
127,570
   
$
-
   
$
-
     
47,220,000
   
$
416,733
     
-
   
$
-
   
$
(503,345
)
 
$
40,958
 
 
TOUCHIT TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE PERIOD ENDED DECEMBER 31, 2011
 
                                                         
Total
 
                                                   
Retained
   
Stockholder's
 
   
Common Stock
   
Preferred Stock
   
Paid-in Capital
   
Treasury Stock
   
Earnings
   
Equity
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Amount
   
Amount
 
                                                             
Balance at January 1, 2011
   
55,839,419
   
$
127,570
   
$
-
   
$
-
     
-
   
$
-
     
-
   
$
-
   
$
(143,285
)
 
$
(15,715
)
                                                                                 
Net Income
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(346,692
)
   
(346,692
)
                                                                                 
Capital Transactions
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
                                                                                 
Prior Period Adjustments
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
5,588
     
5,588
 
                                                                                 
Balance at December 31, 2011
   
55,839,419
   
$
127,570
   
$
-
   
$
-
     
-
   
$
-
     
-
   
$
-
   
$
(484,389
)
 
$
(356,819
)
 
 
F-4

 
 
TOUCHIT TECHNOLOGIES, INC
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED 31 DECEMBER 2012, 2011
(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
 
   
 
   
 
 
   
12/31/2012
   
12/31/2011
 
CASH FLOWS FROM OPERATING  ACTIVITIES
 
 
   
 
 
Net income
    18,059       (346,692 )
Adjustments to reconcile net income to net cash provided
    (17,395 )     6,615  
By operating activities:
               
Depreciation and amortisation
    427       --  
Provision for employee benefit
    --       --  
                 
Changes in operating assets and liabilities
               
Trade receivables, net
    176,698       1,378,337  
Due from shareholders
    --       --  
Due from related parties
    --       --  
Inventories
    (58,640 )     309,953  
Other current assets
    --       1,106  
Other non current assets
    --       --  
Trade payables
    (172,949 )     322,557  
Due to shareholders
    --       --  
Due to related parties
    --       --  
Other current liabilities
    (16,080 )     (1,241,442 )
Share Purchase Advances
    --       --  
                 
Net cash generated from (used for)  operating activities
    (69,880 )     430,434  
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Increase/(decrease) in short-term borrowings
    --       --  
Increase/(decrease) in long-term  borrowings
    11,499       (501,842 )
Dividends paid
    --       --  
                 
Net cash (used for) provided from  financing activities
    (506,705 )     (501,842 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchases of property, plant and equipment and intangible assets
    (5,495 )     91,141  
Share capital increase
            --  
                 
Net cash used for investing activities
    (5,495 )     91,141  
                 
NET INCREASE / (DECREASE) IN CASH AND BANKS
    (63,876 )     19,733  
                 
CASH AND BANKS AT BEGINNING OF THE YEAR
    70,289       50,556  
                 
CASH AND BANKS AT END OF THE PERIOD
    6,413       70,289  
 
 
F-5

 
 
TOUCHIT TECHNOLOGIES, INC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 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 December 31, 2012 and December 31, 2011 is five.

 
F-6

 
 
TOUCHIT TECHNOLOGIES, INC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 2012

Description of Business

TouchIT Technologies, Inc is a designer, producer (via 3rd party) and marketer of touch-based visual communication products. The Company manufactures a large range of touch screen and touch board products containing TouchIT's proprietary technology to suit all types of applications, from LCD & LED touch-screens to large interactive whiteboard displays and audience response systems, with applications to several industry segments including education, business, and government. For more information, please visit the Company's Website: www.touchittechnologies.com.

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.

 
F-7

 

TOUCHIT TECHNOLOGIES, INC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 2012

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 assured. 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.

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 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.

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.

 
F-8

 
 
TOUCHIT TECHNOLOGIES, INC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 2012


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.
 
Financial Instruments

Fair value is defined as the price that would be received to sell an assets or paid to transfer 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. Valuations 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 market. The Company did not have any Level 3 assets or liabilities.

 
F-9

 
 
TOUCHIT TECHNOLOGIES, INC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 2012

5.  
CASH AND CASH EQUIVALENTS

As of December 31, 2011 and December 30, 2011, cash and cash equivalents comprised were comprised of the following:

      31.12.2012       31.12.2011  
                 
Cash on Hand
  $ 0     $ 0  
Banks
  $ 6,413     $ 70,289  
                 
Total
  $ 6,413     $ 70,289  

6.  
TRADE RECEIVABLES

As of December 31, 2012 and December 31, 2011, trade receivables comprised were comprised of the following:

      31.12.2012       31.12.2011  
                 
Trade Receivables
  $ 66,170     $ 242,867  
Provision for doubtful accounts
  $ 2,000     $ 2,000  
Total
  $ 64,170     $ 240,867  

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
    31.12.2012       31.12.2011  
                 
    $ 0     $ 0  
                 
Total
  $ 0     $ 0  
 
 
F-10

 
 
TOUCHIT TECHNOLOGIES, INC