| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this Quarterly Report. This discussion and analysis may contain forward-looking statements based on assumptions about our future business. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors.
Forward-Looking Statements
This Quarterly Report contains forward-looking statements. The forward-looking statements are contained principally in, but not limited to, the sections entitled “Management’s Discussion and Analysis or Plan of Operation,” “Business” and those listed in our other Securities and Exchange Commission filings. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “ongoing,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking.
Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Our actual results could differ materially from those anticipated in forward-looking statements for many reasons. Accordingly, you should not unduly rely on these forward-looking statements, which speak only as of the date of this Report.
Unless required by law, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Report or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this Report.
Management cautions that these statements are qualified by their terms and/or important factors, many of which are outside of our control, and involve a number of risks, uncertainties and other factors that could cause actual results and events to differ materially from the statements made, including, but not limited to, the following:
● actual or anticipated fluctuations in our quarterly and annual operating results;
● actual or anticipated product constraints;
● decreased demand for our products resulting from changes in consumer preferences;
● product and services announcements by us or our competitors;
● loss of any of our key executives;
● regulatory announcements, proceedings or changes;
● announcements in the touch technology community;
● competitive product developments;
● intellectual property and legal developments;
● mergers or strategic alliances in the touch technology industry;
● any business combination we may propose or complete;
● any financing transactions we may propose or complete; or
● broader industry and market trends unrelated to its performance.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.
Plan of Operation
The ability of our Company to achieve our business objectives is contingent upon our success in raising additional capital until adequate revenues are realized from operations.
We are a manufacturer (via 3rd party contract manufacture) of touch based visual communication products for education and corporate worldwide marketplaces. Our mission is to design and manufacture high quality technology products. We manufacture a large range of touch screen and touch board products to suite all types of application from pen input wireless tablets, to large enameled steel touch-sensitive interactive whiteboards and large interactive Liquid Crystal Displays (“LCD”). Our products stand out from our competition in terms of our design, functionality and price offering. Our customers seek our products as they provide them with a different point of entry to the market in terms of price, quality of design and margin. Currently, demand for our products is exceeding our ability to supply.
In the past four years, we have designed, manufactured, launched, developed and sold four new products as well as established the business from scratch.
COMPANY OVERVIEW
We manufacture touch-based visual communication products for the education and corporate worldwide marketplaces. Our products stand out from our competition in terms of design, functionality and price offering. Our customers seek our products as they provide them a different point of entry to the market in terms of price, quality of design and margin.
Our keys to success are:
1. Establish and maintain working relationships and contractual agreements with distribution and Original Equipment Manufacturer (“OEM”) customers;
2. Increase our profit margin by lowering the import and raw material costs by bulk purchasing from vendors;
3. By increasing our purchasing power, we can increase our stock holding and lowering delivery times to customers thus enabling further sales growth; and
4. Effectively communicate with our current and potential customers, through targeted efforts, our position as a differentiated provider of the highest quality of margin laden touch-based communication products.
Recent Developments
On April 11, 2012, we borrowed Two Hundred Fifty Thousand Dollars ($250,000) (the “Advance”) from Bibby International Trade Finance (the “Lender”) pursuant to a revolving credit facility evidenced by a Master Purchase Agreement with an effective date of April 11, 2012 (the “MPA”).
The MPA evidences a revolving credit facility for the purchase of the Company’s accounts receivable up to the principal amount of $250,000, which subject to Lender approval, may be increased. The outstanding principal amount is due on April 11, 2013. This facility was renewed for a further year on April 11, 2013.
The Advance is secured by, among other things, (i) the MPA made by and between our Company and the Lender pursuant to which the Borrower has granted a security interest in all of the Borrower's assets to the Lender (the "Security Agreement"), (ii) a personal guaranty and validity guaranty executed by Andrew Brabin, Chief Executive Officer of our Company.
The MPA also includes customary representations and warranties and affirmative and negative covenants, including, among others, payment of certain customary fees and expenses, covenants relating to financial reporting, maintenance of property and insurance, incurrence of liens and/or other indebtedness. The MPA also contains customary provisions for events of default, remedies in circumstances of default, required notices, governing law and jurisdiction of governance.
We have now completed the development and the establishment of a production line in Taiwan for a new range of Interactive LEDLCD products. Supply of LCD panels has become challenging as panel manufacturers have sent many models end of life in favor of the LED equivalent. These products include Interactive LEDs,LCDs, with and without an embedded PC in sizes from 32” to 80”82”. The unique feature for the range of LEDsLCDs is that they do not require a driver to be installed, nor do they require any form of calibration by the user. These are true plug and play devices. All of these products are full high definition and touch-based and include options of multiple input “multi-touch”. We have also launched the TouchIT LED Fusion which is threesix interactive products in one. An Interactive LED,LCD, and Interactive Easel and an Interactive Table. This is a revolutionary product as it takes us into new group collaboration markets. Management believes the LED range of product will give us an advantage in the marketplace as the competition try and catch up with their own development.
We have finished the development of a new range of four point touch models of LED. These models were launched at the beginning of the quarter. These models have some unique features especially concerning the Apple Macintosh Operating System (“MAC OS”). Traditionally, MAC OS only allows for third party touch screens to operate in single touch mode. However, we have developed a range of LED screens that allow for multi-touch gesture support in MAC OS. Management believes that this new feature will give the Company a unique sales point in the marketplace and will also appeal the growing number of MAC users World-Wide. These models are now sold in all our markets world-wide.
TouchIT has been awarded with the CTICK standard mark for its range of LED product in Australia. After several weeks of testing the standard can now be applied to its products. Furthermore, the product has also been approved for governmental use during the same testing procedure. Management believes that this will give the Company a competitive advantage in governmental tenders where the competition does not have such suitability certification.
We launched and sold into the Australian marketplace a range of IP65 (A standard for all weather, outdoor and sunlight readable products) LCD & LED panels. The Company is able to offer these models in both touch and non-touch formats. Management believes that our niche for this particular product line is the Company’s ability to do small custom design builds of the products for customers that other manufacturers may not entertain. This is a range of products that if successful in the Australian marketplace we will roll out world-wide. The Company has sold these into both private (Perth International Rugby Stadium) and government (Western Australian Government) entities in Australia and these were installed in Quarter 2 2013 through our distributor Ingram Micro. There is an increase in demand for this kind of product in Australia and Management believes we will look to expand this category later in the year.
We have soldseeded units into the United States, Australia and the Middle East for the new LEDLCD product line. The company has received excellent feedback on these models and Management expects that by Quarter 4 2013,2012, the LEDLCD range will be 75%40% of revenue. The LEDLCD range represents a higher ticket item which will impact revenues and also presents a greater margin opportunity which Management believes will have a positive impact on profits.
WithWe have continued our partner DEMCO, we participatedefforts of expanding our product line through the K thru 12 markets as well as the higher Educational market. We are working on opportunities in the American Library Association showPennsylvania, Michigan, Mississippi, and higher educational institutions in Chicago 27th June 2nd July. Management believes that we will continue to see continued revenues from Demco. Demco is currently waiting to take delivery of an order which is destined for the Madison, WI Public Library System.
Sales of TouchIT WIS continue to increase. TouchIT WIS TouchIT "WIS" (Wireless Interactive Screen, pronounced "WIZ") is a wireless presentation system. TouchIT "WIS" allows a group of students in a class or business professionals in a meeting room to take turns in presenting from their Windows or MAC computer or even a mobile device, which are connected wirelessly to the TouchIT LED Duo transmitting in full HD. The increase of Bring Your Own Device (BYOD) initiatives is proving that there is a strong market for this variant of the TouchIT LED product line.
With our partner Shiffler Inc, we participated in School Dude University in Myrtle Beach SC, USA. This mini-tradeshow event gave the Company some prestigious exposure amongst the attendees of the event, as corporate sponsorship is limited to a select few.
At the request of the Apple Division at Ingram Micro Australia, we participated in the Apple Mobility Roadshow. This was a series of events in Brisbane, Melbourne,Upstate NY and Sydney where we showcased our 4 point touch LED and the gesture support that it has under the MAC operating system. This was the first outing for this product and the feedback that we received from the specialist MAC resellers was encouraging. Management believes that this will lead to revenue being recognized in Q3 as a direct result of this event.NJ.
We participatedhave expanded our reseller base with Demco, PCMall.gov, Cascade, US Markerboard and look to expand further into the Canadian and South American marketplaces with several interested parties looking at the TouchIT product lines.
We have had additional interest from the US government on our interactive boards and Interactive LCD. Subsequently, the US Government has purchased sample units of the new TouchIT LCD Duo.
We have targeted the retail marketplace and partnered with the Sales and Marketing Team, Berberian Associates Group covering New England, Florida, Midwest and the South in order to take TouchIT Technologies' product line to the retail, online, educational and enterprise channels. Established for over 30 years, Berberian Associates have a wealth of experience in Sales and Marketing of technology products. They represent a host of brands and have the necessary infrastructure to help grow businesses. Berberian Associates completed sales training on the products and began the product introductions to some of the largest retailers in the ISTE Trade ShowUSA. Companies that have expressed initial interest are Tech Depot, Tiger Direct and Sam’s Club. We have singed initial vendor agreements with Costco and Sam’s Club. Sam’s Club are currently uploading the products into their online portfolio ready for resale in San Antonio TX, USAQ3 2012.
We have signed a vendor agreement with Office Max in July. Thisthe United States of America. Office Max is currently undergoing a training program and the Company’s main educational trade show eventproduct line is being loaded into their website. We expect Office Max to begin selling the products in September 2012. We have also committed to being in the Office Max Maxi Catalogue which is released in Q4 2012 ready for 2013.
We entered the Australian market place by partnering with Ingram Micro PTY late in 2011. Ingram Micro is currently working on several large projects which encompass both the Interactive Whiteboard and the LCD product lines. Through one of the company’s resellers, our products have been chosen for the Western Australian Government Supply Contract for the next four years. Procurement from which begins in September 2012. This includes both the TouchIT Board and the TouchIT LCD Duo range.
We have signed a new distribution partner for the Italian market place, Satnet SRL. Satnet have now received their initial product and are beginning to sell into the Italian Market.
We have continued our expansion into the Middle East and are currently tendering our product in various government and private tenders. The outcomes of which we expect to be received before the end of calendar year 2012.
We continue to grow in the South African market. We officially launched the TouchIT LCD Duo range of LCD products in July and reseller training will take place in September 2012 in Johannesburg.
We have developed during Q2 a new product called TouchIT WebCast. This product is at final prototype stage and is expected to be launch 1st September 2012 in Europe, with a World-Wide roll-out before the end of the year. The Company’s exhibition booth was focused aroundTouchIT WebCast is a media presentation system that allows you to stream your synchronized multimedia and video presentations over the LED product range where we displayed 4 stationsInternet from a single location, a lecture theater or boardroom for example. You can then make the presentations available to multiple viewers on cross platform devices either live or on demand anywhere in the world. TouchIT WebCast is a combination of LED alonghardware and software that when used in conjunction with the Fusion. our cloud storage and streaming services, allows you to capture, stream and store lectures, training presentations or corporate updates for example.
We received over 100 leads from the show that Management believes will generate revenue forfrom the sale of the Recorder Box, the Cloud Services Package and the Accessories. The accessories are still being finalized and one will be the HD Camera as well as a lapel microphone to enable the Company to offer the complete package. The Cloud Services are an annual subscription so enables the company in Q3 2013.to have a reoccurring revenue model which we have not had before.
The CompanyLast, we have undertaken and completed significant research and development of new technologies for a low cost interactive whiteboard. We have launched for the purpose of low cost tenders an Electromagnetic Interactive Whiteboard. This is finalizing a new Digital Signagelow cost product that it will launch in Q3 2013. This product will comprise of a standalone player and signage software. The Company has been receiving a number of requests for such a product. The product will be unique in that it will be able to cater for all types of digital signage, moreover touch and non-touch applications with the same piece of software. This is something that most of the competition do not cater for. The go to market strategy for this new product will be to target both the touch and non-touch applications. Therefore, this product will take us into a different vertical market of signage which Management believes will become a revenue stream forenable the Company by Q4 2013.to compete in large tenders that are particularly price sensitive in markets such as the Middle East.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The accompanying financial statements include the financial statements of TouchIT Tech KS and TouchIT Ed. Although not significant, it should be noted that inter-company transactions and balances do exist and have not been consolidated. TouchIT Tech KS and TouchIT Ed together are also referred to as the “Company.”
This management's discussion and analysis of our financial condition and results of operations are based on the financial statements of both TouchIT Tech and TouchIT Ed, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, we will evaluate these estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis:
Basis of presentation financial statements:
Our Company maintains its books of account and prepares its statutory financial statements in accordance with accounting principles in the United States of America and tax legislation. The accompanying financial statements are based on the statutory records, with adjustments and reclassifications, for the purpose of fair presentation in accordance with United States generally accepted accounting principles (“US GAAP”).
There are inter-company transactions that have not been consolidated on these financial statements.
Revenue recognition:
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for customer returns, rebates, and other similar allowances.
Inventories:
Inventories are stated at the lower of cost or net realizable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories held by the method most appropriate to the particular class of inventory being valued on the weighted average basis. Net realizable value represents the estimated selling price less all estimated costs of completion and costs necessary to deliver service.
Property, plant and equipment:
Property, plant and equipment are carried at cost less accumulated depreciation and any accumulated impairment losses, if any. Depreciation is charged so as to write off the cost of assets, other than land and construction in progress, over their estimated useful lives, using straight line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
The ranges of estimated useful lives are as follows:
| - | Machinery and equipments: 2-6 years |
| - | Furniture, fixtures and office equipments: 4-5 years |
Shipping and handling:
Shipping and handling costs related to costs of the raw material purchased is included in cost of revenues.
Research and development costs:
Research and development costs are expensed as incurred. The costs of material and equipment that are acquired or constructed for research and development activities, and have alternative future uses, either in research and development, marketing, or sales, are classified as property and equipment or depreciated over their estimated useful lives.
Company reporting year end:
We use a calendar year as our fiscal year ending December 31.
RESULTS OF OPERATIONS
TOUCHIT TECHNOLOGIES, INC STATEMENTS OF COMPREHENSIVE INCOME
FOR QUARTER ENDED JUNE 30, 20132012 & 20122011
(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
| | | 30/06/2012 | | | 30/06/2011 | |
| | | | | | | |
| NET SALES | | | 505,685 | | | | 914,867 | |
| COST OF SALES | | | 353,002 | | | | (832,401 | ) |
| Gross profit | | | 152,683 | | | | 82,466 | |
| MARKETING AND SELLING EXPENSE | | | 37,458 | | | | (427,851 | ) |
| GENERAL AND ADMINISTRATIVE EXPENSES | | | 208,517 | | | | (123,057 | ) |
| Profit from operations | | | (93,293 | ) | | | (468,442 | ) |
| OTHER INCOME AND EXPENSES, net | | | 1,200 | | | | (46,344 | ) |
| FINANCIAL INCOME AND EXPENSES, net | | | -- | | | | (28,433 | ) |
| Profit Loss before taxation and currency translation gain/(loss) | | | (92,093 | ) | | | (605,745 | ) |
| TAXATION CHARGE | | | -- | | | | -- | |
| Taxation current | | | -- | | | | -- | |
| Deferred | | | -- | | | | -- | |
| CURRENCY TRANSLATION GAIN/(LOSS) | | | -- | | | | -- | |
| Net income/(loss) for the year | | | (92,093 | ) | | | (605,745 | ) |
| OTHER COMPREHENSIVE INCOME | | | -- | | | | -- | |
| Total comprehensive income | | | (92,093 | ) | | | (605,745 | ) |
| | | 36/06/2013 | | | 30/06/2012 | |
| | | | | | | |
| NET SALES | | | 800,189 | | | | 505,685 | |
| COST OF SALES | | | 550,489 | | | | 353,002 | |
| Gross profit | | | 249,700 | | | | 152,683 | |
| MARKETING AND SELLING EXPENSE | | | 14,717 | | | | 37,458 | |
| GENERAL AND ADMINISTRATIVE EXPENSES | | | 163,599 | | | | 165,317 | |
| Profit from operations | | | 71,384 | | | | (50,092 | ) |
| OTHER INCOME AND EXPENSES,net | | | 9,021 | | | | 1,200 | |
| FINANCIAL INCOME AND EXPENSES, net | | | -- | | | | -- | |
| Profit Loss before taxation and currency translation gain/(loss) | | | 80,405 | | | | (48,892 | ) |
| TAXATION CHARGE | | | -- | | | | -- | |
| Taxation current | | | -- | | | | -- | |
| Deferred | | | -- | | | | -- | |
| CURRENCY TRANSLATION GAIN/(LOSS) | | | -- | | | | -- | |
| Net income/(loss) for the year | | | 80,405 | | | | (48,892 | ) |
| OTHER COMPREHENSIVE INCOME | | | -- | | | | -- | |
| Total comprehensive income | | | 80,405 | | | | (48,892 | ) |
NET SALES (REVENUE) – For the first six months of the year, quarter ended June 30, 2013,2012, as compared to the six months ended June 30, 2012,2011, revenue has increaseddecreased by 58%45% or by $294,504$409,182 from $505,685$914,867 to $800,189.$505,685. This increasedecrease can be attributed firstly, to a changeslow down in strategy by Management.the market due to uncertain budgetary commitments from certain of our customers. Our going forward sales activity reflects our management’s plan of increasing focus on the development of recurring business in existing and new markets for the new Interactive LEDLCD Line. We are also looking to break into the retail market (Business to Business Divisions) of some of the larger retailers in the USA. The introduction of the TouchIT WebCast product in Q3 2012 will also add reoccurring sales revenue to the Company. Our management does anticipate that revenues will continue to grow for the balance of the year due to the LEDLCD product line which represents a much larger value ticket item which will drive revenues higher and the current back order that the Company has built up.higher.
GROSS PROFIT – For the first six months of the year, quarter ended June 30, 2013,2012, as compared to the six months ended June 30, 2012,2011, gross profit has increased by $97,017$70,217 from $152,683$82,466 to 249,700.$152,683. This is primarily due to the restructuring of the business over the last yearthree quarters and the focus onclosure of the more profitable LED product line.Turkish manufacturing facilities. Our management does anticipate gross profits to continue to rise for the balance of the year.
OPERATIONAL PROFITLOSS – For the first six months of the year, quarter ended June 30, 2013,2012, as compared to the six months ended June 30, 2012,2011, operational profitloss has increased from $(50,092)$(123,057) to $71,384$(93,293) an increase of $121,476.$29,764. This can be attributed to the Management’s focus on reducing overhead costs to maximize profitability when revenues increase.
| | | 30/06/2013 | | | 30/06/2012 | |
| | | | | | | |
| MARKETING AND SELLING EXPENSE | | $ | 14,717 | | | $ | 37,458 | |
| As a percentage of revenue | | | 2 | % | | | 7 | % |
| GENERAL AND ADMINISTRATIVE EXPENSES | | $ | 37,458 | | | $ | 165,317 | |
| As a percentage of revenue | | | 5 | % | | | 33 | % |
| | | 30/06/2012 | | | 30/06/2012 | |
| | | | | | | |
| MARKETING AND SELLING EXPENSE | | $ | 37,458 | | | $ | 427,851 | |
| As a percentage of revenue | | | 7 | % | | | 47 | % |
| GENERAL AND ADMINISTRATIVE EXPENSES | | $ | 208,317 | | | $ | 123,057 | |
| As a percentage of revenue | | | 41 | % | | | 4 | % |
NET INCOMELOSS FOR THE PERIOD – For the first six months of the year, quarter ended June 30, 2013,2012, as compared to the six months ended June 30, 2012,2011, NET incomeloss for the period has increased by $129,297$513,652 from $(48,892)$(605,745) to $80,405.$(92,093). This can be attributed to the Management’s focus on reducing overhead costs to maximize profitability when revenues increase.
TOUCHIT TECHNOLOGIES, INC BALANCE SHEET AT JUNE 30, 20132012 & 20122011
(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
| CURRENT ASSETS | | 30/06/2012 | | | 30/06/2011 | |
| | | | | | | |
| Cash and cash equivalents | | | 15,584 | | | | 1,239 | |
| Trade receivables, net | | | 122,194 | | | | 5,060 | |
| Due from related parties | | | - | | | | 655,135 | |
| Due from Shareholders | | | - | | | | 41,955 | |
| Inventories | | | 32,419 | | | | 571,586 | |
| Other current assets | | | | | | | 4,223 | |
| | | | | | | | | |
| Total current assets | | | 170,196 | | | | 1,279,198 | |
| | | | | | | | | |
| NON CURRENT ASSETS | | | | | | | | |
| | | | | | | | | |
| Property, plant and equipment,net | | | 2,032 | | | | 59,530 | |
| Intangible assets, net | | | | | | | 18,426 | |
| Rights | | | | | | | - | |
| Other non current assets | | | 400,000 | | | | 12,763 | |
| | | | | | | | | |
| Total non current assets | | | 402,032 | | | | 90,719 | |
| | | | | | | | | |
| | | | | | | | | |
| TOTAL ASSETS | | | 572,228 | | | | 1,369,917 | |
| | | | | | | | | |
| | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | |
| Borrowings | | | - | | | | - | |
| Trade payables | | | 143,672 | | | | 104,721 | |
| Due to shareholders | | | - | | | | 188,293 | |
| Due to related parties | | | 324,499 | | | | 878,822 | |
| Other current liabilities | | | 47,260 | | | | 68,463 | |
| | | | | | | | | |
| Total current liabilities | | | 525,431 | | | | 1,240,299 | |
| | | | | | | | | |
| | | | | | | | | |
| NON CURRENT LIABILITIES | | | | | | | | |
| Borrowings | | | 71,841 | | | | - | |
| Employee termination benefits | | | - | | | | - | |
| Reserve for retirement pay | | | - | | | | - | |
| Convertible Notes | | | 583,200 | | | | 750,000 | |
| | | | | | | | | |
| Total non current liabilities | | | 655,041 | | | | 751,078 | |
| | | | | | | | | |
| | | | | | | | | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | | |
| | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | |
| Share capital | | | 544,303 | | | | 127,570 | |
| Retained earnings | | | (1,103,654 | ) | | | (143,285 | ) |
| Net income / (loss) for the period | | | (48,893 | ) | | | (605,745 | ) |
| | | | | | | | | |
| Total shareholders’ equity | | | (608,244 | ) | | | (621,460 | ) |
| | | | | | | | | |
| TOTAL LIABILITIES AND | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | 572,228 | | | | 1,369,917 | |
| CURRENT ASSETS | | 30/06/2013 | | | 30/06/2012 | |
| | | | | | | |
| Cash and cash equivalents | | | 9,722 | | | | 15,584 | |
| Trade receivables, net | | | 201,339 | | | | 122,194 | |
| Due from related parties | | | - | | | | - | |
| Due from Shareholders | | | - | | | | - | |
| Inventories | | | 68,829 | | | | 32,419 | |
| Other current assets | | | | | | | | |
| | | | | | | | | |
| Total current assets | | | 279,890 | | | | 170,196 | |
| | | | | | | | | |
| NON CURRENT ASSETS | | | | | | | | |
| | | | | | | | | |
| Property, plant and equipment,net | | | 5,353 | | | | 2,032 | |
| Other Assets | | | - | | | | | |
| Other non current assets | | | 400,000 | | | | 400,000 | |
| | | | | | | | | |
| Total non current assets | | | 405,353 | | | | 402,032 | |
| | | | | | | | | |
| TOTAL ASSETS | | | 685,243 | | | | 572,228 | |
| | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | |
| Borrowings | | | - | | | | - | |
| Trade payables | | | 218,517 | | | | 143,672 | |
| Due to shareholders | | | - | | | | - | |
| Due to related parties | | | 189,499 | | | | 324,499 | |
| Other current liabilities | | | 153,808 | | | | 47,260 | |
| | | | | | | | | |
| Total current liabilities | | | 561,824 | | | | 525,431 | |
| | | | | | | | | |
| NON CURRENT LIABILITIES | | | | | | | | |
| Borrowings | | | - | | | | 71,841 | |
| Employee termination benefits | | | - | | | | - | |
| Reserve for retirement pay | | | - | | | | - | |
| Share purchase advances | | | - | | | | - | |
| | | | | | | | | |
| Total non current liabilities | | | - | | | | 71,841 | |
| | | | | | | | | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | | |
| | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | |
| Share capital | | | 507,428 | | | | 544,303 | |
| Retained earnings | | | (464,415 | ) | | | (520,454 | ) |
| Net income / (loss) for the period | | | 80,406 | | | | (48,893 | ) |
| | | | | | | | | |
| Total shareholders’ equity | | | 123,419 | | | | (25,044 | ) |
| | | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | | 685,243 | | | | 572,228 | |
CURRENT ASSETS – For the first six months of the year, quarter ended June 30, 2013,2012, as compared to the six months ended June 30, 2012,2011, total current assets have increaseddecreased by $109,6941,109,002 or 64%87%. This increasedecrease is primarily due to an increasea decrease in Trade Receivablesits inventory holding moving to a ‘just in time’ supply rather than overstocking which have increased by 65% when compared to the same period in 2012.turn helps cash flow. Monies owed from related parties and from shareholders has also decreased representing a reduction in assets of $697,090
NON-CURRENT ASSETS – For the first six months of the year, quarter ended June 30, 2013,2012, as compared to the six months ended June 30, 2012,2011, total non-current assets have increased by $3,321 or 1%.$311,313. This is mainly due to a small increase in fixed assetsthe recognition of the value of the Full Reporting Public Shell on the Company’s balance sheet.
TOTAL ASSETS – For the first six months of the year, quarter ended June 30, 2013,2012, as compared to the six months ended June 30, 2012,2011, total assets have increaseddecreased by $113,015 or 20%$797,689 from $572,228$1,369,917 to $685,243.$572,228. The reason for the increasedecrease in assets is primarily due to an increase in Trade Receivables which have increased by 65% when comparedcan be attributed to the same period in 2012.decrease dues from related parties and shareholders and the move of production from Turkey to Taiwan.
CURRENT LIABILITIES – For the first six months of the year, quarter ended June 30, 2013,2012, as compared to the six months ended June 30, 2012,2011, total current liabilities have increaseddecreased by $36,393$714,868 from $1,240,299 to $525,431, to $561,824, a 7% increase.58% decrease. Trade payables have increased by 52%27% or $74,845,$38,951, which can be attributed to the trade credit that is being offered to the Company from the LEDLCD supplier.
NON-CURRENT LIABILITIES - For the first six months of the year, quarter ended June 30, 2013,2012, as compared to the six months ended June 30, 20122011 they have decreased by $71,841$679,237 from $71,841$751,078 to zero.$655,041. This can be attributed to a reductionthe Share Purchase Advance brought forward on TouchIT Education’s balance sheet not being shown on TouchIT Technologies Inc now the subsidiary has been closed.
Convertible Notes
Two 8% convertible notes due May 17, 2015 in the principal amounts of $400,000 and $100,000, respectively, on the balance sheets as of the dates indicated (collectively, the "Convertible Notes"), and accrued interest payable under the Convertible Notes. The Convertible Notes were issued in connection with certain subscription agreements entered into by the Company borrowings.and the related share exchange agreement dated May 7, 2010 among the Company, TouchIt Tech KS, the stock holders of TouchIt Tech KS, TouchIt Ed, and the stockholders of TouchIt Ed (the "Share Exchange Agreement"), pursuant to which we entered into various agreements with purchasers of the Convertible Notes.
As of June 30, 2012, we owed approximately $500,000 in aggregate principal amount and $83,200 in accrued interest.
TOUCHIT TECHNOLOGIES, INC STATEMENT OF CASH FLOW FOR QUARTERS ENDED
JUNE 30, 20132012 & 20122011
(Amounts expressed in US Dollars (USD) in full unless otherwise indicated)
| | | 30/06/2013 | | | 30/06/2012 | | | 30/06/2012 | | | 30/06/2011 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | | | | |
| Net income | | | 80,405 | | | | (48,892 | ) | | | (92,092 | ) | | | (605,745 | ) |
| Prior Period Adjustments | | | | (436,865 | ) | | | | |
| Adjustments to reconcile net income to net cash provided | | | 2,056 | | | | (436,865 | ) | | | | | | | -- | |
| By operating activities: | | | | | | | | | | | | | | | | |
| Depreciation and amortisation | | | 723 | | | | | | | | -- | | | | 14,357 | |
| Provision for employee benefit | | | -- | | | | -- | | | | -- | | | | (764 | ) |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Changes in operating assets and liabilities | | | | | | | | | | | | | | | | |
| Trade receivables, net | | | (137,169 | ) | | | 118,674 | | | | 118,674 | | | | 700,165 | |
| Due from shareholders | | | -- | | | | -- | | | | -- | | | | 1,047 | |
| Due from related parties | | | -- | | | | -- | | | | -- | | | | 215,844 | |
| Inventories | | | 42,632 | | | | 23,270 | | | | 23,270 | | | | (205,944 | ) |
| Other current assets | | | -- | | | | -- | | | | -- | | | | (3,117 | ) |
| Other non current assets | | | -- | | | | -- | | | | -- | | | | (3,117 | ) |
| Trade payables | | | 133,664 | | | | 30,869 | | | | 30,869 | | | | (7,640 | ) |
| Due to shareholders | | | -- | | | | -- | | | | -- | | | | 45,912 | |
| Due to related parties | | | -- | | | | -- | | | | -- | | | | (184,430 | ) |
| Other current liabilities | | | 142,498 | | | | 19,870 | | | | 19,870 | | | | (4,770 | ) |
| Share Purchase Advances | | | | | | | | | |
| Convertible Notes | | | | | | | | -- | |
| | | | | | | | | | | | | | | | | |
| Net cash generated from (used for) operating activities | | | 264,808 | | | | (293,074 | ) | | | (293,074 | ) | | | (31,721 | ) |
| | | | | | | | | | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | | | | | |
| Increase/(decrease) in short-term borrowings | | | (261,499 | ) | | | -- | | | | -- | | | | (2,351 | ) |
| Increase/(decrease) in long-term borrowings | | | | | | | 238,574 | | | | 281,774 | | | | -- | |
| Dividends paid | | | -- | | | | -- | | | | -- | | | | -- | |
| | | | | | | | | | | | | | | | | |
| Net cash (used for) provided from financing activities | | | (261,499 | ) | | | 238,574 | | | | 281,774 | | | | (2,351 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | | | | | | | | |
| Purchases of property, plant and equipment and intangible assets | | | -- | | | | (205 | ) | |
| Purchases of property, plant and equipment and | | | | (205 | ) | | | (15,245 | ) |
| intangible assets | | | | | | | | -- | |
| Share capital increase | | | | | | | | | | | | | | | -- | |
| | | | | | | | | | | | | | | | | |
| Net cash used for investing activities | | | -- | | | | (205 | ) | | | (205 | ) | | | (15,245 | ) |
| | | | | | | | | | | | | | | | | |
| NET INCREASE / (DECREASE) IN CASH AND BANKS | | | 3,309 | | | | (54,705 | ) | | | (54,705 | ) | | | (49,317 | ) |
| | | | | | | | | | | | | | | | | |
| CASH AND BANKS AT BEGINNING OF THE YEAR | | | 6,413 | | | | 70,289 | | | | 70,289 | | | | 50,556 | |
| | | | | | | | | | | | | | | | | |
| CASH AND BANKS AT END OF THE PERIOD | | | 9,722 | | | | 15,584 | | | | 15,584 | | | | 1,239 | |
NET INCOMELOSS FOR THE PERIOD – For the first six months of the year, quarter ended June 30, 2013,2012, as compared to the six months ended June 30, 2012,2011, NET incomeloss for the period has increased by $129,297$556,853 from $(48,892)$(605,745) to $80,405.$(48,892). This can be attributed to the Management’s focus on reducing overhead costs to maximize profitability when revenues increase.
NET CASH GENERATED FOR OPERATING ACTIVITIES – For the first six months of the year, quarter ended June 30, 2013,2012, as compared to the six months ended June 30, 2012,2011, NET cash generated for operating activities was $264,808$(293,074) compared to $(293,074)$(31,721) which is an increase of $557,882.$261,353. This can be attributed primarily in the increasedecrease of credit from Trade Payablesaccrued liabilities which were cancelled following the closure of the Turkish Subsidiaries and Other Liabilities.a decrease in trade receivables.
Cash flow in general has improved as we make use of the Credit Facility from our Lender. Our management expects to utilize the facility to its full extent as our business grows.
CASH FLOW FROM FINANCING ACTIVITES – For the first six months of the year, quarter ended June 30, 2013,2012, as compared to the six months ended June 30, 2012,2011, cash flow from financing activities was $(261,499)$281,774 compared to $238,574$(2,351) at June 30, 2012.2011. This wasis due to the restructuring of our credit lines and the switch from TCA’s structure to that of our current Lender BITF.an increase in long term borrowings.
CASH POSITION. There was a NET decrease in the cash and cash equivalents of $5862$66,645 from the beginning of the period through June 30, 2013.2012. This change in cash position can be attributed to being normal in course of regular business We generally pay our suppliers on 30 day terms and as a business, remain to be cash poor with low cash reserves.terms.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a “smaller reporting company” (as defined by Rule 12b-2 of the Exchange Act) and are not required to provide the information required under this item.
Item 4. Controls and Procedures.
(a) Disclosure Controls and Procedures
Regulations under the Securities Exchange Act of 1934 require public companies to maintain “disclosure controls and procedures,” which are defined to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.
We carried outconducted 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)) with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the period covered by this Report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2013,2012, our disclosure controls and procedures were not effective at the reasonable assurance level but we did identifydue to the material weaknesses described below.
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following six material weaknesses in our disclosure controls and procedures:
1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
3. We do not have review and supervision procedures for financial reporting functions. The review and supervision function of internal control relates to the accuracy of financial information reported. The failure to review and supervise could allow the reporting of inaccurate or incomplete financial information. Due to our size and nature, review and supervision may not always be possible or economically feasible. Management evaluated the impact of our significant number of audit adjustments and has concluded that the control deficiency that resulted represented a material weakness.
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
(b) Changes in internal control over financial reporting
During the six months ended June 30, 2013,2012, our Company has not made any changes to internal control over financial reporting.
PART II - OTHER INFORMATION
On August 5th 2013, pursuant to the Advance from Bibby International Trade Finance, the Lender, the Lender agreed to increase the MPA from $250,000 to $500,000. All other terms of the MPA remained unchanged. Management requested this increase in order to capitalize on sales that will be recognized in Quarter 3 2013.
Item 1. Legal Proceedings.
We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse affect on its business, financial condition or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On May 7, 2010, we entered into a Share Exchange Agreement with TouchIT Tech KS, the stockholders of TouchIT Tech KS, TouchIT, and the stockholders of Touch Ed, pursuant to which we issued 48,330,000 shares of our Common Stock to the shareholders of TouchIT Tech KS and TouchIT Ed in exchange for all shares held by these shareholders in TouchIT Tech KS and TouchIT Ed. The issuance of these shares was exempted from registration pursuant to Section 4(2) of the Securities Act of 1933. The terms of the Share Exchange Agreement are discussed more fully in Item 1.01 and 2.01 on Form 8-K, filed with the SEC on May 12, 2010.
In connection with the closing of the Share Exchange Agreement, on May 7, 2010, we entered into a Subscription Agreement with certain investors for the sale of up to $1,500,000 of principal amount convertible promissory notes of the Company convertible into up to 6,000,000 shares of our Common Stock and share purchase warrants to purchase up to 6,000,000 shares of our Common Stock. The terms of the Subscription Agreement, Notes and Warrants (including the terms of conversion and/or exercise of the Notes and Warrants) are discussed more fully in Item 1.01 and 2.01 on Form 8-K, filed with the SEC on May 12, 2010. The issuance of these securities was exempted from registration pursuant to Section 4(2) of the Securities Act of 1933.
On April 10th 2013 The Company entered into an agreement with Ronald George Murphy to convert debt for services as an Officer and President of World Wide Sales for the period April 1, 2012 to March 31, 2013 in exchange for the Company’s restricted Common Stock in the aggregate of 45,000,000 shares for an accrued amount of $10,000. The company owed him a balance of $108,413 at June 30, 2013
On April 10th 2013 The Company entered into an agreement with Andrew Stuart Brabin to convert debt for services as Chief Executive Officer for the period April 1, 2012 to March 31, 2013 in exchange for the Company’s restricted Common Stock in the aggregate of 45,000,000 shares for an accrued amount of $10,000. The company owed him a balance of $81,086 at June 30, 2013
Item 6. Exhibits
(a) Exhibits
Exhibit Number | | Description of Exhibit |
| | |
| 31.1 | | Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended. |
| | | |
| 31.2 | | Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended. |
| | | |
| 32.1 | | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Principal Executive Officer). |
| | | |
| 101.INS | | 101.INS tucn-20130630.xmltucn-20120630.xml XBRL Instance Document |
| | | |
| 101.SCH | | 101.SCH tucn-20130630.xsdtucn-20120630.xsd XBRL Taxonomy Extension Schema Document |
| | | |
| 101.CAL | | 101.CAL tucn-20130630_cal.xmltucn-20120630_cal.xml XBRL Taxonomy Extension Calculation Linkbase Document |
| | | |
| 101.DEF | | 101.DEF tucn-20130630_def.xmltucn-20120630_def.xml XBRL Taxonomy Extension Definition Linkbase Document |
| | | |
| 101.LAB | | 101.LAB tucn-20130630_lab.xmltucn-20120630_lab.xml XBRL Taxonomy Extension Labels Linkbase Document |
| | | |
| 101.PRE | | 101.PRE tucn-20130630_pre.xmltucn-20120630_pre.xml XBRL Taxonomy Extension Presentation Linkbase Document |
| |
PART III – REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM
Edward Richardson Jr., CPA
15565 Northland Suite 508 West
Southfield, MI. 48075
To the Board of Directors
TouchIT Technologies, Inc.
101 West Beaver Road
Suite 1400, Troy, MI. 48084
I have reviewed the accompanying balance sheet of TouchIT Technologies, Inc. as of June 30, 2013 and 2012, and the related statements of income and retained earnings and cash flows for the period then ended, and the accompanying supplementary information, which is presented only for supplementary analysis purposes, in accordance with the standards of the Public Company Accounting Oversight Board (United States). All information included is the representation of the Board of Directors of TouchIT Technologies.
A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an examination in accordance with US Generally Accepted Accounting Principles (“US GAAP”) standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with US GAAP standards.
My review was made for the purpose of expressing limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with US GAAP. The information in the accompanying statements and schedules is presented only for supplementary analysis purposes. Such information has been subject to the inquiry and analytical procedures applied in the review of the basic financial statements, and I am not aware of any material medications that should be made thereto.
/S/ Edward Richardson Jr., CPA
August 12, 2013
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | TouchIT Technologies, Inc. | |
| | | |
| | By: | /s/ Andrew Brabin | |
| | | Andrew Brabin Chief Executive Officer Dated: November 13, 2013January 27, 2014 | |
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