BTCS Inc. - Annual Report 2010 | FinancialReports.eu

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 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, 2010

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)

Istanbul Trakya Serbest Bölgesi Atatürk Bulvari Ali Riza Efendi cd., A4 Blok Çatalca, Istanbul Turkey
(Address of Principal Executive Offices, Including Zip Code)

Registrant’s telephone number: +44 207 858 1045/+90 212 768 6304

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 June 30, 2010, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $6,993,000.

The number of shares outstanding of common stock as of March 30, 2011 was 64,549,419.

DOCUMENTS INCORPORATED BY REFERENCE

N/A.

EXPLANATORY NOTE

TouchIT Technologies, Inc. (the “Company”) is filing this Amendment No. 2 on Form 10-K/A (this “Amendment”) to amend its Annual Report on Form 10-K for the year ended December 31, 2010 that was filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2011 (the “Original Report”), as previously amended by the Company’s Form 10-K/A filed with the SEC on September 7, 2011 (the “Amendment No.1”), to amend the following:

Item 15 of Part IV, to include revised Independent Auditors Reports to opine that the financial statements “present fairly” the financial position of the Company as opposed to “give a true and fair view of” the financial position of the Company which was the language used in the prior reports. While Item 15 is restated herein in its entirety, the only change to this Item was the inclusion of the revised Independent Auditors Reports, located on pages F-1 and F-20.

No other changes have been made to the Original Report and Amendment No.1. This Amendment speaks as of the original filing date of the Original Report, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way and other disclosures made in the Original Report and Amendment No.1.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements, included in this Amendment on Form10-K/A and other filings of the registrant under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as well as information communicated orally or in writing between the dates of such filings may contain “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.

PART IV

Item 15. Exhibits, Financial Statements Schedules.

(a) Documents Filed. The following documents are filed as part of this Amendment No. 2 on Form 10-K/A or incorporated by reference as indicated:

Financial Statements. The financial statements of TouchIT Technologies, Inc. and its subsidiaries are filed under Item 8:

Report of Independent Registered Public Accounting Firm for TouchIT Ed	F-1
TouchIT Ed Statement of Financial Position as of December 31, 2010 and 2009	F-2
TouchIT Ed Statement of Income as of December 31, 2010 and 2009	F-3
TouchIT Ed Statement of Cash Flow as of December 31, 2010 and 2009	F-4
TouchIT Ed Statement of Changes in Equity as of December 31, 2010 and 2009	F-5
Notes to TouchIT Ed Financial Statements	F-6
Report of Independent Registered Public Accounting Firm for TouchIT Tech KS	F-20
TouchIT Tech KS Statement of Financial Position as of December 31, 2010 and 2009	F-21
TouchIT Tech KS Statement of Income as of December 31, 2010 and 2009	F-22
TouchIT Tech KS Statement of Cash Flow as of December 31, 2010 and 2009	F-23
TouchIT Tech KS Statement of Changes in Equity as of December 31, 2010 and 2009	F-24
Notes to TouchIT Tech KS Financial Statements	F-25

Exhibits and Exhibit Index. See the Exhibit Index included as the last part of this Amendment No. 2 on Form 10-K/A, which is incorporated herein by reference.

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 3.1 of Form 10-K filed March 31, 2011)
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 2.1of 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)
21	Subsidiaries of TouchIT Technologies, Inc. (incorporated by reference to Exhibit 21 of Form 10-K filed March 31, 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

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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. f.k.a Hotel Management Systems, Inc.
By:	/s/ Andrew Brabin
	Andrew Brabin, Chief Financial Officer
	September 20, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/s/ Recep Tanisman	Chief Executive Officer and Director (Principal Executive Officer)	September 20, 2011
Recep Tanisman
/s/ Andrew Brabin	Chief Financial Officer, Corporate Secretary, Treasurer, and Director	September 20, 2011
Andrew Brabin	(Principal Financial and Accounting Officer)
/s/ Ronald George Murphy	Officer and Director	September 20, 2011

Ronald George Murphy

TOUCH IT EDUCATION TECHNOLOGIES

DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

FINANCIAL STATEMENTS

AS OF 31 DECEMBER 2010

TOGETHER WITH INDEPENDENT AUDITORS’ REPORT

INDEPENDENT AUDITORS REPORT

To the Board of Directors of

Touch It Education Technologies

Dış Ticaret Kollektif Şirketi Andrew Stuart Brabin ve Ortağı

Report on the Financial Statements

We have audited the accompanying financial statements of Touch IT Education Technologies Dış Ticaret Kollektif Şirketi Andrew Stuart Brabin ve Ortağı (“the Company”) which comprise the financial position as of 31 December 2010 and 31 December 2009 and statements of comprehensive income, changes in equity and cash flows for the period then ended, and a summary of significant accounting policies and other explanatory notes.

Management Responsibility for the Financial Statements

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

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from 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. We believe that our audits provide a reasonable basis for our opinion.

Opinion

In our opinion, the accompanying financial statements present fairly the financial position of the Company as of December 31, 2010, and of its financial performance and its cash flows for the year then ended in accordance with Accounting Principles Generally Accepted in the United States of America.

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

According to Turkish Tax Legislation, service invoices issued abroad are subject to withholding tax with a rate of 20%, provided that the service has been received in Turkey. During our audit of 2010, we have determined significant amount of such invoices under the name of consultant fee and expenses totally amounting to approximately USD 218,628. However, the Company Management does not foresee any risk on the basis of the interpretation that those consultancy services have been received abroad; the Company may face possible tax risk in case of a different interpretation by the tax office

Istanbul, 8 March 2011

DENGE BA ĞIMSIZ DENETİM

SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.

Member of MAZARS

/s/ Gökhan Almacı

Partner

F-1

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

STATEMENT OF FINANCIAL POSITION

AS OF 31 DECEMBER 2010 AND 31 DECEMBER 2009

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

		31.12.2010	31.12.2009
ASSETS
Cash and cash equivalents	5	3,274	2,204
Trade receivables, net	6	35,288	5,408
Due from related parties	7	863,395	130,594
Due from shareholders	7	9,842	--
Inventories, net	8	191,417	93,435
Other current assets	9	221	382
Total current assets		1,103,437	232,023
Rights, net	10	13,312	14,976
Total non-current assets		13,312	14,976
Total assets		1,116,749	246,999

LIABILITIES AND SHAREHOLDERS' EQUITY — Trade payables	11	54,211		1,606
Due to related parties	7	104,887		28,816
Due to shareholders	7	22,147		19,924
Other current liabilities	12	48,001		49,103
Total current liabilities		229,246		99,449
Share purchase advances	1	750,000		--
Employee termination benefits	13	--		1,041
Total long-term liabilities		750,000		1,041
Shareholders' Equity :
Share capital	14	37,570		35,500
Retained Earnings		111,009		53,743
Net income/ (loss) for the period		(11,076	)	57,266
Total shareholders’ equity		137,503		146,509
Total liabilities and shareholders’ equity		1,116,749		246,999

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

F-2

TOUCH IT EDUCATION T ECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

STATEMENTS OF INCOME AS OF 31 DECEMBER 2010 AND 31 DECEMBER 2009

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

Sales	15	31.12.2010 — 1,307,420		31.12.2009 — 777,013
Cost of sales	16	(929,350	)	(649,708	)
Gross profit		378,070		127,305
Marketing and selling expenses	17	(154,275	)	(24,562	)
General and administrative expenses	18	(289,285	)	(55,690	)
Total operating income		(65,490	)	47,053
Financial income / (expense), net	20	(3,043	)	(2,172	)
Other income / (expense), net	19	15,652		12,077
Profit before provision for taxation		(52,881	)	56,958
Provision for taxation
- Current
- Deferred
Net income for the period		(52,881	)	56,958
Other comprehensive income
Currency translation differences		41,805		308
Total comprehensive income for the period		(11,076	)	57,266

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

F-3

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

STATEMENT OF CASH FLOW AS OF 31 DECEMBER 2010 AND 31 DECEMBER 2009

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

	31.12.2010		31.12.2009
Cash flow from operating activities
Net income for the period	(11,076	)	57,266
Adjustments to reconcile net profit to net cash provided by operating activities:
Provision for employee termination benefit	(1,041	)	727
Depreciation	1,664		8,493
Net income adjusted to non-cash items	(10,453	)	66,486
Changes in operating assets and liabilities:
Change in trade receivables	(29,880	)	(4,124	)
Change in due from related parties	(732,801	)	203,282
Change in due from shareholders	(9,842	)	12,258
Change in inventories	(97,982	)	(23,205	)
Change in other current assets	161		321
Change in trade payables	52,605		(331,716	)
Change in due to related parties	84,963		19,924
Change in due to shareholders	(6,669	)	14,847
Change in other current liabilities	(1,102	)	29,475
Net cash provided from operating activities	(751,000	)	(12,452	)
Cash flows from investing activities:
Change in share purchase advances	750,000		--
Net cash provided from investing activities	(1,000	)	(12,452	)
Cash flows from financing activities:
Increase of share capital	2,070		--
Cash flows provided by financing activities	2,070		--
Net decrease in cash and cash equivalents	1,070		(12,452	)
Cash and cash equivalents at the beginning of the year	2,204		14,656
Cash and cash equivalents at the end of the period	3,274		2,204

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

F-4

TOUCH IT EDUCATION TECHNOLOGIE S DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

STATEMENT OF CHANGES IN EQUITY AS OF 31 DECEMBER 2010 AND 31 DECEMBER 2009

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

Balances at 31 December 2008	35,500	7,749	45,994		89,243
Transfer to retained earnings	--	45,994	(45,994	)	--
Net income for the year	--	--	57,266		57,266
Balances at 31 December 2009	35,500	53,743	57,266		146,509
Share capital increase	2,070	--	--		2,070
Transfer to retained earnings	--	57,266	(57,266	)	--
Net income for the year	--	--	(11,076	)	(11,076	)
Balances at 31 December 2010	37,570	111,009	(11,076	)	137,503

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

F-5

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

OPERATIONS OF THE COMPANY :

General

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

Nature of Activities

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

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

Pursuant to the terms of the Share Exchange Agreement, Hotel Management issued a total of48,330,000 shares of their common stock, par value USD 0.001 per share (the “Common Stock”), tothe shareholders of Touch IT Technology and Touch IT Education in exchange for the transfer of100% of the shares of TouchIT Tech and Touch IT Education to Hotel Management. This exchangetransaction resulted in Touch IT Technologies and Touch IT Education becoming HotelManagement. The wholly-owned subsidiaries and the stockholders of Touch IT Turkey ownapproximately 78.93% of the Hotel Management’s issued and outstanding stock, prior to anyfinancing.

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

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

Average number of employees of the Company as of 31 December 2010 is 6 while it was 3 as at December 31, 2009.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

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

BASIS OF PRESENTATION

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

F-6

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

SIGNIFICANT ACCOUNTING POLICIES:

Cash and cash equivalents

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

Revenue recognition

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

Inventories

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

Related parties

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

Rights

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

Taxation

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

Retirement pay provision

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

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

F-7

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign currency transactions

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

Following period rates are applicable as of 31 December 2010 and 2009;

	31.12.2010	31.12.2009
USD	1.5460	1.5057
EURO	2.0491	2.1603
GBP	2.3886	2.3892
Average USD	1.4991	1.5454

Leasing - the Company as lessee

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

Comprehensive income

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

Financial Instruments

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

Level 1

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

F-8

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Financial Instruments (continued)

Level 2

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

Level 3

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

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

CASH AND CASH EQUIVALENTS

As of 31 December2010 and 2009 cash and cash equivalents comprised of the followings:

	31.12.2010	31.12.2009
Cash in hand	695	--
Banks	2,579	2,204
	0
Total	3,274	2,204

TRADE RECEIVABLES

As of 31 December2010 and 31 December 2009 trade receivables comprised of followings:

Trade receivables	31.12.2010 — 54,829		31.12.2009 — 5,408
Provision for doubtful receivables (-)	(19,541	)	--
Total	35,288		5,408

F-9

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

RELATED PARTY BALANCES AND TRANSACTIONS:

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

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

Due from related parties	31.12.2010	31.12.2009
Touch IT Technologies Koll. Şir. Ronald George Murphy ve Ortakları	587,308	25,528
Emko Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	276,087	105,066
Total	863,395	130,594

Due from shareholders	31.12.2010	31.12.2009
Andrew Stuart Brabin	9,842	--
Total	9,842	--

Due to related parties	31.12.2010	31.12.2009
Kamron Inc	50,467	--
Emko Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	--	28,816
ASB Trading	54,420
Total	104,887	28,816

Due to shareholders	31.12.2010	31.12.2009
Ali Rıza Tanışman	22,147	19,924
Total	22,147	19,924

Major purchases from related parties have been presented as follows:

Major purchases from related parties	31.12.2010	31.12.2009
Touch It Technologies Koll. Şir. Ronald George Murphy ve Ortakları	166,309	179,035
Emko Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	--	15,734
Total	166,309	194,769

Major sales to related parties	31.12.2010	31.12.2009
Emko Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	660,520	280,000
Touch IT Technologies Koll. Şir. Ronald George Murphy ve Ortakları	255,201	156,524
Total	915,721	436,524

F-10

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

RELATED PARTY BALANCES AND TRANSACTIONS:

Service provided	31.12.2010	31.12.2009
Kamron Inc.	115,101	--
Andrew Stuart Brabin	103,527	--
Total	218,628	--

INVENTORIES

As of 31 December 2010 and 2009 inventories comprised of the followings:

	31.12.2010	31.12.2009
Advances given for purchases	82,156	45,324
Trade goods	109,261	48,111
Total	191,417	93,435

The insurance on the inventories as of December 31, 2010 and 2009 is USD 100,000.

OTHER CURRENT ASSETS:

As of 31 December 2010 and 31 December 2009 other receivables and assets comprised of prepaid expenses of USD 221 and USD 382 respectively.

NON-CURRENT ASSETS

As of 31 December 2010 and 2009 non-current assets comprised of followings:

License right	31.12.2010 — 35,500		31.12.2009 — 35,500
Depreciation allowance	(22,188	)	(20,524	)
Total	13,312		14,976

Rights represent the operating license obtained from Under secretariat of The Prime Ministry for Foreign Trade. The validation date of the licence has been extended from 10 year to 15 year in 2010. The remaining useful life as of December 31, 2010 has been increased from 4 year to 9 year.

F-11

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

TRADE PAYABLES

As of 31 December 2010 and 2009 trade payables comprised as of the followings:

	31.12.2010	31.12.2009
Trade payables	54,211	1,606
Total	54,211	1,606

OTHER CURRENT LIABILITIES

As of 31 December2010 and 31 2009 other current liabilities comprised of the followings:

	31.12.2010	31.12.2009
Taxes and funds payable	2,471	--
Social security withholdings payable	1,439	929
Accrued expenses	1,250	--
Advances received	40,731	48,174
Due to personnel	2,110
Total	48,001	49,103

RESERVE FOR EMPLOYMENT TERMINATION BENEFITS

The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying financial statements as at December 31, 2010, the provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. The anticipated rate of forfeitures is considered. As the maximum liability is revised semi annually, the maximum amount of TRY 2,623 effective from January 1, 2011 has been taken into consideration in calculation of provision from employment termination benefits (2009: TRY 2,517).

SHARE CAPITAL

The issued share capital of the Company is respectively for the period ended at 31 December2010 and for the year ended 31 December 2009 comprised as follows;

Shareholding		Shareholding
Amount	%	Amount	%
Andrew Stuart Brabin	7,050	2	6,625	75
Ali Rıza Tanışman	1,503	4	8,875	25
Recep Tanışman	7,515	20	--	--
Cansın Tanışman	751	2	--	--
Volkan Tanışman	751	2	--	--
	37,570	100	35,500	100

F-12

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

SALES

The composition of sales by principal operation for the period ended as at 31 December 2010 and 2009can be summarized as follows:

Electronic set	31.12.2010 — 1,023,279	31.12.2009 — 383,466
Remote Control for classroom	153,335	6,297
EBEAM whiteboard and devices	--	194,890
Touch IT board	62,288	--
Triumph board	--	173,606
Writing pad	47,745	5,067
Others	20,773	14,392
Returns (-)	--	(705	)
Total	1,307,420	777,013

COST OF SALES

The composition of cost of sales by principal operations for the period ended as at 31 December 2010 and 2009 can be summarized as follows:

Beginning inventory of trade goods	31.12.2010 — 48,111		31.12.2009 — 70,230
Purchases	990,500		627,589
Ending inventory of trade goods (-)	(109,261	)	(48,111	)
Total	929,350		649,708

F-13

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

MARKETING AND SELLING EXPENSES

The composition of marketing and selling expenses by principal operations for the year ended as at 31 December 2010 and 2009 can be summarized as follows:

	31.12.2010	31.12.2009
Shareholders expenses (*)	105,773	10,834
Export expenses	32,858	12,657
Web site design expenses	8,587	--
Other expenses	7,057	1,071
Total	154,275	24,562

(*) The balance comprises of the marketing and selling expense of Ronald George Murph and Andrew Stuart Brabin.

GENERAL AND ADMINISTRATIVE EXPENSES

The composition of general and administrative expenses by principal operations for the period ended as at 31 December 2010 and 2009 can be summarized as follows:

	31.12.2010	31.12.2009
Consultancy expenses (*)	209,806	2,291
Salaries	59,176	29,378
Rental expenses	12,283	12,930
Depreciation expenses	1,664	8,493
Other expenses	6,356	2,598
Total	289,285	55,690

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

F-14

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

OTHER INCOME AND (EXPENSES), net:

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

Other income	31.12.2010 — 2,508		31.12.2009 — 1,023
Insurance compensation income	8,301		--
Provision for doubtful receivables	(20,152	)	--
Consultancy income	25,000		16,735
Other expense	(5	)	(5,681	)
Total	15,652		12,077

FINANCIAL EXPENSES:

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

Bank charges	31.12.2010 — (3,043	)	31.12.2009 — (2,172	)
Total	(3,043	)	(2,172	)

F-15

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Capital risk management

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

31 December2010
Financial assets
Cash and cash equivalents	--	3,274	--	3,274	3,274	5
Trade receivables (including related parties)	--	898,683	--	898,683	898,683	6-7
Financial liabilities
Trade payables (including related parties)	--	159,098	--	159,098	159,098	7-11

31 December 2009
Financial assets
Cash and cash equivalents	--	2,204	--	2,204	2,204	5
Trade receivables (including related parties)	--	136,002	--	136,002	136,002	6-7
Financial liabilities
Trade payables (including related parties)	--	30,442	--	30,442	30,442	7-11

Financial risk factors

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

Market risk

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

F-16

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

Foreign currency risk management

The Company undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. Foreign currency position, net for the period ended at 31 December 2010 and for the year ended 31 December 2009 can be summarized as follows:

		31.12. 2010
	F/C	Foreign			Foreign
	Type	Currency		TRY	Currency		TRY
Banks	USD	2,138		3,306		2,157		3,248
	EUR	19		38
Due from related parties	USD	587,308		907,979		123,953		186,636
Trade receivables	USD	34,731		53,694		3,843		5,786
Advances given	USD	72,544		112,153		45,324		68,244
(Inventories)
Trade payables	USD	(43,480	)	(67,220	)	--		--
Advances received	USD	(40,731	)	(62,970	)	(48,173	)	(72,534	)
(Other current liabilities)
Due to related parties	USD	(104,887	)	(162,155	)	--		--
Share purchase advances	USD	(750,000	)	(1,159,500	)	--		--
Net F/C Assets and Liabilities				(374,675	)			191,380

F-17

TOUCH IT EDUCATION TECHNOLOGIES DIŞ TİCARET KOLLEKTİF ŞİRKETİ

ANDREW STUART BRABIN VE ORTAĞI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010

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

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

Credit risk management

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

Liquidity risk management

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

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


31 December 2010
Trade payables (including related parties)	159,098	--	159,098
31 December 2009
Trade payables (including related parties)	21,530	--	21,530

SUBSEQUENT EVENTS

Effective from January 1, 2011, the ceiling for employee termination benefits has increased to RY 2,623.

F-18

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

FINANCIAL STATEMENTS

AS OF 31 DECEMBER 2010

TOGETHER WITH INDEPENDENT AUDITORS’ REPORT

F-19

INDEPENDENT AUDITORS REPORT

To the Board of Directors of

Touch IT Technologies Kollektif Şirketi

Ronald George Murphy ve Ortakları

Report on the Financial Statements

We have audited the accompanying financial statements of Touch IT Technologies Kollektif Şirketi Ronald George Murphy ve Ortakları (“the Company”) which comprise the financial position as of 31 December 2010 and 31 December 2009 and statements of comprehe nsive income, changes in equity and cash flows for the period then ended, and a summary of significant accounting policies and other explanatory notes.

Management Responsibility for the Financial Statements

Auditor’s Responsibility

Opinion

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

The accompanying financial statements of the Company have been prepared on a going concern basis. However, in the accompanying financial statements, the Company’s current liabilities exceed its current assets by an amount of USD 231,259 and the total equity shows a negative balance amounting to USD 153,218 as of December 31, 2010. Accordingly, the continuity of the Company’s operations is dependent on the profitability of future operations and the existence of necessary financial support by shareholders and other creditors.

Istanbul, 8 March 2011

DENGE BAĞIMSIZ DENETİM

SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.

Member of MAZARS

/s/ Gökhan Almacı

Partner

F-20

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

STATEMENT OF FINANCIAL POSITION

AS OF 31 DECEMBER 2010 AND 31 DECEMBER 2009

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

		31.12.2010	31.12.2009
ASSETS
Cash and cash equivalents	5	47,282	52,641
Trade receivables, net	6	669,937	269,394
Due from shareholders	7	40,743	--
Inventories, net	8	174,226	166,448
Other current assets	9	885	400
Total current assets		933,073	488,883
Property and equipment, net	10	64,495	29,872
Intangible assets, net	11	11,833	--
Other non-current assets	12	3,555	3,725
Total non-current assets		79,883	33,597
Total assets		1,012,956	522,480

LIABILITIES AND SHAREHOLDERS' EQUITY — Short-term bank loans	13	2,351		11,282
Trade payables	14	58,150		69,013
Due to shareholders	7	37,494		55,660
Due to related parties	7	1,041,105		642,160
Other current liabilities	15	25,232		71,516
Total current liabilities		1,164,332		849,631
Long-term bank loans	13	--		2,321
Employee termination benefits	16	1,842		--
Total long-term liabilities		1,842		2,321
Shareholders' Equity :
Share capital	17	90,000		90,000
Accumulated deficit		(419,472	)	(100,028	)
Net profit/(loss) for the period		176,254		(319,444	)
Total shareholders’ equity		(153,218	)	(329,472	)
Total liabilities and shareholders’ equity		1,012,956		522,480

F-21

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARS ENDED AS OF

31 DECEMBER 2010 AND 2009

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

Sales	18	31.12.2010 — 2,270,461		31.12.2009 — 1,252,061
Cost of sales	19	(1,572,687	)	(1,092,339	)
Gross profit		697,774		159,722
Marketing and selling expenses	20	(350,054	)	(384,824	)
General and administrative expenses	21	(189,779	)	(84,431	)
Total operating profit		157,941		(309,533	)
Financial income / (expense), net	23	(5,252	)	(6,569	)
Other income / (expense), net	22	(39,745	)	(5,456	)
Profit before provision for taxation		112,944		(321,558	)
Provision for taxation
- Current		--		--
- Deferred		--		--
Net profit for the period		112,944		(321,558	)
Other comprehensive income
Currency translation differences		63,310		2,114
Total comprehensive income for the period		176,254		(319,444	)

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

F-22

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

STATEMENT OF CASH FLOW AS OF 31 DECEMBER 2010 AND31 DECEMBER 2009

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

	31.12.2010		31.12.2009
Cash flow from operating activities
Net profit for the period	176,254		(319,444	)
Adjustments to reconcile net profit to net cash provided by operating activities:
Depreciation	15,852		8,640
Provision for employee termination benefit	1,842
Net profit adjusted to non-cash items	193,948		(310,804	)
Changes in operating assets and liabilities:
Change in trade receivables	(400,548	)	(185,692	)
Change in due from shareholders	(40,743	)	--
Change in inventories	(7,778	)	46,198
Change in other current assets	(485	)	3,575
Change in other non current assets	170		(3,725	)
Change in trade payables	(10,863	)	58,791
Change in due to shareholders	(18,166	)	15,583
Change in due to related parties	398,945		366,805
Change in other current liabilities	(46,284	)	65,857
Net cash used for operating activities	68,196		56,588
Cash flows from investing activities:
Purchased of property and equipment and intangibles	(62,304	)	(17,324	)
Net cash outflows from investing activities	5,892		39,264
Cash flows from financing activities:
Increase in short-term borrowings	(8,930	)	6,815
Decrease in long-term borrowings	(2,321	)	(2,797	)
Cash outflows generated by financing activities	(11,251	)	4,018
Net decrease in cash and cash equivalents	(5,359	)	43,282
Cash and cash equivalents at the beginning of the year	52,641		9,359
Cash and cash equivalents at the end of the period	47,282		52,641

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

F-23

TO UCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

STATEMENT OF CHANGES IN EQUITY AS OF 31 DECEMBER 2010 AND 31 DECEMBER 2009

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

Opening balance as of 1 January 2009	90,000	--		(100,028	)	(10,028	)
Transfer to accumulated deficit		(100,028	)	100,028	)	--
Lloss for the year 2009	--	--		(319,444	)	(319,444	)
Balances at 31 December 2009	90,000	(100,028	)	(319,444	)	(329,472	)
Transfer to accumulated deficit	--	(319,444	)	319,444		--
Net profit for the year 2010	--	--		176,254		176,254
Balances at 31 December 2010	90,000	(419,472	)	176,254		(153,218	)

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

F-24

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

OPERATIONS OF THE COMPANY :

General

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

Nature of activities

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

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

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

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

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

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

Average number of employees of the Company as of 31 December 2010 is 10 while it was 6 as at December 31, 2009.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

BASIS OF PRESENTATION

F-25

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

SIGNIFICANT ACCOUNTING POLICIES

Cash and cash equivalents

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

Revenue recognition

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

Inventories

Related parties

Property, plant and equipment

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

The ranges of estimated useful lives are as follows:

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

Intangible assets

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

F-26

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Borrowing costs

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

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

Taxation

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

Foreign currency transactions

Following period rates are applicable as of 31 December 2010 and 2009:

	31.12.2010	31.12.2009
USD	1.5460	1.5057
EURO	2.0491	2.1603
GBP	2.3886	2.3892
Average USD	1.4991	1.5454

Comprehensive income

In September 1997, the Financial Accounting Standard Board issued SFAS No. 130, “Reporting Comprehensive Income”. SFAS 130 is effective for years beginning after 15 September 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.

F-27

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Financial instruments

Level 1

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

Level 2

Level 3

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

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

CASH AND CASH EQUIVALENTS

As of 31 December 2010 and 2009 cash and cash equivalents comprised of the followings:

	31.12.2010	31.12.2009
Cash in hand	1,196	9,621
Banks	46,086	43,020
Total	47,282	52,641

F-28

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

TRADE RECEIVABLES

As of 31 December 2010 and 31 December 2009 trade receivables comprised of followings:

	31.12.2010	31.12.2009
PROFORMANCE PRODUCTS	526,077	--
TRIUMPH BOARD S.R.O	--	204,913
Others ( less than USD 60,000)	143,860	64,481
Total	669,937	269,394

RELATED PARTY BALANCES AND TRANSACTIONS

Due from shareholders has been presented as follows:

Due from shareholders	31.12.2010	31.12.2009
Recep Tanışman	40,743	--
Total	40,743	--

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

Due to related parties	31.12.2010	31.12.2009
Emko Emaye ve Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	417,709	570,532
Touch IT Educations Technologies Dış. Tic. Koll. Şirketi	587,308	25,529
Kamron Inc	36,088	46,099
Total	1,041,105	642,160

Due to shareholders	31.12.2010	31.12.2009
Ali Rıza Tanışman	22,549	22,657
Andrew Stuart Brabin	14,566	--
Recep Tanışman	379	--
Total	37,494	55,660

F-29

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

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

Major purchases from related parties have been presented as follows:

Major purchases from related parties — Trade goods	31.12.2010	31.12.2009
Emko Emaye ve Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	568,439	447,898
Touch IT Educations Te chnologies Dış. Tic. Koll. Şirketi	181,256	156,524
Total	749,695	604,422

Major sales from related parties have been presented as follows:

Major sales from related parties — Trade goods	31.12.2010	31.12.2009
Emko Emaye ve Yazı Tahtaları ve Eğitim Gereçleri A.Ş.	3,507	--
Touch IT Educations Technologies Dış. Tic. Koll. Şirketi	167,270	179,035
Total	170,777	179,035

Services provided	31.12.2010	31.12.2009
Kamron Inc.	55,364	88,181
Emko Emaye ve Yaz ı Tahtaları ve Eğitim Gereçleri A.Ş.	--	21,267
Total	55,364	109,448

INVENTORIES:

As of 31 December 2010 and 2009 inventories comprised of the followings:

Raw material and supplies	31.12.2010 — 196,971		31.12.2009 — 120,691
Finished goods	1,534		16,045
Advances given for purchases	11,232		22,632
Other inventories	2,738		7,080
Provision for damaged and slow moving stock (-)	(38,249	)	--
Total	174,226		166,448

The insurance on the inventories as of 31 December 2010 and 2009 is USD 600,000.

F-30

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

OTHER CURRENT ASSETS:

As of 31 December 2010 and 2009 other receivables and assets comprised of the followings:

	31.12.2010	31.12.2009
Deposits and Guarantees given	400	400
Other	485	--
Total	885	400

PROPERTY, PLANT AND EQUIPMENT, NET

The movement of property, plant and equipment, net as of 31 December 2010 and 2009 is as follows;


Cost
Machinery and equipment	3,655		--		3,655		1,483		5,139
Vehicles	12,522		16,933		29,455		--		29,455
Furniture and fixtures	5,911		391		6,302		46,165		52,467
Total	22,088		17,324		39,412		47,648		87,061
Depreciation
Machinery and equipment	(171	)	(1,023	)	(1,194	)	(1,113	)	(2,308	)
Vehicles	(522	)	(6,306	)	(6,828	)	(5,883	)	(12,711	)
Furniture and fixtures	(207	)	(1,311	)	(1,518	)	(6,029	)	(7,547	)
Total	(900	)	(8,640	)	(9,540	)	(13,025	)	(22,566	)
Net book value	21,188				29,872				64,495

The insurance on property, plant and equipment as of 31 December 2010 and 2009 is USD 10,000.

F-31

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

INTANGIBLE ASSETS, NET

The movement of intangible assets, net as of 31 December 2010 and 2009 is as follows;


Cost
Rights	--	10,774	10,774
Other tangible assets	--	3,885	3,885
Total	--	14,659	14,659
Depreciation
Rights	--	2,394	2,394
Other tangible assets	--	432	432
Total	--	2,826	2,826
Net book value	--		11,833

OTHER NON CURRENT ASSETS:

As of 31 December 2010 and 2009 non-current assets comprised of the prepaid expenses of USD 3,555 and USD 3,725 respectively.

F-32

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

BANK LOANS

As of 31 December 2010 and 31 December 2009 bank loans comprised the followings:

	31.12.2010	31.12.2009
Short term borrowings
TRY bank loans	2,351	11,282
Sub total	2,351	11,282
Long term borrowings
TRY bank loans	--	2,321
Sub total	--	2,321
Total	2,351	13,603

Analysis of bank loans’ repayments is as follows:

	31.12.2010	31.12.2009
Within one year	2,351	11,282
Between one to two years	--	2,321
Total	2,351	13,603

Bank Loans arise from purchases of two motor vehicles.

TRADE PAYABLES

As of 31 December 2010 and 2009, trade payables comprised the followings:

	31.12.2010	31.12.2009
Suppliers	58,150	65,831
Other trade payables	--	3,182
Total	58,150	69,013

F-33

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

OTHER CURRENT LIABILITIES

As of 31 December 2010 and 2009 other current liabilities comprised the followings:

	31.12.2010	31.12.2009
Social security withholdings payable	6,010	685
Due to personnel	7,056	--
Accrued expenses	1,350	--
Advances received	10,776	68,597
Other liabilities	40	2,234
Total	25,232	71,516

RESERVE FOR EMPLOYEE TERMINATION BENEFITS

The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying financial statements as at 31 December 2010, the provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. The anticipated rate of forfeitures is considered. As the maximum liability is revised semi annually, the maximum amount of TRY 2,517 effective from 1 July 2010 has been taken into consideration in calculation of provision from employment termination benefits (2009: TRY 2,365).

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

	31.12.2010	31.12.2009
Discount rate	10.00 %	11.00 %
Expected rates of salary / limit increases	5.1 %	4.80 %

SHARE CAPITAL

The shareholders and their participation percentages as of 31 December 2010 and 2009 are as follows:

	31.12.2010 — Shareholding		31.12.2009 — Shareholding
	Amount	%	Amount	%
Ali Rıza Tanışman	2,676	2.97%	29,700	33.00%
Andrew Stuart Brabin	30,324	33.70%	30,600	34.00%
Recep Tanışman	26,757	29.73%	--	--
Ronald George Murphy	29,432	32.70%	29,700	33.00%
Cansın Tanışman	811	0.90%	--	--
	90,000	100.00%	90,000	100.00%

SALES

The composition of sales by principal operation for the year ended as at 31 December 2010 and 2009 can be summarized as follows:

Clever board	31.12.2010 — 887,639		31.12.2009 — 42,034
Touch it board 78 inch	628,105		254,816
Touch it board 80 inch	179,794		17,533
Triumph board 78 inch	136,867		423,203
Electronic circuit	222,100		--
Touch it board 90 inch	121,048		9,462
Triumph board 80 inch	53,182		330,937
Touch it board 50 inch	34,589		17,578
Triumph board 50 inch	1,244		5,880
RM easyboard 78 inch	--		120,423
Triumph board 90 inch	--		34,114
RM easyboard 50 inch			9,299
Others	23,807		64,566
Returns and discounts(-)	(17,914	)	(77,784	)
Total	2,270,461		1,252,061

F-34

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

COST OF SALES

The composition of cost of sales by principal operations for the year ended as at 31 December 2010 and 2009 can be summarized as follows:

Direct material cost	31.12.2010 — 1,334,558		31.12.2009 — 1,028,469
Direct labor cost	125,833		23,697
General production overheads	108,283		51,715
Ending inventory (trade goods)	(1,534	)	(16,045	)
Depreciation	5,547		4,503
Total	1,572,687		1,092,339

MARKETING AND SELLING EXPENSES

The composition of marketing and selling expenses by principal operations for the year ended as at 31 December 2010 and 2009 can be summarized as follows:

	31.12.2010	31.12.2009
Export expenses	156,185	169,528
Sales & marketing expenses of shareholders	45,748	109,381
Software expenses	44,506	--
Fair expense	--	36,849
Salaries	--	8,782
Consultancy expenses	24,333	--
Cargo expenses	5,626	6,208
Depreciation	748	2,780
Others	72,908	51,296
Total	350,054	384,824

GENERAL AND ADMINISTRATIVE EXPENSES

The composition of general and administrative expenses by principal operations for the year ended as at 31 December 2010 and 2009 can be summarized as follows:

	31.12.2010	31.12.2010
Shareholders expenses	102,632	46,200
Consulting expenses	57,877	20,315
Food expenses	5,057	3,132
Depreciation	9,556	1,357
Tax and duties	931	918
Employee termination benefits	1,842	--
Other	11,533	12,509
Total	189,428	84,431

F-35

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

OTHER INCOME AND (EXPENSES),NET

The composition of other income and (expenses), net for the year ended as at 31 December 2010 and 2009 can be summarized as follows:

Provision for impairment of inventory	31.12.2010 — (38,249	)	31.12.2009 — --
Non tax deductable expenses	(4,990	)	(10,516	)
Other income	3,494		5,060
Total	(39,745	)	(5,456	)

FINANCIAL EXPENSES

The composition of financial expenses for the year ended at 31 December 2010 and 2009 can be summarized as follows:

	31.12.2010	31.12.2009
Interest expenses	1,224	4,284
Other banking expenses	4,028	2,285
Total	5,252	6,569

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Capital risk management

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

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

31 December 2010
Financial assets
Cash and cash equivalents	--	47,282	--	47,282	47,282	5
Trade receivables	--	669,937	--	669,937	669,937	6
Financial liabilities
Borrowings	--	--	2,351	2,351	2,351	13
Trade payables (including related parties)	--	1,111,639	--	1,111,639	1,111,639	7-14

F-36

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

31 December 2009
Financial assets
Cash and cash equivalents	--	52,641	--	52,641	52,641	5
Trade receivables	--	269,394	--	269,394	269,394	6
Financial liabilities
Borrowings	--	--	13,603	13,603	13,603	13
Trade payables(including related parties)	--	711,173	--	711,173	711,173	7-14

Financial risk factors

Market risk

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

Foreign currency risk management

	F/C Type	31.12.2010 — Foreign Currency	TRY	31.12.2009 — Foreign Currency	TRY
Cash	USD	-	-	--	--
Banks	USD	45,538	70,401	41,901	63,090
	EUR	78	160
Trade receivables	USD	669,937	1,035,723	269,394	405,628
Advances Given (inventories)	USD	-	-	10,774	16,222
		31,302	48,393	-	-
Trade payables	USD	(23,829)	(36,839)	(553,238)	(833,010)
Due to related parties	USD	(1,039,944)	(1,607,753)	-	-
	EUR			(904)	(1,953)
Due to shareholders	USD	(9,170)	(14,177)	(33,003)	(49,693)
Other current liabilities	USD	(10,776)	(16,660)	(68,598)	(103,288)
Net F/C Assets and Liabilities			(520,752)		(503,004)

F-37

TOUCH IT TECHNOLOGIES KOLLEKTİF ŞİRKETİ

RONALD GEORGE MURPHY VE ORTAKLARI

NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2010 AND 2009

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

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

Credit risk management

Liquidity risk management


31 December 2010
Borrowings	2,351	--	2,351
Trade payables	70,534	--	70,534
Due to related parties	1,041,105	--	1,041,105
31 December 2009
Borrowings	11,282	2,321	13,603
Trade payables	69,013	--	69,013
Due to related parties	642,160	--	642,160

SUBSEQUENT EVENTS

On February 16, 2011 the Company has borrowed USD 250,000 from TCA Global Credit Master Fund pursuant to a revolving credit facility evidenced by a Credit Agreement with an effective date as of November 30, 2010. The Credit Agreement evidences a revolving credit facility in the maximum principal amount of USD 250,000, which subject Lender approval may be increased up to USD 1,000,000. The outstanding principal amount is due on February 16, 2012.

Effective from January 1, 2011, the ceiling for employee termination benefits has increased to

TRY 2,623.

======================

F-38

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BTCS Inc. Annual Report 2010

33585_10-k_2011-09-20_873d7bd9-d8dd-432c-9322-43bb0f3a1685.zip

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BTCS Inc. — Annual Report 2010

33585_10-k_2011-09-20_873d7bd9-d8dd-432c-9322-43bb0f3a1685.zip

More from BTCS Inc.

BTCS Inc. Annual Report 2010