Attached files
file | filename |
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EX-10.15 - FORFEITURE AGREEMENT - PRIME GLOBAL CAPITAL GROUP Inc | hometouch_ex1015.htm |
EX-10.13 - PENFLOW TECHNOLOGY LOAN AGREEMENT - PRIME GLOBAL CAPITAL GROUP Inc | hometouch_ex1013.htm |
EX-10.14 - TERMS OF ORAL LOAN AGREEMENT - PRIME GLOBAL CAPITAL GROUP Inc | hometouch_ex1014.htm |
EX-10.16 - CANCELLATION OF AGREEMENT - PRIME GLOBAL CAPITAL GROUP Inc | hometouch_ex1016.htm |
EX-23.1 - CONSENT - PRIME GLOBAL CAPITAL GROUP Inc | hometouch_ex2301.htm |
EX-10.17 - DISTRIBUTION AGREEMENT - PRIME GLOBAL CAPITAL GROUP Inc | hometouch_ex1017.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 3
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
Home
Touch Holding Company
(Name of
small business issuer in our charter)
Nevada
|
|
3670
|
|
26-4309660
|
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard
Industrial
Classification
Code
Number)
|
IRS
I.D.
|
703,
Liven House, 61-63 King Yip Street,
Kwun
Tong, Hong Kong.
|
N/A
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number: +852 2111 0121.
SEC File
No. 333-158713
CSC
Services of Nevada, Inc.
502 East
John Street
Carson
City, NV 89706
(800)
315-9420
(Name,
address and telephone number of agent for service)
Approximate
date of commencement of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act Registration Statement number of the earlier effective Registration
Statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for the same
offering. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.
Large
accelerated filer ¨
Accelerated Filer ¨
Non-accelerated
filer ¨ Smaller
reporting company x
CALCULATION
OF REGISTRATION FEE
Title of each class of
securities to be registered
|
Amount to be
registered
|
Proposed
maximum
offering
price per unit
|
Proposed
maximum
aggregate
offering price
|
Amount of
registration
fee [1] [2]
|
||||||||||||
Common
Stock offered by the Selling
Stockholders
[3]
|
1,579,000
|
$
|
0.05
|
$
|
78,950
|
$
|
4.01
|
(1) Estimated
in accordance with Rule 457(c) of the Securities Act of 1933 solely for the
purpose of computing the amount of the registration fee based on recent prices
of private transactions.
(2) Calculated
under Section 6(b) of the Securities Act of 1933 as . 00005580 of the aggregate
offering price.
(3) Represents
shares of the registrant’s common stock being registered for resale that have
been issued to the selling shareholders named in this registration statement.
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay our effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a) may
determine.
PROSPECTUS
HOME
TOUCH HOLDING COMPANY
Selling
shareholders are offering up to 1,579,000 shares of common stock. The
selling shareholders will offer their shares at $.05 per share until our
shares are quoted on the OTC Bulletin Board and, assuming we secure this
qualification, thereafter at prevailing market prices or privately negotiated
prices. We will not receive proceeds from the sale of
shares from the selling shareholders.
There are
no underwriting commissions involved in this offering. We have agreed
to pay all the costs of this offering. Selling shareholders will pay no offering
expenses.
Prior to
this offering, there has been no market for our securities. Our common stock is
not now listed on any national securities exchange, the NASDAQ stock market, or
the OTC Bulletin Board. There is no guarantee that our securities
will ever trade on the OTC Bulletin Board or other exchange.
This
offering is highly speculative and these securities involve a high degree of
risk and should be considered only by persons who can afford the loss of their
entire investment. See “Risk Factors” beginning on page
7.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is _________________ , 2009.
2
TABLE OF
CONTENTS
SUMMARY
INFORMATION AND RISK FACTORS
|
4
|
RISK
FACTORS
|
7
|
USE
OF PROCEEDS
|
17
|
DETERMINATION
OF OFFERING PRICE
|
17
|
DILUTION
|
17
|
SELLING
SHAREHOLDERS
|
17
|
PLAN
OF DISTRIBUTION
|
22
|
LEGAL
PROCEEDINGS
|
23
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
|
24
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
25
|
DESCRIPTION
OF SECURITIES
|
26
|
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
LIABILITIES
|
27
|
DESCRIPTION
OF BUSINESS
|
27
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
36
|
DESCRIPTION
OF PROPERTY
|
43
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
43
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
45
|
EXECUTIVE
COMPENSATION
|
47
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
50
|
FINANCIAL
STATEMENTS
|
F-1
|
3
SUMMARY
INFORMATION AND RISK FACTORS
You
should carefully read all information in the prospectus, including the financial
statements and their explanatory notes, under the Financial Statements prior to
making an investment decision. Please do not enter into a investment
decision on our company without proper guidance from your financial advisor or a
registered broker.
Organization
Home
Touch Holding Company is a Nevada corporation formed on January 26,
2009. As of January 26, 2009, we acquired Home Touch Limited, a Hong
Kong China corporation formed as Lexing Group Limited in July 2004 which changed
its name to Home Touch Limited in 2005. Home Touch Limited is our
wholly-owned subsidiary. The transaction was structured as a share
exchange in which we exchanged 40,000,000 shares of our common stock for 10,000
shares of Home Touch Limited. The purpose of this transaction was
solely to form a U.S. holding company for our business.
Our
principal office is located at 703, Liven House, 61-63 King Yip Street, Kwun
Tong, Hong Kong. Telephone: +852 2111 0121.
Business
Through
Home Touch Limited, we design and sell and install various energy saving + smart
home system products and solutions. Our products and solutions can
centrally control home systems in buildings and/or villas which are pre-wired as
well as those that aren’t pre-wired by using utilize radio frequency, or
European Installation Bus, wireless electronic networking technology to
integrate the various devices and appliances found in most homes, hotels and
offices. We design, supply and install the whole building
system. We are a registered electrical contractor in Hong
Kong.
Our main
target is property developers in Hong Kong and China – about 85% of our business
come from them. We also sell to single end users, generally owners of high-end
residences, that in general are referred by interior designers. For outside Hong
Kong, we have a distribution agreement Home Touch Solutions Sdn Bhd, a Malaysian
company. Under our
distribution agreement, the local distributor directly sells to
developers. We do not own Home Touch Solutions Sdn Bhd and
they are not a partner or affiliate. Once they have purchased the products, they
assume all expenses for installation and maintenance. We have sold $2,232 to
this distributor as of June 30, 2009.
We design
our own products such as Novel, Noble, Royal lighting switch, transceiver,
remote controller, telephone controller, IP video door phone and WiFi video door
phone, which are produced for us by third party manufactures. We also design our
own solutions such as t.HOME, Building Management Software, E-boardcasting
software and IP Smart. In addition, we distribute products with built in
software from other brands. All of the products we sell operate on
the same RF wireless frequency /or EIB and easily communicate with each
other.
Our
products and solutions include, among others:
·
|
IP
video door phone
|
·
|
WiFi
video door phone
|
·
|
WiFi
network for the whole
building
|
4
·
|
Energy
Saving system for home and
building
|
·
|
Smart
home system, include, lighting control, home appliance control, curtain
control
|
·
|
Security
system, including all kinds of detector and alarm
products
|
·
|
Intelligent
Household Management System that allows text message, picture, video
message, report, to all residences of a building. It also allows residents
to book club house facilities, send messages, and panic alarm to building
management office. With the same system, residents may remote site control
their residence
|
·
|
Windows
Vista Media Center Edition
solution
|
·
|
transceiver
- a wireless device used to transmit RF signal to infrared signal to
control heating and air conditioning, all home appliances and audio-visual
systems such as DVD, TV, Amplifier, Cable TV, and
Stereo.
|
·
|
remote
controller or internet tablet
|
·
|
t.HOME
1 - A USB white box that plugs into a computer USB port that allows the
user to use Window Media Center to coordinate with the transceiver for
control of home systems, appliances and audio-visual
media.
|
·
|
Smart
home system from Visiomatic – a German made product and solution which
uses a panel to control all kinds of home
devices.
|
·
|
IP
Smart - A plug in to a Cisco IP phone to control lighting, curtain and all
kinds of appliances. This solution is mainly for hotel, service apartment
and office.
|
The
Offering
As of the
date of this prospectus, we had 40,000,000 shares of common stock
outstanding.
Selling
shareholders are offering up to 1,579,000 shares of common stock. The
selling shareholders will offer their shares at $.05 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices. We will pay all expenses of
registering the securities, estimated at approximately $50,000. We
will not receive any proceeds of the sale of these securities.
To be
quoted on the OTC Bulletin Board, a market maker must file an application on our
behalf in order to make a market for our common stock. The current
absence of a public market for our common stock may make it more difficult for
you to sell shares of our common stock that you own.
Financial
Summary
Because
this is only a financial summary, it does not contain all the financial
information that may be important to you. Therefore, you should carefully read
all the information in this prospectus, including the financial statements and
their explanatory notes before making an investment decision. The following
table summarizes our financial position as of June 30, 2009, March 31, 2009 and
2008, and the results of our operations for the periods ended June 30, 2009 and
2008 and the years ended March 31, 2009 and 2008, which were derived from our
audited financial statements.
5
HOME
TOUCH HOLDING COMPANY
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF JUNE 30, 2009, MARCH 31, 2009 AND 2008
June
30, 2009
|
March
31, 2009
|
March
31, 2008
|
||||||||||
(unaudited)
|
||||||||||||
Total
Assets
|
$ | 234,560 | $ | 214,419 | $ | 332,662 | ||||||
Total
Liabilities
|
$ | 286,911 | $ | 145,244 | $ | 778,899 | ||||||
Total
Stockholders' Equity (Deficit)
|
$ | (52,351 | ) | $ | 69,175 | $ | (446,237 | ) | ||||
Total
Liabilities and Stockholders’ Equity (Deficit)
|
$ | 234,560 | $ | 214,419 | $ | 332,662 |
HOME
TOUCH HOLDING COMPANY
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008 AND FOR THE YEARS ENDED MARCH 31,
2009 AND 2008
Three
Months
|
Three
Months
|
|||||||||||||||
Ended
|
Ended
|
Year ended
|
Year ended
|
|||||||||||||
June
30, 2009
|
June
30, 2008
|
March
31, 2009
|
March
31, 2008
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
Total
revenues, net
|
$ | 21,539 | $ | 28,063 | $ | 882,685 | $ | 259,822 | ||||||||
Total
cost of revenue
|
11,644 | 6,769 | 509,356 | 145,578 | ||||||||||||
Gross
profit
|
9,895 | 21,294 | 373,329 | 114,244 | ||||||||||||
Total
operating expenses
|
129,751 | 90,920 | 391,237 | 338,972 | ||||||||||||
Loss
from operations
|
(119,856 | ) | (69,626 | ) | (17,908 | ) | (224,728 | ) | ||||||||
Total
other (expense) income
|
(1,670 | ) | (1,737 | ) | (6,074 | ) | 2,115 | |||||||||
Loss
before income taxes
|
(121,526 | ) | (71,363 | ) | (23,982 | ) | (222,613 | ) | ||||||||
Income
tax expense
|
- | - | - | - | ||||||||||||
Net
loss
|
$ | (121,526 | ) | $ | (71,363 | ) | $ | (23,982 | ) | $ | (222,613 | ) | ||||
Net
loss per share – Basic and diluted
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Weighted
average shares outstanding
|
40,000,000 | 40,000,000 | 40,000,000 | 40,000,000 |
6
RISK
FACTORS
In
addition to the other information provided in this prospectus, you should
carefully consider the following risk factors in evaluating our business before
purchasing any of our common stock. All material risks are discussed
in this section.
There is substantial doubt
about our ability to continue as a going concern and if we are unable to
generate significant revenue or secure additional financing we may be unable to
implement our business plan and grow our business.
Our
auditors have raised substantial doubt as to our ability to continue as a going
concern because we have suffered from continuous losses with an accumulated
deficit of $631,745 as of June 30, 2009. The continuation of our business as a
going concern is dependent upon the continued financial support from our
stockholders and credit facility from the revolving lines of credit. There is
uncertainty regarding our ability to implement our business plan and grow our
business without additional financing. We have no agreements,
commitments or understandings to secure additional financing. Our future growth
and success is dependent upon our ability to continue selling our products,
generate cash from operating activities and obtain additional financing. There
is no assurance that we will be able to continue selling our products, generate
sufficient cash from operations, sell additional shares of common stock or
borrow additional funds. Our inability to obtain additional cash could have a
material adverse affect on our ability to grow our business and implement our
business plan.
Risks Related to our
Business
Because of dependence on
consumer preference for our smart home systems products, our revenues are
susceptible to fluctuations and decreases.
We are
susceptible to fluctuations in our business based upon consumer demand for our
products. In addition, we cannot guarantee that increases in demand for our
products associated with increases in the deployment of new technology will
continue. We believe that our success depends on our ability to anticipate,
gauge and respond to fluctuations in consumer preferences. However, it is
impossible to predict with complete accuracy the occurrence and effect of
fluctuations in consumer demand over a product’s life cycle. Moreover, we
caution that any growth in revenues that we achieve may be transitory and should
not be relied upon as an indication of future performance.
Increased demand for
consumer service and support services could decrease our
profitability.
Certain
of our products and solutions have more features and are more complex than
others and therefore require more end-user technical support. We provide 12
months defect liability period which is free of charge, afterward we charge
clients for a minimum three years maintenance service. Therefore, as the mix of
our products includes more of these complex product lines, support costs could
increase, which could decrease our profitability.
Any failure to anticipate or
respond adequately to technological developments and customer requirements, or
any significant delays in product introduction, could reduce our revenues or
profitability.
Our
ability to remain competitive in the smart home systems products market will
depend considerably upon our ability to successfully identify new product
opportunities, as well as secure the right to sell and introduce these products
and enhancements on a timely and cost effective basis. There can be no assurance
that we will be successful at securing the rights to sell and marketing new
products or enhancing our existing products, or that these new or enhanced
products will achieve consumer acceptance and, if achieved, will sustain that
acceptance. In addition, there can be no assurance that products developed by
others will not render our products non-competitive or obsolete or that we will
be able to obtain or maintain the rights to use proprietary technologies
developed by others which are incorporated in our products. Any failure to
anticipate or respond adequately to technological developments and customer
requirements, or any significant delays in product development or introduction,
could reduce our revenues or profitability.
7
Our revenues are highly
concentrated in several customers which accounts for more than 73% of our
revenues, and our revenues could be reduced if these customers reduce their
orders from us.
In our
fiscal year ended March 31, 2009, the following customer accounted for the
following amounts and percentages of our total revenues:
Name
of Customer
|
Amount
of Revenues
|
Percentage
of
Total
Revenues
|
||||||
Grand
Tech Construction Limited
|
382,050
|
43
|
%
|
|||||
Shenzhen
Bochuang Hi-Tech Company Limited
|
145,371
|
16
|
%
|
|||||
Home
Touch Services Limited (related party)
|
127,193
|
14
|
%
|
|||||
We have
no agreements with these customers, who purchases from us on purchase orders
only. If we cease
to do business with these customers at current levels and are unable to generate
additional sales with new and existing customers that purchase a similar amount
of our products, our revenues and net income would decline
considerably.
Because more than 10% of our
revenues in our last fiscal quarter and last fiscal year were derived from
related parties and our past financings have been obtained from related parties,
a material portion of our business and financing is dependent upon related party
transactions.
In our
fiscal year ended March 31, 2009, the following customer accounted for the
following amounts and percentages of our total revenues:
Name
of Customer
|
Amount
of Revenues
|
Percentage
of
Total
Revenues
|
||||||
Home
Touch Services Limited
|
127,193
|
14
|
%
|
Home
Touch Services Limited is a related party because it is owned by our officers
and directors. In addition, as of March 31, 2008, a balance of
$382,702 due to related parties represented temporary advances from a related
company, which is controlled by Mr. David Gunawan Ng and Ms. Stella Wai Yau. The
balance was unsecured, non-interest bearing and repayable on
demand. For the year ended March 31, 2009, we received the additional
advances of $66,949 and the balance of $449,651 due to related parties was
waived by the related company subsequently. As a result, a material
portion of our business and financing is dependent upon related party
transactions.
Because a material amount of
aggregate revenues from March 31, 2006 through June 30, 2009, of which $685,411
in revenues were generated from sales of products with the entities with whom we
have marketing arrangements, if we were to lose these arrangements, our revenues
could be reduced.
We market
through and in cooperation with various partners. We view these
marketing arrangements as material to our future success in that we have
generated a total revenues of $1,387,387 in aggregate revenues from March 31,
2006 through June 30, 2009, of which $685,411 in revenues were generated from
sales of products with the entities with whom we have these marketing
arrangements. If we were to lose these arrangements, our revenues
could be reduced.
Our purchases are
concentrated in several product suppliers and third party manufacturers, which
account for more than 37% of our orders, and our sales and thus our revenues
could be reduced if these product suppliers stop supplying
us.
For the
year ended March 31, 2009, three product suppliers accounted for 10% or more of
our purchases as follows:
Year
ended March 31, 2009
|
||||||||||||
Purchases
|
Percentage
of
purchases
|
Accounts
payable
|
||||||||||
Jardine
One Solution
|
56,532
|
14%
|
-
|
|||||||||
MAG
Living (Shenzhen) Co. Limited
|
51,481
|
12%
|
-
|
|||||||||
Shenzhen
Bochuang Hi-Tech Company Limited
|
43,669
|
11%
|
||||||||||
151,682
|
37%
|
-
|
8
Because of the rapid
innovation of products and technologies that is characteristic of our industry,
although we have obtained various patents on our products, the rights granted
under any patent may not provide competitive advantages to us, may not be
adequate to safeguard and maintain our proprietary rights or may infringe upon
right of others, which could reduce our revenues.
The
procedures by which we identify, document and file for patent, trademark, and
copyright protection are based solely on engineering and management judgment,
with no assurance that a specific filing will be issued, or if issued, will
deliver any lasting value to us. Because of the rapid innovation of products and
technologies that is characteristic of our industry, there is no assurance that
rights granted under any patent will provide competitive advantages to us or
will be adequate to safeguard and maintain our proprietary rights. Moreover, the
laws of certain countries in which our products are or may be manufactured or
sold may not offer protection on such products and associated intellectual
property to the same extent that the U.S. legal system may
offer. Because of technological changes in the smart home systems
products industry, current extensive patent coverage, and the rapid rate of
issuance of new patents, it is possible certain components of our products and
business methods may unknowingly infringe upon the patents of
others.
We sell complex products
that incorporate leading-edge technology, the presence of defects may harm
customer satisfaction, reduce sales opportunities, or increase returns and
reduce our revenues or profits.
We sell
complex products that incorporate leading-edge technology, including hardware
and software. Software may contain bugs that can unexpectedly interfere with
operations. There can be no assurance that our or our suppliers testing programs
will detect all defects in individual products or defects that could affect
numerous shipments. The presence of defects may harm customer satisfaction,
reduce sales opportunities, or increase returns. An inability to cure or repair
a product defect could result in the failure of a product line, temporary or
permanent withdrawal from a product or market, damage to our reputation, or
increased inventory costs, any of which could reduce our revenues, margins and
net income.
We face risks associated
with product warranties.
We could
incur substantial costs as a result of product failures for which we are
responsible under warranty obligations.
Because we depend on a
limited number of suppliers and third party manufacturers for the smart home
system products we sell, any interruption in the availability of these products
could reduce our revenues.
We rely
on a limited number of suppliers and third party manufacturers for the smart
home system products we sell. We do not have any long-term or exclusive purchase
or manufacturing commitments with any of our suppliers and third party
manufacturers except Shenzhen Bochuang Hi-Tech Company Limited which
manufactures switches and a video door phone for us. Our failure to maintain
existing relationships with our suppliers and third party manufacturers or to
establish new relationships in the future could also negatively affect our
ability to obtain smart home system products we sell in a timely manner. If we
are unable to obtain ample supply of product from our existing suppliers and
third party manufacturers or alternative sources of supply or manufacture, we
may be unable to satisfy customers' demands for particular products, which could
reduce our revenues.
9
If our business reputation
is damaged due to the actions of external factors over which we may have little
or no control, including the performance of persons acting as suppliers of our
smart home system products, our revenues could be reduced.
Promoting
our business depends largely on the success of our marketing efforts and our
ability to provide a consistent, positive customer experience. Our ability to
provide a positive customer experience is dependent on external factors over
which we may have little or no control, including the nature and quality of the
smart home system products we sell. We will purchase the products we
sell from third parties. Our failure to provide our customers with
positive customer experiences, including our or our suppliers failure to deliver
high quality products on a timely basis, for any reason could substantially harm
our reputation. The failure of these activities could adversely affect our
ability to attract new customers and maintain customer relationships and, as a
result, substantially harm our business and reduce our revenues.
If we
cannot increase our sales volumes, reduce our costs or introduce higher margin
products to offset anticipated reductions in the average unit price of our
products, our operating results may suffer.
The
average unit price of our products may decrease in the future in response to
changes in product mix, competitive pricing pressures, new product introductions
by our competitors or other factors. If we are unable to offset the anticipated
decrease in our average selling prices by increasing our sales volumes or
through new product introductions, our net revenues will decline. Our business
could be seriously harmed, particularly if the average selling price of our
products decreases significantly without a corresponding increase in
sales.
Because our competitors in
the smart home system products sales business have greater financial and
marketing resources than we do, we may experience a reduction in market share
and revenues.
The
markets for our smart home system products are highly competitive and rapidly
changing. Some of our current and prospective competitors have
significantly greater financial, technical, marketing resources than we
do. Our ability to compete in our markets depends on a number of
factors, some within and others outside our control. These factors
include: the frequency and success of product introductions by us and by our
competitors, the selling prices of our products and of our competitors’
products, the performance of our products and of our competitors’ products,
product distribution by our competitors, our marketing ability and the marketing
ability of our competitors, and the quality of customer support offered by us
and by our competitors.
The real estate market is
cyclical and is experiencing a downturn which could decrease the demand for our
products and reduce our revenues.
Our
products are primarily installed in new residential, hotel and commercial real
estate projects. The market for real estate in Hong Kong, Macau, U.A.E., and
mainland China tends to be cyclical, with periods in which real estate
construction declines, such as is the current case. A continued
downturn or the lack of a recovery in the real estate market could decrease the
demand for our products and reduce our revenues.
10
Risks Related to Management
and Personnel
We depend heavily on key
personnel, and turnover of key senior management could harm our
business.
Our
future business and results of operations depend in significant part upon the
continued contributions of our senior management personnel, including Mr. David
Gunawan Ng, Chairman and Executive Director, Ms. Stella Wai Yau, Chief Operating
Officer (“COO”) and Chief Financial Officer (“CFO”) and Mr. Remus Hung Yat Lam,
Sales Director. If we were to lose Mr. David Gunawan Ng, Executive Director, Ms.
Stella Wai Yau, COO and CFO, and Mr. Remus Hung Yat Lam, Sales Director, if Mr.
David Gunawan Ng, Executive Director, Ms. Stella Wai Yau, COO and
CFO, and Mr. Remus Hung Yat Lam, Sales Director fails to perform in their
respective current position, or if we are not able to attract and retain skilled
employees as needed, our business could suffer. We have no key person insurance
on these members of management. We have no employment agreements with
any management except Mr. Remus Hung Yat Lam, Sales
Director. Significant turnover in our senior management could
significantly deplete our institutional knowledge held by our existing senior
management team. We depend on the skills and abilities of these key employees in
managing the product acquisition, marketing and sales aspects of our business,
any part of which could be harmed by turnover in the future.
Our management has limited
experience in managing the day to day operations of a public company and, as a
result, we may incur additional expenses associated with the management of our
company.
The
management team, including Mr. David Gunawan Ng, Chairman and Executive Director
and Ms. Stella Wai Yau, COO and CFO is responsible for the operations and
reporting of the combined company. The requirements of operating as a small
public company are new to the management team and the employees as a whole. This
may require us to obtain outside assistance from legal, accounting, investor
relations, or other professionals that could be more costly than planned. We may
also be required to hire additional staff to comply with additional SEC
reporting requirements and compliance under the Sarbanes-Oxley Act of 2002. Our
failure to comply with reporting requirements and other provisions of securities
laws could negatively affect our stock price and adversely affect our results of
operations, cash flow and financial condition.
Although we believe that we
currently have adequate internal control over financial reporting, we are
exposed to risks from recent legislation requiring companies to evaluate
internal control over financial reporting.
Section
404 of the Sarbanes-Oxley Act of 2002 ("Section 404") requires our
management to report on the operating effectiveness of the Company's
Internal Controls over financial reporting for the year ended March 31, 2011.
ZYCPA Company Limited, (formerly Zhong Yi (Hong Kong) C.P.A. Company Limited)
Certified Public Accountants, our independent registered public accounting firm,
will be required to attest to the effectiveness of our internal control over
financial reporting beginning with the year ended March 31, 2011. We must
establish an ongoing program to perform the system and process evaluation and
testing necessary to comply with these requirements. We expect that the cost of
this program will require us to incur expenses and to devote resources to
Section 404 compliance on an ongoing basis.
11
It is
difficult for us to predict how long it will take to complete management's
assessment of the effectiveness of our internal control over financial
reporting for each year and to remediate any deficiencies in our internal
control over financial reporting. As a result, we may not be able to complete
the assessment and process on a timely basis. In the event that our Chief
Operating Officer, Chief Financial Officer or independent registered public
accounting firm determine that our internal control over financial reporting is
not effective as defined under Section 404, we cannot predict how regulators
will react or how the market prices of our shares will be affected.
Because we do not have an
audit or compensation committee, shareholders will have to rely on the entire
board of directors, none of which are not independent, to perform these
functions.
We do not
have an audit or compensation committee comprised of independent
directors. Indeed, we do not have any audit or compensation
committee. These functions are performed by the board of directors as
a whole. No members of the board of directors are independent
directors. Thus, there is a potential conflict in that board members
who are management will participate in discussions concerning management
compensation and audit issues that may affect management decisions.
Certain
of our stockholders hold a significant percentage of our outstanding voting
securities which could reduce the ability of minority shareholders to effect
certain corporate actions.
Our
officers, directors and majority shareholders are the beneficial owners of
approximately 69.2% of our outstanding voting securities. As a result, they
possess significant influence and can elect a majority of our board of directors
and authorize or prevent proposed significant corporate transactions. Their
ownership and control may also have the effect of delaying or preventing a
future change in control, impeding a merger, consolidation, takeover or other
business combination or discourage a potential acquirer from making a tender
offer.
Risks Related to our
Operations in China
Because
we all our customers and operations are located in China, the following risks
could affect our business of our suppliers and thus harm our
revenues.
General economic conditions
in China could reduce our revenues.
General
economic conditions in China have an impact on our business and financial
results. The global economy in general and in China specifically remains
uncertain. As a result, individuals and companies may delay or reduce
expenditures. Weak economic conditions and/or softness in the consumer or
business channels for the use of smart home systems products could result in
lower demand for our products, resulting in lower sales, earnings and cash
flows.
Changes in China’s political
or economic situation could harm us and our operating
results.
Economic
reforms adopted by the Chinese government have had a positive effect on the
economic development of the country, but the government could change these
economic reforms or any of the legal systems at any time. This could either
benefit or damage our operations and profitability. Some of the things that
could have this effect are:
12
|
·
|
Level
of government involvement in the
economy;
|
|
·
|
Control
of foreign exchange;
|
|
·
|
Methods
of allocating resources;
|
|
·
|
Balance
of payments position;
|
|
·
|
International
trade restrictions; and
|
|
·
|
International
conflict.
|
The
Chinese economy differs from the economies of most countries belonging to the
Organization for Economic Cooperation and Development, or OECD, in many ways.
For example, state-owned enterprises still constitute a large portion of the
Chinese economy, and weak corporate governance traditions and a lack of flexible
currency exchange policy continue to persist. As a result of these differences,
the business of our suppliers could be adversely affected.
Our business is largely
subject to the uncertain legal environment in China and your legal protection
could be limited.
The
Chinese legal system is a civil law system based on written statutes. Unlike
common law systems, it is a system in which precedents set in earlier legal
cases are not generally used. The overall effect of legislation enacted over the
past 20 years has been to enhance the protections afforded to foreign invested
enterprises in China. However, these laws, regulations and legal requirements
are relatively recent and are evolving rapidly, and their interpretation and
enforcement involve uncertainties. These uncertainties could limit the legal
protections available to foreign investors, such as the right of foreign
invested enterprises to hold licenses and permits such as requisite business
licenses.
Because all of our executive
officers and our directors are residents of China and not of the U.S., and all
the assets of these persons are located outside the U.S. and all of our revenues
are generated in China or other areas outside the United States, you may have
difficulty in enforcing your legal rights against us or our executive officers
and directors.
All of
our executive officers and our directors are residents of China and not of the
U.S., and all the assets of these persons are located outside the U.S. All of
our revenues are generated in China or other areas outside the United
States. As a result, it could be difficult for investors to effect
service of process on our officers or directors, to enforce a judgment under
U.S. federal securities laws or other U.S. laws obtained in the U.S. against our
Chinese operations and subsidiaries or our executive officers or
directors. Further, China’s treaties do not provide for reciprocal
recognition and enforcement of judgments of U.S. courts.
The Chinese government
exerts substantial influence over the manner in which we and our suppliers must
conduct their business activities.
Only
recently has China permitted provincial and local economic autonomy and private
economic activities. The Chinese government has exercised and continues to
exercise substantial control over virtually every sector of the Chinese economy
through regulation and state ownership. Our ability to operate in China may be
harmed by changes in its laws and regulations, including those relating to
taxation, import and export tariffs, environmental regulations, land use rights,
property and other matters. We believe that our operations in China are in
material compliance with all applicable legal and regulatory requirements.
However, the central or local governments of the jurisdictions in which we
operate may impose new, stricter regulations or interpretations of existing
regulations that would require additional expenditures and efforts on our part
to ensure our compliance with such regulations or interpretations.
Accordingly,
government actions in the future, including any decision not to continue to
support recent economic reforms and to return to a more centrally planned
economy or regional or local variations in the implementation of economic
policies, could have a significant effect on economic conditions in China or
particular regions thereof, and could require us to divest ourselves of any
interest we then hold in Chinese properties or joint ventures. Any divestiture could reduce our assets or revenues and
thus reduce the value of our stock.
13
Future inflation in China
may inhibit our suppliers’ to conduct business profitably in China, increasing
their prices and potentially reducing our revenues.
In recent
years, the Chinese economy has experienced periods of rapid expansion and highly
fluctuating rates of inflation. During the past ten years, the rate of inflation
in China has been as high as 20.7% and as low as -2.2%. These factors have led
to the adoption by the Chinese government, from time to time, of various
corrective measures designed to restrict the availability of credit or regulate
growth and contain inflation. High inflation may in the future cause the Chinese
government to impose controls on credit and/or prices, or to take other action,
which could inhibit economic activity in China, and thereby harm the market for
our products.
The value of our securities
will be affected by the foreign exchange rate between U.S. dollars and
RMB.
The value
of our common stock will be affected by the foreign exchange rate between U.S.
dollars and RMB, and between those currencies and other currencies in which our
sales may be denominated. Currently, RMB is stronger than U.S. Dollars. For
example, to the extent that we need to convert U.S. dollars into RMB for our
operational needs and should RMB appreciate against the U.S. dollar at that
time, our financial position, the business of the Company, and the price of our
common stock may be harmed. Conversely, if we decide to convert our RMB into
U.S. dollars for the purpose of declaring dividends on our common stock or for
other business purposes and the U.S. dollar appreciates against RMB, the U.S.
dollar equivalent of our earnings from our subsidiaries in China would be
reduced.
In the
event that the U.S. dollars appreciate against RMB, our costs will increase. If
we cannot pass the resulting cost increase on to our customers, our
profitability and operating results will suffer. In addition, since our sales to
international customers grew rapidly, we are subject to the risk of foreign
currency depreciation.
Risks Related to the Market
for our Stock
Investors may have
difficulty in reselling their shares due to the lack of market or state Blue Sky
laws.
Our
common stock is currently not quoted on any market. No market may ever develop
for our common stock, or if developed, may not be sustained in the
future.
14
The
holders of our shares of common stock and persons who desire to purchase them in
any trading market that might develop in the future should be aware that there
may be significant state law restrictions upon the ability of investors to
resell our shares. Accordingly, even if we are successful in having the Shares
available for trading on the OTCBB, investors should consider any secondary
market for the Company's securities to be a limited one. We intend to seek
coverage and publication of information regarding the company in an accepted
publication which permits a "manual exemption." This manual exemption permits a
security to be distributed in a particular state without being registered if the
company issuing the security has a listing for that security in a securities
manual recognized by the state. However, it is not enough for the security to be
listed in a recognized manual. The listing entry must contain (1) the names of
issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a
profit and loss statement for either the fiscal year preceding the balance sheet
or for the most recent fiscal year of operations. We may not be able
to secure a listing containing all of this information. Furthermore,
the manual exemption is a non issuer exemption restricted to secondary trading
transactions, making it unavailable for issuers selling newly issued securities.
Most of the accepted manuals are those published in Standard and Poor's, Moody's
Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and
many states expressly recognize these manuals. A smaller number of states
declare that they “recognize securities manuals” but do not specify the
recognized manuals. The following states do not have any provisions and
therefore do not expressly recognize the manual exemption: Alabama, Georgia,
Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and
Wisconsin.
Accordingly,
our shares should be considered totally illiquid, which inhibits investors’
ability to resell their shares.
We will be subject to penny
stock regulations and restrictions and you may have difficulty selling shares of
our common stock.
The SEC
has adopted regulations which generally define so-called “penny stocks” to be an
equity security that has a market price less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exemptions. We anticipate
that our common stock will become a “penny stock”, and we will become subject to
Rule 15g-9 under the Exchange Act, or the “Penny Stock Rule.” This rule imposes
additional sales practice requirements on broker-dealers that sell such
securities to persons other than established customers and “accredited
investors” (generally, individuals with a net worth in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses). For
transactions covered by Rule 15g-9, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser’s
written consent to the transaction prior to sale. As a result, this rule may
affect the ability of broker-dealers to sell our securities and may affect the
ability of purchasers to sell any of our securities in the secondary
market.
For any
transaction involving a penny stock, unless exempt, the rules require delivery,
prior to any transaction in a penny stock, of a disclosure schedule prepared by
the SEC relating to the penny stock market. Disclosure is also required to be
made about sales commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stock.
We do not
anticipate that our common stock will qualify for exemption from the Penny Stock
Rule. In any event, even if our common stock were exempt from the Penny Stock
Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which
gives the SEC the authority to restrict any person from participating in a
distribution of penny stock, if the SEC finds that such a restriction would be
in the public interest.
Sales of our common stock
under Rule 144 could reduce the price of our stock.
There are
12,320,000 shares of our common stock held by non- affiliates and 27,680,000
shares held by affiliates Rule 144 of the Securities Act of 1933 defines as
restricted securities. 1,579,000 shares of our common stock held by
non-affiliates are currently eligible for resale or are being registered in this
offering, however affiliates will still be subject to the resale restrictions of
Rule 144. In general, persons holding restricted securities,
including affiliates, must hold their shares for a period of at least six
months, may not sell more than one percent of the total issued and outstanding
shares in any 90-day period, and must resell the shares in an unsolicited
brokerage transaction at the market price. The availability for sale
of substantial amounts of common stock under Rule 144 could reduce prevailing
market prices for our securities.
15
Although we will be a
mandatory reporting company under Section 15(d) of the Securities Act of 1933
until and through fiscal year end March 31, 2010, if we do not file a
Registration Statement on Form 8-A to become a mandatory reporting company under
Section 12(g) of the Securities Exchange Act of 1934 thereafter, we will
continue as a voluntary reporting company and will not be subject to the proxy
statement or other information requirements of the 1934 Act, our securities can
no longer be quoted on the OTC Bulletin Board, and our officers, directors and
10% stockholders will not be required to submit reports to the SEC on their
stock ownership and stock trading activity, all of which could reduce the value
of your investment and the amount of publicly available information about
us.
As a
result of this offering as required under Section 15(d) of the Securities
Exchange Act of 1934, we will file periodic reports with the Securities and
Exchange Commission through March 31, 2010, including a Form 10-K for the year
ended March 31, 2010, assuming this registration statement is declared effective
before that date. At or prior to March 31, 2010, we intend
voluntarily to file a registration statement on Form 8-A which will subject us
to all of the reporting requirements of the 1934 Act. This will require us to
file quarterly and annual reports with the SEC and will also subject us to the
proxy rules of the SEC. In addition, our officers, directors and 10%
stockholders will be required to submit reports to the SEC on their stock
ownership and stock trading activity. We are not required under
Section 12(g) or otherwise to become a mandatory 1934 Act filer unless we have
more than 500 shareholders and total assets of more than $10 million on March
31, 2010. If we do not file a registration statement on Form 8-A at
or prior to March 31, 2010, we will continue as a voluntary reporting company
and will not be subject to the proxy rules, Section 16 ownership reporting and
short swing profits provisions or other requirements of the 1934 Act, our
securities can no longer be quoted on the OTC Bulletin Board, and our officers,
directors and 10% stockholders will not be required to submit reports to the SEC
on their stock ownership and stock trading activity and our
securities can no longer be quoted on the OTC Bulletin
Board.
16
USE
OF PROCEEDS
Not
applicable. We will not receive any proceeds from the sale of shares
offered by the selling shareholders.
DETERMINATION
OF OFFERING PRICE
The
offering price has been arbitrarily determined and does not bear any
relationship to our assets, results of operations, or book value, or to any
other generally accepted criteria of valuation. Prior to this offering, there
has been no market for our securities. In order to assure that
selling shareholders will offer their shares at $.05 per share until our shares
are quoted on the OTC Bulletin Board, we will notified our shareholders and our
Transfer Agent that no sales will be allowed prior to the date our shares are
quoted on the OTC Bulletin Board without proof of the selling
price.
DILUTION
Not
applicable. We are not offering any shares in this registration statement. All
shares are being registered on behalf of our selling shareholders.
SELLING
SHAREHOLDERS
The
selling shareholders named below are selling the securities. The
table assumes that all of the securities will be sold in this offering. However,
any or all of the securities listed below may be retained by any of the selling
shareholders, and therefore, no accurate forecast can be made as to the number
of securities that will be held by the selling shareholders upon termination of
this offering. The nine selling shareholders who are U.S. citizens or
residents acquired their shares by purchase exempt from registration under
section 4(2) of the Securities Act of 1933 in the share exchange pursuant to
which we acquired Home Touch Limited. The remaining 33 selling
shareholders who are not U.S. citizens or residents acquired their shares by
purchase exempt from registration under section 4(2) of the Securities Act of
1933 or Regulation S under the Securities Act of 1933 in the share exchange
pursuant to which we acquired Home Touch Limited.
We
believed that Section 4(2) of the Securities Act of 1933 was available
because:
|
·
|
None
of these issuances involved underwriters, underwriting discounts or
commissions.
|
|
·
|
Restrictive
legends were and will be placed on all certificates issued as described
above.
|
|
·
|
The
distribution did not involve general solicitation or
advertising.
|
|
·
|
The
distributions were made only to investors who were sophisticated enough to
evaluate the risks of the
investment.
|
We
believed that Regulation S was available because:
|
·
|
None
of these issuances involved underwriters, underwriting discounts or
commissions;
|
|
·
|
We
placed Regulation S required restrictive legends on all certificates
issued;
|
|
·
|
No
offers or sales of stock under the Regulation S offering were made to
persons in the United States;
|
|
·
|
No
direct selling efforts of the Regulation S offering were made in the
United States.
|
17
In
connection with the above transactions, although some of the investors may have
also been accredited, we provided the following to all investors:
|
·
|
Access
to all our books and records.
|
|
·
|
Access
to all material contracts and documents relating to our
operations.
|
|
·
|
The
opportunity to obtain any additional information, to the extent we
possessed such information, necessary to verify the accuracy of the
information to which the investors were given
access.
|
Prospective
investors were invited to review at our offices at any reasonable hour, after
reasonable advance notice, any materials available to us concerning our
business. Prospective Investors were also invited to visit our
offices.
18
We
believe that the selling shareholders listed in the table have sole voting and
investment powers with respect to the securities indicated. We will
not receive any proceeds from the sale of the securities by the selling
shareholders. No selling shareholders are broker-dealers or
affiliates of broker-dealers.
Amount
|
Percentage
|
||||||||||||||||
owned
|
owned
|
||||||||||||||||
Shares
to
|
after
the
|
after
the
|
|||||||||||||||
be
offered
|
Percentage
|
offering,
|
offering,
|
||||||||||||||
by
the
|
owned
|
assuming
|
assuming
|
||||||||||||||
Selling
|
before
|
all
shares
|
all
shares
|
Relationship
|
|||||||||||||
Selling Shareholder
|
Stockholders
|
Offering
|
sold [1]
|
sold [1]
|
to us
|
||||||||||||
Liu
Jia Min
|
10,000
|
*
|
0
|
0
|
|||||||||||||
Li
Mi
|
15,000
|
*
|
0
|
0
|
|||||||||||||
Xu
Chen Yuan
|
20,000
|
*
|
0
|
0
|
|||||||||||||
Liu
Fang Jun
|
15,000
|
*
|
0
|
0
|
|||||||||||||
Yang
Zhong Jie
|
20,000
|
*
|
0
|
0
|
|||||||||||||
Zhang
Xiao Ming
|
15,000
|
*
|
0
|
0
|
|||||||||||||
Li
Jian Hui
|
15,000
|
*
|
0
|
0
|
|||||||||||||
Zhang
Bai Fang
|
30,000
|
*
|
0
|
0
|
|||||||||||||
Chen
Min
|
20,000
|
*
|
0
|
0
|
|||||||||||||
Shen
Jin Rong
|
15,000
|
*
|
0
|
0
|
|||||||||||||
Zhou
Yao Yu
|
15,000
|
*
|
0
|
0
|
|||||||||||||
Xu
Ren Hui
|
15,000
|
*
|
0
|
0
|
|||||||||||||
Shi
Guo Neng
|
10,000
|
*
|
0
|
0
|
|||||||||||||
Cheng
Bang Hui
|
10,000
|
*
|
0
|
0
|
|||||||||||||
Qian
Kang Mei
|
20,000
|
*
|
0
|
0
|
|||||||||||||
Chen
Sheng Hua
|
30,000
|
*
|
0
|
0
|
19
Cao
Ming
|
14,000
|
*
|
0
|
0
|
|||||||||||||
Yan
Yan
|
10,000
|
*
|
0
|
0
|
|||||||||||||
Zhou
Tao
|
20,000
|
*
|
0
|
0
|
|||||||||||||
Wang
Min Jun
|
20,000
|
*
|
0
|
0
|
|||||||||||||
Gu
Xin Lun
|
20,000
|
*
|
0
|
0
|
|||||||||||||
Hu
Jing
|
15,000
|
*
|
0
|
0
|
|||||||||||||
Zhou
Bo
|
20,000
|
*
|
0
|
0
|
|||||||||||||
Yu
Qiang
|
20,000
|
*
|
0
|
0
|
|||||||||||||
Ye
Li Hong
|
20,000
|
*
|
0
|
0
|
|||||||||||||
Li
Yan Ting
|
20,000
|
*
|
0
|
0
|
|||||||||||||
Xu
Guang Rong
|
15,000
|
*
|
0
|
0
|
|||||||||||||
Hu
Liang Na
|
15,000
|
*
|
0
|
0
|
|||||||||||||
Zhao
Shan Bao
|
20,000
|
*
|
0
|
0
|
|||||||||||||
Li
Zhi Hui
|
15,000
|
*
|
0
|
0
|
|||||||||||||
Yi
Fei Chen
|
80,000
|
1.95
|
700,000
|
1.75
|
|||||||||||||
Shiu
Pao Chen
|
80,000
|
1.07
|
350,000
|
0.87
|
|||||||||||||
Au
Yeung Po Leung
|
100,000
|
4.55
|
1,712,000
|
4.3
|
|||||||||||||
Pau
Chin Hung
|
100,000
|
3.56
|
1,324,000
|
3.31
|
|||||||||||||
Robert
Forstedt
|
70,000
|
1.36
|
476,000
|
1.19
|
|||||||||||||
Nancy
Hundt
|
80,000
|
2.29
|
836,000
|
2.09
|
20
Intrepid
Capital, LLC [1]
|
100,000
|
4.84
|
1,836,000
|
4.59
|
|||||||||||||
Gulf
Asset Management[2]
|
100,000
|
3.37
|
1,248,000
|
3.12
|
|||||||||||||
Pegasus
Asset Management,
[3]
|
100,000
|
4.72
|
1,789,000
|
4.47
|
|||||||||||||
Michael
Williams
|
100,000
|
1.42
|
470,000
|
1.17
|
Attorney
|
||||||||||||
Brandon
Williams
|
100,000
|
*
|
0
|
0
|
Affiliate
of Attorney
|
||||||||||||
Maggie
Ensley
|
50,000
|
*
|
0
|
0
|
Affiliate
of Attorney
|
||||||||||||
Total
|
1,579,000
|
[1] Jeff
Toghraie is the beneficial owner of Intrepid Capital, LLC.
[2] Parvin
M. Riazi is the beneficial owner of Gulf Asset Management.
[3] Sam
Toghraie is the beneficial owner of Pegasus Asset Management.
* Represents
ownership of less than one percent
Blue Sky
The
holders of our shares of common stock and persons who desire to purchase them in
any trading market that might develop in the future should be aware that there
may be significant state law restrictions upon the ability of investors to
resell our shares. Accordingly, even if we are successful in having the Shares
available for trading on the OTCBB, investors should consider any secondary
market for the Company's securities to be a limited one. We intend to seek
coverage and publication of information regarding the company in an accepted
publication which permits a "manual exemption." This manual exemption permits a
security to be distributed in a particular state without being registered if the
company issuing the security has a listing for that security in a securities
manual recognized by the state. However, it is not enough for the security to be
listed in a recognized manual. The listing entry must contain (1) the names of
issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a
profit and loss statement for either the fiscal year preceding the balance sheet
or for the most recent fiscal year of operations. We may not be able
to secure a listing containing all of this information. Furthermore,
the manual exemption is a non issuer exemption restricted to secondary trading
transactions, making it unavailable for issuers selling newly issued securities.
Most of the accepted manuals are those published in Standard and Poor's, Moody's
Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and
many states expressly recognize these manuals. A smaller number of states
declare that they “recognize securities manuals” but do not specify the
recognized manuals. The following states do not have any provisions and
therefore do not expressly recognize the manual exemption: Alabama, Georgia,
Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and
Wisconsin.
21
PLAN
OF DISTRIBUTION
Our
common stock is currently not quoted on any market. No market may
ever develop for our common stock, or if developed, may not be sustained in the
future. Accordingly, our shares should be considered totally
illiquid, which inhibits investors’ ability to resell their shares.
Selling
shareholders are offering up to 1,579,000 shares of common stock. The
selling shareholders will offer their shares at $.05 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices. We will not receive any proceeds of
the sale of these securities. We will pay all expenses of registering
the securities.
The
securities offered by this prospectus will be sold by the selling shareholders
without underwriters and without commissions. The distribution of the
securities by the selling shareholders may be effected in one or more
transactions that may take place in the over-the-counter market or privately
negotiated transactions.
The
selling shareholders may pledge all or a portion of the securities owned as
collateral for margin accounts or in loan transactions, and the securities may
be resold pursuant to the terms of such pledges, margin accounts or loan
transactions. Upon default by such selling shareholders, the pledge in such loan
transaction would have the same rights of sale as the selling shareholders under
this prospectus. The selling shareholders may also enter into exchange traded
listed option transactions, which require the delivery of the securities listed
under this prospectus. After our securities are qualified for quotation on the
OTC Bulletin Board, the selling shareholders may also transfer securities owned
in other ways not involving market makers or established trading markets,
including directly by gift, distribution, or other transfer without
consideration, and upon any such transfer the transferee would have the same
rights of sale as such selling shareholders under this prospectus.
In
addition to the above, each of the selling shareholders will be affected by the
applicable provisions of the Securities Exchange Act of 1934, including, without
limitation, Regulation M, which may limit the timing of purchases and sales of
any of the securities by the selling shareholders or any such other
person. We have instructed our selling shareholders that they many
not purchase any of our securities while they are selling shares under this
registration statement.
Upon this
registration statement being declared effective, the selling shareholders may
offer and sell their shares from time to time until all of the shares registered
are sold; however, this offering may not extend beyond two years from the
initial effective date of this registration statement.
There can
be no assurances that the selling shareholders will sell any or all of the
securities. In various states, the securities may not be sold unless
these securities have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied
with.
All of
the foregoing may affect the marketability of our securities. Pursuant to oral
promises we made to the selling shareholders, we will pay all the fees and
expenses incident to the registration of the securities.
22
Should
any substantial change occur regarding the status or other matters concerning
the selling shareholders or us, we will file a post-effective amendment
disclosing such matters.
OTC Bulletin Board
Considerations
To be
quoted on the OTC Bulletin Board, a market maker must file an application on our
behalf in order to make a market for our common stock. We have
engaged in preliminary discussions with a FINRA Market Maker to file our
application on Form 211 with FINRA, but as of the date of this prospectus, no
filing has been made. Based upon our counsel’s prior experience, we
anticipate that after this registration statement is declared effective, it will
take approximately 2 – 8 weeks for FINRA to issue a trading
symbol.
The OTC
Bulletin Board is separate and distinct from the NASDAQ stock
market. NASDAQ has no business relationship with issuers of
securities quoted on the OTC Bulletin Board. The SEC’s order handling
rules, which apply to NASDAQ-listed securities, do not apply to securities
quoted on the OTC Bulletin Board.
Although
the NASDAQ stock market has rigorous listing standards to ensure the high
quality of our issuers, and can delist issuers for not meeting those standards,
the OTC Bulletin Board has no listing standards. Rather, it is the
market maker who chooses to quote a security on the system, files the
application, and is obligated to comply with keeping information about the
issuer in our files. FINRA cannot deny an application by a market
maker to quote the stock of a company. The only requirement for
inclusion in the bulletin board is that the issuer be current in our reporting
requirements with the SEC.
Although
we anticipate listing on the OTC Bulletin board will increase liquidity for our
stock, investors may have greater difficulty in getting orders filled because it
is anticipated that if our stock trades on a public market, it initially will
trade on the OTC Bulletin Board rather than on NASDAQ. Investors’
orders may be filled at a price much different than expected when an order is
placed. Trading activity in general is not conducted as efficiently
and effectively as with NASDAQ-listed securities.
Investors
must contact a broker-dealer to trade OTC Bulletin Board
securities. Investors do not have direct access to the bulletin board
service. For bulletin board securities, there only has to be one
market maker.
Bulletin
board transactions are conducted almost entirely manually. Because
there are no automated systems for negotiating trades on the bulletin board,
they are conducted via telephone. In times of heavy market volume,
the limitations of this process may result in a significant increase in the time
it takes to execute investor orders. Therefore, when investors place
market orders - an order to buy or sell a specific number of shares at the
current market price - it is possible for the price of a stock to go up or down
significantly during the lapse of time between placing a market order and
getting execution.
Because
bulletin board stocks are usually not followed by analysts, there may be lower
trading volume than for NASDAQ-listed securities.
LEGAL
PROCEEDINGS
There are
no pending or threatened lawsuits against us.
23
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The board
of directors elects our executive officers annually. A majority vote
of the directors who are in office is required to fill
vacancies. Each director shall be elected for the term of one year,
and until his or her successor is elected and qualified, or until his earlier
resignation or removal. Our directors and executive officers are as
follows:
Name
|
Age
|
Position
|
||
Mr.
David Gunawan Ng
|
39
|
Chairman
and Executive Director
|
||
Ms.
Stella Wai Yau
|
38
|
COO,
CFO, Secretary and Director
|
||
Mr.
Remus Hung Yat Lam
|
29
|
Sales
Director
|
Mr. David
Gunawan Ng has held his current position since he joined us in July
2004. Since May 1997 he has been a director of Sky Well Group
Limited, an electronic products company. He has a Diploma of Hotel
Institute Montreux (Switzerland, 1991) and a Diploma of American Hotel and Motel
Association (Switzerland, 1991) (Specialization in Marketing and
Sales).
Ms.
Stella Wai Yau has held her current position as COO, CFO, Secretary and Director
since she joined us in October 2005. Since July 2002, she has been Operation
Manager & Director of Sky Well Group Limited, an electronic products
company. She has a Diploma of Hotel Institute Montreux (Switzerland,
1991).
Mr. Remus
Hung Yat Lam has held his current position as Sales Director since he joined us
in December 2006. From December 2005 to November 2006, he was Project Manager of
School Touch (Hong Kong) Limited, a system design & engineering
firm. From January 2005 to November 2005, he was Sales Engineer of
Sky Well Group Limited, an electronic products
company. From January 2004 to January 2005, he was Electronic
Engineer of Asia Contact Probes Company, an electronic products
company. He was graduated from Royal Melbourne Institute of
Technology in the year of 2003 with a Bachelor of Communication
Engineering.
Family
Relationships
Mr. David
Gunawan Ng and Ms. Stella Wai Yau are married.
Legal
Proceedings
No
officer, director, promoter or significant employee has been involved in the
last five years in any of the following:
·
|
Any
bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that
time;
|
·
|
Any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor
offenses);
|
·
|
Being
subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities;
and
|
·
|
Being
found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not
been reversed, suspended, or
vacated.
|
24
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following tables set forth the ownership, as of the date of this prospectus, of
our common stock by each person known by us to be the beneficial owner of more
than 5% of our outstanding common stock, our directors, and our executive
officers and directors as a group. To the best of our knowledge, the
persons named have sole voting and investment power with respect to such shares,
except as otherwise noted. There are not any pending or anticipated
arrangements that may cause a change in control.
The
information presented below regarding beneficial ownership of our voting
securities has been presented in accordance with the rules of the Securities and
Exchange Commission and is not necessarily indicative of ownership for any other
purpose. Under these rules, a person is deemed to be a "beneficial owner" of a
security if that person has or shares the power to vote or direct the voting of
the security or the power to dispose or direct the disposition of the security.
A person is deemed to own beneficially any security as to which such person has
the right to acquire sole or shared voting or investment power within 60 days
through the conversion or exercise of any convertible security, warrant, option
or other right. More than one person may be deemed to be a beneficial owner of
the same securities. The percentage of beneficial ownership by any person as of
a particular date is calculated by dividing the number of shares beneficially
owned by such person, which includes the number of shares as to which such
person has the right to acquire voting or investment power within 60 days, by
the sum of the number of shares outstanding as of such date plus the number of
shares as to which such person has the right to acquire voting or investment
power within 60 days. Consequently, the denominator used for calculating such
percentage may be different for each beneficial owner. Except as otherwise
indicated below and under applicable community property laws, we believe that
the beneficial owners of our common stock listed below have sole voting and
investment power with respect to the shares shown. The business
address of the shareholders is 703, Liven House, 61-63 King Yip Street, Kwun
Tong, Hong Kong.
Name
|
Number
of Shares of Common Stock
|
Percentage
|
|||||
Mr.
David Gunawan Ng[1]
|
27,680,000
|
69.2%
|
|||||
Ms.
Stella Wai Yau [1]
|
27,680,000
|
69.2%
|
|||||
All
officers and directors as a group [2 persons]
|
27,680,000
|
69.2%
|
[1] Owned
21,000,000 shares by Mr. David Gunawan Ng and 6,680,000 by Ms. Stella Wai
Yau. Mr. David Gunawan Ng and Ms. Stella Wai Yau are husband and
wife.
This
table is based upon information derived from our stock records. Unless otherwise
indicated in the footnotes to this table and subject to community property laws
where applicable, each of the shareholders named in this table has sole or
shared voting and investment power with respect to the shares indicated as
beneficially owned. Except as set forth above, applicable percentages are based
upon 40,000,000 shares of common stock outstanding as of April 15,
2009.
25
DESCRIPTION
OF SECURITIES
The
following description as a summary of the material terms of the provisions of
our Articles of Incorporation and Bylaws is qualified in our
entirety. The Articles of Incorporation and Bylaws have been filed as
exhibits to the registration statement of which this prospectus is a
part.
Common
Stock
We are
authorized to issue 100,000,000 shares of common stock with $0.001 par value per
share. As of the date of this registration statement, there were 40,000,000
shares of common stock issued and outstanding held by 44 shareholders of the
record.
Each
share of common stock entitles the holder to one vote, either in person or by
proxy, at meetings of shareholders. The holders are not permitted to vote their
shares cumulatively. Accordingly, the shareholders of our common stock who hold,
in the aggregate, more than fifty percent of the total voting rights can elect
all of our directors and, in such event, the holders of the remaining minority
shares will not be able to elect any of such directors. The vote of the holders
of a majority of the issued and outstanding shares of common stock entitled to
vote thereon is sufficient to authorize, affirm, ratify or consent to such act
or action, except as otherwise provided by law.
Holders
of common stock are entitled to receive ratably such dividends, if any, as may
be declared by the Board of Directors out of funds legally available. We have
not paid any dividends since our inception, and we presently anticipate that all
earnings, if any, will be retained for development of our business. Any future
disposition of dividends will be at the discretion of our Board of Directors and
will depend upon, among other things, our future earnings, operating and
financial condition, capital requirements, and other factors.
Holders
of our common stock have no preemptive rights or other subscription rights,
conversion rights, redemption or sinking fund provisions. Upon our liquidation,
dissolution or winding up, the holders of our common stock will be entitled to
share ratably in the net assets legally available for distribution to
shareholders after the payment of all of our debts and other liabilities. There
are not any provisions in our Articles of Incorporation or our Bylaws that would
prevent or delay change in our control.
Preferred
Stock
The
Company is authorized to issue 10,000,000 shares of preferred stock in series as
fixed by the Directors with $0.001 par value per share. As of the date of this
Prospectus, there are no preferred shares outstanding.
Preferred
stock may be issued in series with preferences and designations as the Board of
Directors may from time to time determine. The board may, without shareholders
approval, issue preferred stock with voting, dividend, liquidation and
conversion rights that could dilute the voting strength of our common
shareholders and may assist management in impeding an unfriendly takeover or
attempted changes in control. There are no restrictions on our ability to
repurchase or reclaim our preferred shares while there is any arrearage in the
payment of dividends on our preferred stock.
26
INTEREST
OF NAMED EXPERTS
Our
Financial Statements as of March 31, 2009 and 2008, and the results of
operations and cash flows for the years ended March 31, 2009 and 2008 were
audited by ZYCPA Company Limited, (formerly Zhong Yi (Hong Kong) C.P.A Company
Limited) Certified Public Accountants, as experts in accounting and auditing, to
the extent and for the periods set forth in our report and are incorporated
herein in reliance upon such report given upon the authority of said firm as
experts in auditing and accounting.
The
legality of the shares offered under this registration statement is being passed
upon by Williams Law Group, P.A., Tampa, Florida. Michael T. Williams,
principal of Williams Law Group, P.A., owns 570,000 shares of our common stock,
of which 100,000 shares are being registered in this offering. Two
affiliates of Williams Law Group, P.A. own an aggregate of 150,000 additional
shares being registered in this offering.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
LIABILITIES
Our
Bylaws, subject to the provisions of Nevada, contain provisions which allow the
corporation to indemnify any person against liabilities and other expenses
incurred as the result of defending or administering any pending or anticipated
legal issue in connection with service to us if it is determined that person
acted in good faith and in a manner which he reasonably believed was in the best
interest of the corporation. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to our
directors, officers and controlling persons, we have been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
DESCRIPTION
OF BUSINESS
Organization
Home
Touch Holding Company is a Nevada corporation formed on January 26,
2009. As of January 26, 2009, we acquired Home Touch Limited, a Hong
Kong Special Administrative Region of China corporation formed as Lexing Group
Limited in July 2004 which changed its name to Home Touch Limited in
2005. Home Touch Limited is our wholly-owned
subsidiary. The transaction was structured as a share exchange in
which we exchanged 40,000,000 shares of our common stock for 10,000 shares of
Home Touch Limited. The purpose of this transaction was solely to
form a U.S. holding company for our business.
Business
Through
Home Touch Limited, we design and sell and install various energy saving + smart
home system products and solutions. Our products and solutions can
centrally control home systems in buildings and/or villas which are pre-wired as
well as those that aren’t pre-wired by using utilize radio frequency, or
European Installation Bus, wireless electronic networking technology to
integrate the various devices and appliances found in most homes, hotels and
offices. We design, supply and install the whole building
system. We are a registered electrical contractor in Hong
Kong.
27
Our main
target is property developers in Hong Kong and China – about 85% of our business
come from them. We also sell to single end users, generally owners of high-end
residences, that in general are referred by interior designers. For outside Hong
Kong, we have a distribution agreement Home Touch Solutions Sdn Bhd, a Malaysian
company. Under our distribution agreement, our distributor sells to
developers directly. We do not own Home Touch Solutions Sdn Bhd and
they are not a partner or affiliate.. Once they have purchased the products,
they assume all expenses for installation and maintenance. We have sold $2,232
to this distributor as of June 30, 2009.
We design
ourselves some of the products we sell such as Novel, Noble, Royal lighting
switch, transceiver, remote controller, telephone controller, IP video door
phone and WiFi video door phone. We also design our own solutions such as
t.HOME, Building Management Software, E-boardcasting software and IP Smart. In
addition, we distribute products with built in software from other
brands. All of the products we sell operate on the same RF wireless
frequency /or EIB and easily communicate with each other. This
hardware and software is all our design except the European Installation Bus.
Because we do not own any production facilities, we use manufacturers in China
to produce some of our products for us.
We also
act as a distributor of product manufactured by others, as described
below.
Our
products and solutions include, among others:
|
·
|
IP
video door phone
|
|
·
|
WiFi
video door phone
|
|
·
|
WiFi
network for the whole building
|
|
·
|
Energy
Saving system for home and building
|
|
·
|
Smart
home system, include, lighting control, home appliance control, curtain
control
|
|
·
|
Security
system, including all kinds of detector and alarm
products
|
|
·
|
Intelligent
Household Management System that allows text message, picture, video
message, report, to all residences of a building. It also allows residents
to book club house facilities, send messages, and panic alarm to building
management office. With the same system, residents may remote site control
their residence
|
|
·
|
Windows
Vista Media Center Edition solution
|
|
·
|
transceiver
- a wireless device used to transmit RF signal to infrared signal to
control heating and air conditioning, all home appliances and audio-visual
systems such as DVD, TV, Amplifier, Cable TV, and
Stereo.
|
|
·
|
remote
controller or internet tablet
|
|
·
|
t.HOME
1 - A USB white box that plugs into a computer USB port that allows the
user to use Window Media Center to coordinate with the transceiver for
control of home systems, appliances and audio-visual
media.
|
|
·
|
Smart
home system from Visiomatic – a German made product and solution which
uses a panel to control all kinds of home
devices.
|
|
·
|
IP
Smart - A plug in to a Cisco IP phone to control lighting, curtain and all
kinds of appliances. This solution is mainly for hotel, service apartment
and office.
|
Since
inception, we have sold our systems to developers in 15 projects at prices
ranging from $5,000 to $10,000.
We also
offer a one stop solution to a home owner or their interior designer
including:
|
·
|
Smart
home system from Visiomatic – a German made product and solution which
uses a panel to control all kinds of home
devices.
|
28
|
·
|
Lighting
Switch from Basalte – a Belgium made modern designed touch
switch.
|
|
·
|
Video
door phone from Elcom
|
|
·
|
Infrastructure
from ABB – a European type control system for home and building use. We
use this system as backbone and add our own control interface hardware
which gives us more flexibility and custom-made to property developers.
ABB iBUS system is running on EIB KNX (European Industry Bus) , it is a
one wire bus system, low voltage. A bus system is a wire or
collection of wires through which data is transmitted from one part of a
computer to another.
|
We have
designed a system to work with the Windows Vista Media Center software found on
desktop computers with the appropriate version of the Windows Vista program
installed. Components of this wireless system include:
|
·
|
Novel,
Noble and or Royal lighting
switches
|
|
·
|
curtain
controller
|
|
·
|
transceiver
- a wireless device used to transmit RF signal to infrared signal to
control heating and air conditioning, all home appliances and audio-visual
systems such as DVD, TV, Amplifier, Cable TV, and
Stereo.
|
|
·
|
remote
controller or internet tablet
|
|
o
|
The
main different between remote control and web tablet is that there is a
preset button and icon on remote controller even you don’t have such kind
of devices or you have more than one set, web tablet provides the graphic
interface to client and allow to add/delete devices even the devices
located at different bedrooms. The scene control is provided to client
custom-made the sequence control of the lighting, curtain and home
appliances.
|
|
·
|
t.HOME
1 - A USB white box that plugs into a computer USB port that allows the
user to use Window Media Center to coordinate with the transceiver for
control of home systems, appliances and audio-visual
media.
|
|
·
|
tHOME
software on Media Center Edition
platform.
|
Since
inception, we have sold these type of systems to homeowners at prices ranging
from $5000 to $10,000.
We also
sell Visiomatic, a high level/luxury home control system. The
monitoring and control of home automation, security technology, entertainment
electronics, communication technology, building technology and infotainment are
provided on a single user interface which utilizes clear design and simple terms
and symbols to make management of all of the technologies
unambiguous.
The base
is an intelligent software with a large number of interfaces. The
general system comprises a powerful industrial controller which has been
designed for around-the-clock operation 365 days a year. Functions
include:
|
·
|
control
and visualization of security
systems,
|
|
·
|
retrieval
of information such as stock exchange news, weather forecasts, world
news,
|
|
·
|
regulation
of heating and air conditioning,
|
|
·
|
activation
of the answer phone,
|
|
·
|
Internet
access
|
29
|
·
|
curtain
and window shade control
|
|
·
|
telephone,
|
|
·
|
DVD
player
|
|
·
|
video
intercom
|
|
·
|
e-mail
|
|
·
|
home
cinema
|
|
·
|
traffic
reports, world time and many other
options.
|
|
·
|
Remote
control operation via a call
centre
|
Since
inception, we have sold these types of systems to homeowners at prices ranging
from $50,000 to $300,000.
Our
systems can also be adapted for the elderly and disabled. This field uses much
of the same technology and equipment as home automation for security,
entertainment, and energy conservation but tailors it towards the elderly and
disabled through emergency assistance systems and tools, reminder systems, and medication
dispensing. For example, we offer a product called softphone, which
allows disabled individuals to use their head to control the above features plus
use the telephone and surf the internet.
Since
inception, we have sold these type of systems to homeowners at prices ranging
from $5,000 to $10,000.
Our smart
home products also have commercial applications such as:
|
·
|
Hotel: Finger
tip display that allows user and hotel staff to switch on mailbox, close
roller shutters, lighting on, and favorite music is played in every room
with a director’s personal welcome on the
display.
|
|
·
|
Office: For
presentations and conferences, coordinates technologies such
as:
|
o
|
DVD
|
o
|
Digital
video
|
o
|
Power
Point presentations
|
o
|
Beamer/
projector
|
o
|
Plasma
monitor
|
o
|
Multi
room and surround systems
|
o
|
Videoconference
system
|
For
example, we developed and sell a product that can plug in to a Cisco IP phone to
control lighting, curtain and all kinds of appliances. This solution is mainly
for hotel, service apartment and office. Prices for this product
range from $5000 to $10000.
30
In our
fiscal year ended March 31, 2009, the following customers accounted for the
following amounts and percentages of our total revenues:
Name
of Customer
|
Amount
of Revenues
|
Percentage
of Total Revenues
|
|||||
Grand
Tech Construction Limited
|
382,050
|
43%
|
|||||
Shenzhen
Bochuang Hi-Tech Company Limited
|
145,371
|
16%
|
|||||
Home
Touch Services Limited
|
127,193
|
14%
|
We have
no agreements with these customers, who purchase from us on purchase orders
only.
Suppliers
For the
year ended March 31, 2009, three product suppliers accounted for 10% or more of
our purchases as follows:
Year
ended March 31, 2009
|
||||||||||||
Purchases
|
Percentage
of
purchases
|
Accounts
payable
|
||||||||||
Jardine
One Solution
|
56,532
|
14%
|
-
|
|||||||||
MAG
Living (Shenzhen) Co. Limited
|
51,481
|
12%
|
-
|
|||||||||
Shenzhen
Bochuang Hi-Tech Company Limited
|
43,669
|
11%
|
||||||||||
151,682
|
37%
|
-
|
We have
distribution agreements with:
|
·
|
ABB
for their i-busE IB/KNX system in Hong Kong, Basalt BVBE for their Tacto,
Mona and Sentido KNX products in Hong Kong, Macau and Mainland
China.
|
|
·
|
Elcom
for their door phone products in
China.
|
|
·
|
Visiomatic
for their Visomatic System in the greater China
area.
|
We do not
anticipate any difficulty in locating back up suppliers, such as MAG Living for
Shenzhen Bochuang.
Third Party
Manufacturers
We design
the outlook, print circuit board, software platform, and software interface and
we give the designs to various factories in China to manufacture for
us. We have no agreements with our third party manufacturers except
Shenzhen Bochuang Hi-Tech Company Limited which manufactures Noble series, Royal
series, Novel series, Transeceiver, Telephone Controller, Remote Controller,
Video Door Phone , Curtain Controller and Intelligent Socket for us and do not
anticipate any difficulty in locating back up third party
manufacturers. Our Agreement with Shenzhen Bochuang Hi-Tech Company
Limited is for a term of two years, commencing August 9, 2006, automatically
renewable unless notice is given 60 days in the advance of the expiration
date. The Agreement is currently in force.
31
Markets and
Marketing
We
currently sell our products in Hong Kong, Mainland China, Macau, Taiwan ROC,
U.A.E., Malaysia and Singapore.
We market
through and in cooperation with various partners.
Microsoft Hong Kong
Limited
We have
cooperated with Microsoft in the Windows Vista launch. Before Window Vista
launch in US, we started to develop a smart home function for Vista. And become
the first launch smart home program in Vista. The smart home feature is a new
direction for PC, and it is suitable to integrate with Vista main feature -
Windows Media Center. Accordingly, we believe we are the only
Independent Software Vendor partner that was invited to be their digital home
solution provider throughout over the world. We and Microsoft agreed to promote
new concept of “ehome.” We do not have a written agreement with
Microsoft we have a join case study leaflet. Microsoft wants to
promote their Vista development platform to the industry. Because
have successful used this platform in our products, they picked us to highlight
the advantage and benefits of Windows Vista platform. We believe this
will support additional sales of our products.
ABB (Hong Kong)
Limited
We have a
written distribution cooperation agreement with ABB. ABB’s distribution channel
gives us access to various new hotel projects. We intend move into China market
in cooperation with ABB. There are 3 tenders we have bid together. We
believe this will support additional sales of our products.
Nokia Hong Kong
Limited
We do not
have agreement with Nokia but are working with them on a joint leaflet for a
joint promotion. Nokia wanted to expand their business to other
categories when they developed a new product line called web tebnet (N800,
N810). We got the device and integrated it with our system. Nokia agreed to put
their logo in the leaflet and promote this feature. And they will support the
future development, such as mobile phone and smartphone integrated with smart
home features. We believe this will support additional sales of our
products. However, we have not yet sold any of these
products.
China Light
Group:
We have
agreed to cooperate with China Light Group in marketing the concept of “All
Electric Home + Intelligent Home” in Hong Kong. We have successfully won 4
projects totaling 68 houses. We do not have a written agreement with
CLP Group but we have a joint case study leaflet. CLP Group wanted to
promote the new concept - All Electric Home - to the Village user and felt our
smart home product features add value to their promotion. We believe this will
support additional sales of our products.
32
Megastrength Security
Service Co. Ltd.
As a
subsidiary of Henderson Land Group, one of the big four property developers in
Hong Kong, they are the supply arm of the group. Home Touch has signed an
exclusive cooperation agreement with them to promote Home Touch products and
solution into Henderson Land Group. We believe this will support
additional sales of our products.
Cisco Systems (HK)
Limited
We have
successfully integrated Home Touch t.HOME 1’s platform into Cisco’s internet
protocol phone infrastructure. We have successfully co-operate to launch a new
generation of IP phone + intelligent home system into the office/hotel market
together – IP Smart. We do not have a written agreement with Cisco
but we have a joint case study leaflet. CISCO want to bring the IP
phone to the home and office and. Our smart control feature is a new function to
them, so they invited us to their Hong Kong promotion exhibition. We became the
only smart control solution for Cisco IP phone. We believe this will support
additional sales of our products.
EBS
We have a
license with EBS in Malaysia to use Home Touch’s name to secure business in the
region. We will utilize a joint promotion and approach acting as developers
together. We believe this will support additional sales of our
products. However, we have not yet sold any of products as a
result of this relationship.
T&J
We have
license T&J in Singapore to use Home Touch’s name to secure business in the
region. We will utilize a joint promotion and approach acting as developers
together. We believe this will support additional sales of our
products. However, we have not yet sold any of products as a result
of this relationship.
eHome
We have
license ehome in UAE to use Home Touch’s name to secure business in the region.
We will utilize a joint promotion and approach acting as developers
together. We believe this will support additional sales of our
products. However, we have not yet sold any of products as a result
of this relationship.
We view
these marketing arrangements as material to our future success in that we have
generated a total revenues of $1,387,387 in aggregate revenues from March 31,
2006 through June 30, 2009, of which $685,411 in revenues were generated from
sales of products with the entities with whom we have these marketing
arrangements. We have generated the following revenues through these
marketing efforts:
|
·
|
Microsoft/Cisco
- $293,447 [1]
|
|
·
|
ABB
- $227,104
|
|
·
|
China
Light - $61,523
|
|
·
|
Megastrength
Security Service Co. Ltd. -
$103,337
|
[1] Consists
of Cisco related products of $181,311 and Microsoft related products of
$112,136, aggregated because they were sold in the same
project.
Our
products are primarily sold through the efforts of our officers, directors and
employees.
Warranties
We
include 12-months warranty coverage on the products we design and distribute.
With respect to products we acquire from third party suppliers, these suppliers
reimburse us for the cost of warranty service.
Insurance
We have
no products liability or other insurance.
33
Intellectual
Property
We have
the following patents:
NAME
|
GRANTED BY
|
DATE
|
NUMBER
|
|||
USB
Wireless Controller
|
Hong
Kong
|
December
29, 2006
|
HK1090804
|
|||
Intelligent
House-Hold Management System
|
Hong
Kong
|
March
16, 2007
|
HK1093867
|
|||
A
Visible Doorbell Device
|
Hong
Kong
|
August
1, 2008
|
HK1111306
|
|||
Advance
computer usage/Audio-Visual/Gaming - Entertainment
Automation
|
Hong
Kong
|
July
7, 2008
|
HK1116992
|
|||
A
Visible Doorbell System
|
Hong
Kong
|
August
1, 2008
|
HK1111307
|
The
duration of all of the above patents is 7 years.
Our
company name/logo were trademarked in Hong Kong on December 6, 2005, No.
300432422
Environmental
Issues
We have
not incurred and do not expect to incur any costs relating to environmental
matters.
Competition and Market
Position
The smart
home systems products industry is characterized by intense competition based
primarily on product availability, price, speed of delivery, ability to tailor
specific solutions to customer needs, quality, and depth of product lines. Our
competition is fragmented across our products, and, accordingly, we do not
compete with any one company across all product and solutions lines. We compete
with a variety of entities, some of which have greater financial resources. Our
ability to remain competitive in this industry depends in part on our ability to
successfully identify new product opportunities, develop and introduce new
products and enhancements on a timely and cost effective basis, as well as our
ability to successfully identify and enter into strategic alliances with
entities doing business within the industries we serve. There can be no
assurance that our product offerings will be, and/or remain, competitive or that
strategic alliances, if any, will achieve the type, extent, and amount of
success or business that we expect them to achieve. The sales of our products
and technology may not occur or grow in the manner we expect, and thus we may
not generate as much revenue as anticipated from such
products.
34
Competition
within the smart home system products industry varies by region and by specific
product offerings. We compete with large scale, well capitalized public
companies and smaller scale private companies that sell home health products and
home medical equipment. We are a small competitor in the
industry. Many of our competitors have substantially greater
financial, marketing, personnel and other resources than we do.
The major
competitors in China are:
|
·
|
Guangzhou
Anjubao Sci-tech Co. Ltd
|
|
·
|
Shanghai
Super Smart Electronics Co. Ltd
|
|
·
|
TianJin
Ruilang Smarthome Co. Ltd
|
|
·
|
GKB
Group
|
|
·
|
Bright
Technologies Co. Ltd
|
|
·
|
RainRead
(China) Intelligence Co., Ltd
|
|
·
|
BoChuang
Corporation Group
|
|
·
|
Xiamen
Genway Security Technology Development Co.,
Ltd.
|
|
·
|
Aurine
Group Co. Ltd
|
|
·
|
Haier
Home Group
|
Haier and
Aurine are the strongest in this industry and significantly larger and have
significantly more resources than us. Haier is owned by Haier Group which a
publically listed company in China, and they have a very strong back up from
their parent company. Aurine is very strong in south east China. They own their
own factory with more than 1000+ people. They are the pioneer in this industry
which have the most job references all over China. We believe we are
of comparable size to most of the remainder these competitors.
In Hong
Kong there are fewer competitors. Most of the competitors are system integrators
meaning they do not have their own brand’s products, they just try to put
everything together and offer to end customers. In addition, they do not have
their own patent technology, solution and so do development team.
|
·
|
Intexact
- Intexact is a small company specializes in personalized solutions for
Intelligent Homes. It mainly focuses in high end intelligent home
solution. Many of their job references are from single
apartment.
|
|
·
|
Cypress
Asia Group – Cypress focuses on larger projects. It has its own
architecture, consultant and design
company.
|
|
·
|
Nixon
Technology – A traditional security systems provider. With many years
security alarm installation experience, it claims to provide total
solutions of intelligent building systems. It is the official distributor
of Samsung home automation
system.
|
Cypress
and Interact are middle-size companies that are significantly larger than
us.
We
compete with other smart home system products companies based upon:
|
·
|
Design
|
|
o
|
We
are an experienced design team of 5 people. All our patented solutions and
products design is done in house.
|
|
·
|
Brand
awareness
|
35
|
o
|
We
are the only smart home system solution provider which spending our effort
on brand building. For instance, one of our project Soho 38, we build our
brand in the same platform with Microsoft, Cisco and Hewlett
Packard.
|
|
·
|
Cost
advantage + flexibility
|
|
o
|
We
have both our own development solution and distribution of well known
brands like Visiomatic, Elcom, Basalte and ABB. In this case, we believe
we offer a cost advantage by providing the tailor-made and flexibility
solution and products to
customers.
|
Research and Development
We have
not incurred research and development expenses during the last two fiscal
years.
Employees
We have
the following full time employees:
|
·
|
Clerical
– One
|
|
·
|
Operations
– One
|
|
·
|
Administrative
– One
|
|
·
|
Management
– One
|
|
·
|
Sales
– Three
|
|
·
|
Technical
– Three
|
|
·
|
Automation
System – Three
|
|
·
|
Marketing
- One
|
We have
no part time employees. We have no collective bargaining agreement
with our employees. We consider our relationship with our employees
to be excellent.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The
following discussion of our financial condition and results of operations should
be read in conjunction with our financial statements and the related notes, and
other financial information included in this Form S-1.
Our
Management’s Discussion and Analysis contains not only statements that are
historical facts, but also statements that are forward-looking (within the
meaning of section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934). The Private Securities Litigation
Reform Act of 1995 is not available to us as a non-reporting
issuer. Further, Section 27A(b)(2)(D) of the Securities Act and
Section 21E(b)(2)(D) of the Securities Exchange Act expressly state that the
safe harbor for forward looking statements does not apply to statements made in
connection with an initial public offering.
36
Forward-looking
statements are, by their very nature, uncertain and risky. These
risks and uncertainties include international, national, and local general
economic and market conditions; our ability to sustain, manage, or forecast
growth; our ability to successfully make and integrate acquisitions; new product
development and introduction; existing government regulations and changes in, or
the failure to comply with, government regulations; adverse publicity;
competition; the loss of significant customers or suppliers; fluctuations and
difficulty in forecasting operating results; change in business strategy or
development plans; business disruptions; the ability to attract and retain
qualified personnel; the ability to protect technology; the risk of foreign
currency exchange rate; and other risks that might be detailed from time to time
in our filing with the Securities and Exchange Commission.
Although
the forward-looking statements in this Registration Statement reflect the good
faith judgment of our management, such statements can only be based on facts and
factors currently known by them. Consequently, and because
forward-looking statements are inherently subject to risks and uncertainties,
the actual results and outcomes may differ materially from the results and
outcomes discussed in the forward-looking statements. You are urged
to carefully review and consider the various disclosures made by us in this
report and in our other reports as we attempt to advise interested parties of
the risks and factors that may affect our business, financial condition, and
results of operations and prospects.
Overview
Generally,
we operate in the “home integration” market, also called “smart home” or
“intelligent home,” although our products, solutions and services apply to
commercial, hotels and industrial buildings as well. This market is
also sometimes referred to as “home automation.”
As a
registered electrical contractor in Hong Kong, we are principally engaged in the
provision of a variety of smart home system products and solutions, which enable
to centrally control home systems with wireless or non-wireless features by
means of radio frequency (RF) or European Installation Bus (EIB), wireless
electronic networking technology to integrate the various devices and appliances
commonly found in buildings, homes, hotels and offices.
We sell
various smart home system products and solutions that can centrally control
various systems and functions in a multitude of residential and commercial
buildings that are either pre-wired as well as those that are not. By
using current technology available in the marketplace today, both our own and
through third parties, we are equipped to design, supply, install and fully
integrate an entire building system.
We have
designed our own proprietary products such as Novel, Noble, and Royal Lighting
Switch, which are produced for us by third party manufactures. We also design
our own solutions such as t.HOME Building Management Software, E-broadcasting
software and IP Smart. In addition, we distribute products and
software from other brands. All of the products we sell operate on
the same RF wireless frequency /or EIB and easily communicate with each
other.
Through
Home Touch Limited, we design and sell and install various energy saving + smart
home system products and solutions. Our products and solutions can
centrally control home systems in buildings and/or villas which are pre-wired as
well as those that aren’t pre-wired by using utilize radio frequency, or
European Installation Bus, wireless electronic networking technology to
integrate the various devices and appliances found in most homes, hotels and
offices. We design, supply and install the whole building
system. We are a registered electrical contractor in Hong
Kong.
37
Our main
target is property developers in Hong Kong and China – about 85% of our business
come from them. We also sell to single end users, generally owners of high-end
residences, that in general are referred by interior designers. For outside Hong
Kong, we have a distribution agreement Home Touch Solutions Sdn Bhd, a Malaysian
company. Under our
distribution agreement, the local distributor directly sells to
developers. We do not own Home Touch Solutions Sdn Bhd and they are
not a partner or affiliate. Once they have purchased the products, they assume
all expenses for installation and maintenance.
We design
our own products such as Novel, Noble, Royal lighting switch, transceiver,
remote controller, telephone controller, IP video door phone and WiFi video door
phone, which are produced for us by third party manufactures. We also design our
own solutions such as t.HOME, Building Management Software, E-boardcasting
software and IP Smart. In addition, we distribute products and software from
other brands. All of the products we sell operate on the same RF
wireless frequency /or EIB and easily communicate with each other.
Summary of Critical
Accounting Estimates
In
accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition”, the
Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable, and
collectibility is reasonably assured.
(a) Sale
of products
The
Company generally sells its products on a no-return basis, including lighting
and curtain switch, lighting components, video door phone, remote controller and
computer accessories, etc. The Company recognizes product revenue when
persuasive evidence of an arrangement exists, the product has been delivered
upon shipment, the sales price is fixed or determinable and collectibility is
reasonably assured.
(b) Projects
revenue
Under the
intelligent home system solutions arrangement, the Company is obligated to
deliver to its customers multiple products and/or services (“multiple
elements”), which include two elements: (1) hardware and software; and (2)
provision of design, customized implementation system and technical supports,
under the customers’ requirement on significant modification of hardware and
customization of software.
The
Company offers multiple solutions to their customers' needs. Those solutions may
involve the delivery or performance of multiple products and services and
performance may occur at different points in time or over different periods of
time. In general, its sale arrangements include initial installation of
hardware, technical support or implementation services and involve consideration
in the form of a fixed fee with no general rights of return.
Fee is negotiated in a fixed amount and concluded upon
the signing the contract, which provides for a customer deposit upon contract
execution, milestone billings. The Company classifies hardware and its related
implementation fees together as project revenue in the statement of operation
and considers multiple element arrangements. Revenue from the sales of the Company’s hardware are
recognized upon shipment or delivery of the hardware provided that persuasive
evidence of an arrangement exists, collection is probable, payment terms are
fixed and determinable and no significant obligations remain. Revenues from
providing implementation services or technical supports are recognized when
services are rendered and accepted by the customers.
38
The
Company adopted the Emerging Issues Task Force Issue No. 00-21, “Revenue Arrangements with Multiple
Deliverables” (“EITF 00-21”) to allocates revenue for these transactions
that include multiple elements to each unit of accounting based on its relative
fair value and recognizes revenue for each unit of accounting when revenue
recognition criteria have been met. The price charged when the element is sold
separately generally determines fair value. When the Company has objective
evidence of the fair values of undelivered elements but not delivered elements,
the Company allocates revenue first to the fair value of the undelivered
elements, and the residual revenue is then allocated to the delivered elements.
If the fair value of any undelivered element included in a multiple element
arrangement cannot be objectively determined, revenue is deferred until all
elements are delivered or services have been performed, or until fair value can
objectively be determined for any remaining undelivered elements.
For fixed
fee long-term contracts, the Company recognizes project revenues using the
percentage-of-completion method of accounting upon completion of each contract
milestone, under the provisions of SOP No. 81-1, “Accounting for Performance of
Construction Type and Certain Production Type Contracts” , (“SOP
81-1”).
(c) Technical
service
Technical
service is primarily derived from the provision of technical development and
application on home system solutions to a single customer for a certain period
of time, which is considered as a long term contract. The Company recognizes technical service income using
the percentage-of-completion method of accounting upon completion of each
milestone, under the provisions of SOP No. 81-1, “Accounting for Performance of
Construction Type and Certain Production Type Contracts” , (“SOP 81-1”). This service is generally billed
on a time-cost plus basis in accordance with each milestone under the
contract.
(d) Interest
income
Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.
Allowance for Doubtful
Accounts
An
allowance for doubtful accounts is established and determined based on
managements’ assessment of known requirements, aging of receivables, payment
history, the customer’s current credit worthiness and the economic
environment. If actual results differ from the estimate, revisions to
the allowance are recorded.
Inventories
Inventories
are recorded at the lower of cost or net realizable value, with expense
estimates made for obsolescence or unsaleable inventory equal to the difference
between the recorded cost of inventories and their estimated market value based
upon assumptions about future demand and market conditions. On an on-going
basis, we monitor these estimates and records adjustments for differences
between estimates and actual experience. Historically, actual results have not
significantly deviated from those determined using these
estimates.
39
Impairment of Long-Lived
Assets
Long-lived
assets primarily include plant and equipment. In accordance with the Statement
of Financial Accounting Standard ("SFAS") No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, we review our long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable. If the
total of the expected undiscounted future net cash flows is less than the
carrying amount of the asset, a loss is recognized for the difference between
the fair value and carrying amount of the asset.
Income
taxes
We
have considered potential sources of future
taxable income in determining the amount of a valuation allowance against its
deferred tax assets at March 31, 2009. Changes in the future taxable
income estimate, could affect the deferred tax asset in the future and an
adjustment to the valuation allowance would be recorded in the period such
determination is made.
We also
adopted Financial Accounting Standards Board ("FASB") Interpretation No. (FIN)
48, "Accounting for
Uncertainty in Income Taxes" and FSP FIN 48-1, which amended certain
provisions of FIN 48. FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in the financial statements in accordance with SFAS No.
109, “Accounting for Income
Taxes.” FIN 48 provides that a tax benefit from an uncertain tax position
may be recognized when it is more likely than not that the position will be
sustained upon examination, including resolutions of any related appeals or
litigation processes, based on the technical merits. Income tax positions must
meet a more-likely-than-not recognition threshold at the effective date to be
recognized upon the adoption of FIN 48 and in subsequent periods. This
interpretation also provides guidance on measurement, de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
In
connection with the adoption of FIN 48, we analyzed the filing positions in all
of the federal, state and foreign jurisdictions where we and our subsidiaries
are required to file income tax returns, as well as all open tax years in these
jurisdictions. We adopted the policy of recognizing interest and penalties, if
any, related to unrecognized tax positions as income tax expense. We did not
have any unrecognized tax positions or benefits and there was no effect on the
financial condition or results of operations for the years ended March 31, 2009
and 2008.
Product warranty and post
service support
We
generally offer product warranty and post-contract customer support (“PCS”) to
its customers for a period of twelve months, free of charge. We periodically
assesses the adequacy of its recorded warranty liabilities and adjusts the
amounts as necessary.
Results of
Operations
Comparison of the three
months ended June 30, 2009 to the three month ended June 30,
2008
Revenues
for the three months ended June 30, 2009 amounted to $21,539 compared to $28,063
for the three months ended June 30, 2008 representing a decrease of
6,524. The decrease is due to the downturn of the economy in Hong
Kong, Macau and China which caused us to delay many of our projects during this
period. During the three months ended June 30, 2009, we had related
party, project revenue of $18,919 and did not have any related party, project
revenue for the three months ended June 30, 2008. We are now focusing
our efforts on project revenue instead of product revenue and we used a related
party to bid on the projects. We will continue to increase our
project revenue; however, we will not be using the related party to bid on the
projects.
Gross
profit for the three months ended June 30, 2009 was $9,895, a decrease of
$11,399, as compared to $21,294 for the three months ended June 30, 2008. The
gross profit rate was 45.9% for the three months ended June 30, 2009 compared to
75.9% for the three months ended June 30, 2008. Management feels that
the gross profit percentage for the three months ended June 30, 2009 is
consistent with the gross profit percentage of 42.3% for the year ended March
31, 2009 and 44.0% for the year ended March 31, 2008 and will continue to be
within this range. Cost of revenue consists primarily of material
costs, direct labor and sub-contracting fees. The lower profit margin
for the three months ended June 30, 2009 compared to 2008 is due to the change
in customer base. During 2008, we focused more on the end customer
which provided a higher profit margin, but now we are focusing more on developer
projects which have a lower profit margin. Although the developer
projects have lower profit margins, we will be able to achieve higher revenues
by selling directly to developers instead of the end user.
Our
operating expenses increased $38,831 to $129,751 for the three months ended June
30, 2009, as compared to operating expenses of $90,920 for the three months
ended June 30, 2008. The increase of 42.7% is due to the overall
expansion of our business. We do not expect to see a significant
increase in our operating expenses during the fiscal year ended March 31,
2010.
Comparison of the year ended
March 31, 2009 to the year ended March 31, 2008
Revenues
for the year ended March 31, 2009 amounted to $882,685 representing an increase
of $622,863 as compared to sales of $259,822 for
2008. In the fiscal year ended March 31, 2009, project revenue
increased by $394,100 or 220%. The increase is due to work being
completed on existing contracts, and the addition and deliver of new contracts
obtained during the year ended March 31, 2009. We also had technical
service revenue of $127,193 for the year ended March 31, 2009 compared to $0 in
2008. The increase is due to our focused effort on selling more
service contracts during fiscal year 2009.
40
Gross
profit for the year ended March 31, 2009 was $373,329, an increase of $259,085,
as compared to $114,244 in 2008. The gross profit rate was 42.3% for the year
ended March 31, 2009 compared to 44.0% in 2008. Management feels this
difference is immaterial. Cost of revenue consists primarily of
material costs, direct labor and sub-contracting fees. Management
feels that at these levels of revenue, our cost of sales will continue to be in
this range.
Our
operating expenses increased $52,265 to $391,237 for
the year ended March 31, 2009, as compared to operating expenses of $338,972 for
2008. The increase of 14.1% is due to the overall expansion of our
business. We do not expect to see a significant increase in our
operating expenses during the fiscal year ended March 31, 2010.
Net loss
for the year ended March 31, 2009 was ($23,982), or ($0.00) per share as
compared to ($222,613), or ($0.00) per share for 2008. Our net loss decreased by
198,631, due primarily to the increase in revenue.
Liquidity and Capital
Resources
At June 30, 2009, our cash and cash equivalents totaled
$16,213, compared to $17,391 as of March 31,
2009. Historically our cash has been provided by collection of
sales revenues, bank loans, short and long-term notes as well as capital from
related parties, primarily certain shareholders. During the three months ended June 30, 2009
and 2008, cash used in operations was $144,672 and $226,471,
respectively. For the three months ended June 30, 2009, the cash used
in operations comprised primarily of our net loss of $121,526 , payments for inventories of $12,531, payments
for deposits and other assets of 33,981, offset by collections of accounts
receivable of $16,941. For the three months ended June 30, 2008, the
cash used in operations comprised primarily of our net loss of $71,363, payments
for inventories of $155,196, payments for accrued liabilities and other payables
of $44,956 , offset by an increase in accounts
payable of 38,784.
We did
not expend funds for investing activities during the three months ended June 30,
2009 and 2008.
During
the three months ended June 30, 2009, we received proceeds from bank loans of
$153,846 and made payments of $10,352 on long-term bank loans compared to
proceeds of $185,897 from the issuance of promissory notes and payments of
$9,283 on long-term bank loans.
As we
expand, we may need to make sizeable cash commitments to secure inventory, and
the impact of this potential trend on our business is uncertain. We plan to
continue to fund our operations from our stockholders and the anticipated
addition of new banking facilities, such as Government Guarantee Loans and/or
Hong Kong Government SME funding. In addition, we plan to increase
the initial deposit percentage from our clients upon the undertaking of new
projects. However, we currently do not have any agreements with
shareholders or lenders and we can offer no assurances that we will be able to
obtain additional funds on acceptable terms, if at all.
We also
anticipate that our continued growth will require a substantial increase in
capital needs. Except as set forth above, we do not have and we have not
identified any source for additional financing. There can be no
assurance that we will be able to secure financing for this
growth. The ability and speed that will be able to grow of our
operations will directly related to the amount of financing that we can
obtain.
41
Long-term
bank loans consist of the following:
June
30, 2009
|
March
31, 2009
|
|||||||
Bank
loans, payable to financial institutions in Hong Kong:
|
||||||||
Equivalent
to HK$300,000 with interest rate at 6.84% per annum payable monthly,
repayable by April 24, 2009, guaranteed by one director of our
company
|
$
|
1,603
|
$
|
1,603
|
||||
Equivalent
to HK$300,000 with interest rate at 7.8% per annum payable monthly,
repayable by October 4, 2009, guaranteed by the directors of our
company
|
7,810
|
12,618
|
||||||
Equivalent
to HK$1,200,000 with annual interest rate at
0.5%
over Hong Kong prime rate payable monthly, repayable by May 3, 2012,
guaranteed by the local government of Hong Kong Special Administrative
Region and the directors of the Company
|
149,905
|
|||||||
Total
|
157,715
|
14,221
|
||||||
Less:
current portion of bank loans
|
(56,527
|
)
|
(14,221
|
)
|
||||
Bank
loans, net of current portion
|
$
|
101,188
|
$
|
-
|
The
minimum future payments of the aggregate bank loans are $56,527 in the next 12
months.
From its
inception, we have suffered from continuous losses with an accumulated deficit
of $631,745 as of June 30, 2009. The continuation as a going concern through
March 31, 2010 is dependent upon the continued financial support from its
stockholders and credit facility from the revolving lines of credit. We have
executed a growing strategy by setting up a showroom to attract and promote
their products and solutions and plans to institute the cost-saving strategy to
reduce all non-essential costs. Also, we are currently pursuing the additional
financing for our operations. However, there is no assurance that we will be
successful in securing sufficient funds to sustain the operations.
Commitments and
Contingencies
Operating lease
commitments
We were
committed under non-cancelable operating leases with fixed monthly rentals, due
through October 26, 2011. Total rent expenses for
the three months ended June 30, 2009 and 2008 was $1,923 and $4,994,
respectively. Total rent expense for the years ended March 31, 2009
and 2008 was $16,165 and $19,975,
respectively.
Future
minimum rental payments due under non-cancelable operating leases are as
follows:
Years
ending June 30,
|
||||
2010
|
$
|
53,846
|
||
2011
|
53,846
|
|||
2012
|
17,949
|
|||
Total:
|
$
|
125,641
|
Reserve for product
warranties
We have
not experienced any material returns where it was under obligation to honor this
standard warranty provision. As such, no reserve for product warranties has been
provided in the statement of operations for three months ended June 30, 2009 and
2008.
42
Revolving lines of
credit
We have
outstanding revolving bank line of credit of $19,230 (equivalent to HK$150,000).
Advances under the lines of credit are unsecured and bear interest at a rate of
3% per annum over Hong Kong Best Lending Rate, payable monthly. The revolving
bank line of credit is reviewed on a regular basis, subject to cancellation at
the discretion of the bank and requires a minimum monthly fee of $13 (equivalent
to HK$100). There were no borrowings under the revolving bank line of credit as
of June 30, 2009.
Recently issued accounting
pronouncements:
We have
reviewed all recently issued, but not yet effective, accounting pronouncements
and do not believe the future adoption of any such pronouncements may be
expected to cause a material impact on its financial condition or the results of
its operations.
DESCRIPTION
OF PROPERTY
We
currently rent the following property:
|
·
|
Address: Rooms
703, 705 and 706, Liven House, 61-63 King Yip Street, Kwun Tong, Hong
Kong
|
|
·
|
Number
of Square Feet: 4,450
|
|
·
|
Name
of Landlord: Smartway Investment Development
Limited
|
|
·
|
Term
of Lease: October 27, 2008 to October 26,
2011
|
|
·
|
Monthly
Rental: $4,487
|
|
·
|
Adequate
for current
needs: Yes
|
We are
committed under non-cancelable operating leases with fixed monthly rentals, due
through October 26, 2011. Total rent expenses for the years ended March 31, 2009
and 2008 was $16,165 and $19,975, respectively.
As of
December 31, 2008, future minimum rental payments due under non-cancelable
operating leases are as follows:
Year
ending December 31,
|
||||
2009
|
$
|
53,846
|
||
2010
|
53,846
|
|||
2011
|
31,410
|
|||
Total:
|
$
|
139,102
|
We do not
intend to renovate, improve, or develop properties. We are not
subject to competitive conditions for property and currently have no property to
insure. We have no policy with respect to investments in real estate
or interests in real estate and no policy with respect to investments in real
estate mortgages. Further, we have no policy with respect to
investments in securities of or interests in persons primarily engaged in real
estate activities.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
For the
year ended March 31, 2009, the Company sold its products at its current market
value totaling $13,682 to a related company, Home Touch Services Limited, which
is controlled by Mr. David Gunawan Ng and Ms. Stella Wai Yau, the directors of
the Company in a normal course of business.
For the
year ended March 31, 2009, the Company provided intelligent home system
solutions at its current market value totaling $131,689 to a related company,
Home Touch Services Limited, which is controlled by Mr. David Gunawan Ng and Ms.
Stella Wai Yau, the directors of the Company in a normal course of business,
with $6,108 of accounts receivable at year-end.
43
For the
year ended March 31, 2009, the Company purchased certain products at its current
market value totaling $17,397 from a related company, Penflow Technology (Asia)
Limited, which is controlled by Mr. David Gunawan Ng and Ms. Stella Wai Yau, the
directors of the Company in a normal course of
business.
During
the year ended March 31, 2009, the Company received the customer deposits of
$52,956 from the related company, Home Touch Services Limited, which is
controlled by Mr. David Gunawan Ng and Ms. Stella Wai Yau, the directors of the
Company, relating to the service agreement of intelligent home system solutions
with the contract value of $158,059 at its current market value in a normal
course of business. As of March 31, 2009, the Company has included
the $52,956 in accrued liabilities and other payables.
As of
March 31, 2008, a balance of $382,702 due to related parties represented
temporary advances pursuant to an oral agreement from a related company,
Technics Group Limited, which is controlled by Mr. David Gunawan Ng and Ms.
Stella Wai Yau. The balance was unsecured, non-interest bearing and repayable on
demand. During the year ended March 31, 2009, the Company received additional
advances of $66,949 and the balance of $449,651 due to related parties was
waived by the related party.
The
following is a table summarized the transactions:
Amounts
Due to
|
||||
Related
Parties
|
||||
Balance,
March 31, 2008
|
$ | 382,702 | ||
Proceeds
|
66,949 | |||
Amount
waived
|
(449,651 | ) | ||
Balance,
March 31, 2009
|
$ | - |
For the
year ended March 31, 2008, the Company obtained a note payable up to the
available amount of $384,615 (approximately HK$3,000,000) from a related party,
which was controlled by Mr. Ng Tze Lung David Gunawan and Ms. Yau Wai Stella,
the directors of the Company. The note payable was unsecured and carried with an
interest charge at a fixed sum of $12,820 payable upon its maturity due January
31, 2010, for working capital purposes to certain projects.
During
the fiscal year of 2008, the Company received the proceeds of $230,769 from note
payable and made repayments of $25,641.
During
the fiscal year of 2009, the Company drew an additional $153,846 on the note
payable and made repayments of $269,231. The remaining $89,743 from
the note payable was waived by the related party. The following table
summarizes the transactions:
Note
Payable
|
||||
Related
Party
|
||||
Balance,
March 31, 2007
|
$ | - | ||
Proceeds
|
230,769 | |||
Payments
|
(25,641 | ) | ||
Balance,
March 31, 2008
|
205,128 | |||
Proceeds
|
153,846 | |||
Payments
|
(269,231 | ) | ||
Amount
waived
|
(89,743 | ) | ||
Balance,
March 31, 2009
|
$ | - |
Because
the Company was not in a position to meet repayment obligation to these related
companies, Technics Group Limited and Penflow Technology (Asia) Limited, the
forfeiture was granted by the related companies that were controlled by Mr.
David Gunawan Ng and Ms. Stella Wai Yau, the directors of the Company, in
exchange for the additional paid-in capital to the Company. The loans were
forfeited by these entities controlled by the principal shareholders of the
company in order to improve the Company’s financial position. However, Mr.
David Gunawan Ng and Ms. Stella Wai Yau, our directors, did not receive any
additional stock or other equity interest from us in exchange for the forfeiture
of these loans. The forfeiture was pursuant to an oral
agreement.
For the
period ended June 30, 2009, the Company provided intelligent home system
solutions at its current market value totaling $18,919 to a related company,
Home Touch Services Limited, which is controlled by Mr. David Gunawan Ng and Ms.
Stella Wai Yau, the directors of the Company in a normal course of business,
with zero accounts receivable at year-end.
For the
period ended June 30, 2009, the Company leased out some portion of the office
premises to and reimbursed rental charge of $11,538 from a related company,
Technices Group Limited, which is controlled by Mr. David Gunawan Ng and Ms.
Stella Wai Yau, the directors of the Company, at the market price in accordance
with the lease agreement in a normal course of business.
As of
June 30, 2009, the Company had amounts due of $52,956 from the related company,
Home Touch Services Limited, which is controlled by Mr. David Gunawan Ng
and Ms. Stella Wai Yau, the directors of the Company, relating to the service
agreement of intelligent home system solutions with the contract value of
$158,059 at its current market value in a normal course of
business. The amount of $52,956 is included in accrued liabilities
and other payables.
We
believe that all related party transactions were on terms at least as favorable
as we would have secured in arm’s-length transactions with third
parties. Except as set forth above, we have not entered into any
material transactions with any director, executive officer, and promoter,
beneficial owner of five percent or more of our common stock, or family members
of such persons.
44
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
There is
no established public trading market for our securities and a regular trading
market may not develop, or if developed, may not be sustained. A
shareholder in all likelihood, therefore, will not be able to resell his or her
securities should he or she desire to do so when eligible for public
resales. Furthermore, it is unlikely that a lending institution will
accept our securities as pledged collateral for loans unless a regular trading
market develops. We have no plans, proposals, arrangements, or
understandings with any person with regard to the development of a trading
market in any of our securities.
Options, Warrants,
Convertible Securities
There are
no options, warrants or convertible securities outstanding.
Penny Stock
Considerations
Our
shares will be "penny stocks" as that term is generally defined in the
Securities Exchange Act of 1934 to mean equity securities with a price of less
than $5.00. Our shares thus will be subject to rules that impose
sales practice and disclosure requirements on broker-dealers who engage in
certain transactions involving a penny stock.
Under the
penny stock regulations, a broker-dealer selling a penny stock to anyone other
than an established customer must make a special suitability determination
regarding the purchaser and must receive the purchaser's written consent to the
transaction prior to the sale, unless the broker-dealer is otherwise
exempt. Generally, an individual with a net worth in excess of
$1,000,000, or annual income exceeding $100,000 individually or $300,000
together with his or her spouse, is considered an accredited
investor. In addition, under the penny stock regulations the
broker-dealer is required to:
· Deliver,
prior to any transaction involving a penny stock, a disclosure schedule prepared
by the Securities and Exchange Commissions relating to the penny stock market,
unless the broker-dealer or the transaction is otherwise exempt;
· Disclose
commissions payable to the broker-dealer and our registered representatives and
current bid and offer quotations for the securities;
· Send
monthly statements disclosing recent price information pertaining to the penny
stock held in a customer's account, the account's value and information
regarding the limited market in penny stocks; and
· Make
a special written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser's written agreement to the
transaction, prior to conducting any penny stock transaction in the customer's
account.
Because
of these regulations, broker-dealers may encounter difficulties in their attempt
to sell shares of our common stock, which may affect the ability of selling
shareholders or other holders to sell their shares in the secondary market and
have the effect of reducing the level of trading activity in the secondary
market. These additional sales practice and disclosure requirements
could impede the sale of our securities, if our securities become publicly
traded. In addition, the liquidity for our securities may be
decreased, with a corresponding decrease in the price of our
securities. Our shares in all probability will be subject to such
penny stock rules and our shareholders will, in all likelihood, find it
difficult to sell their securities.
45
OTC Bulletin Board
Qualification for Quotation
To have
our shares of common stock on the OTC Bulletin Board, a market maker must file
an application on our behalf in order to make a market for our common
stock. We have engaged in preliminary discussions with a FINRA Market
Maker to file our application on Form 211 with FINRA, but as of the date of this
prospectus, no filing has been made. Based upon our counsel’s prior
experience, we anticipate that after this registration statement is declared
effective, it will take approximately 2 – 8 weeks for FINRA to issue a trading
symbol.
Sales of our common stock
under Rule 144.
There are
12,320,000 shares of our common stock held by non- affiliates and 27,680,000
shares held by affiliates Rule 144 of the Securities Act of 1933 defines as
restricted securities. 1,579,000 shares of our Common stock are held by
non-affiliates are currently eligible for resale or are being registered in this
offering, however affiliates will still be subject to the resale restrictions of
Rule 144. In general, persons holding restricted securities,
including affiliates, must hold their shares for a period of at least six
months, may not sell more than one percent of the total issued and outstanding
shares in any 90-day period, and must resell the shares in an unsolicited
brokerage transaction at the market price. The availability for sale
of substantial amounts of common stock under Rule 144 could reduce prevailing
market prices for our securities.
Holders
As of the
date of this registration statement, we had 44 shareholders of record
of our common stock.
Dividends
We have
not declared any cash dividends on our common stock since our inception and do
not anticipate paying such dividends in the foreseeable future. We
plan to retain any future earnings for use in our business. Any
decisions as to future payments of dividends will depend on our earnings and
financial position and such other facts, as the Board of Directors deems
relevant.
Reports to
Shareholders
As a
result of this offering, we will become subject to the information and reporting
requirements of the Securities Exchange Act of 1934 and will file periodic
reports, proxy statements, and other information with the Securities and
Exchange Commission through March 31, 2010, assuming this registration statement
is declared effective before that date. Thereafter, we will continue as a
voluntary reporting company and will not be subject to the proxy statement or
other information requirements of the 1934 Act. We are not required under
Section 12(g) or otherwise to become a mandatory 1934 Act filer unless we have
more than 500 shareholders and total assets of more than $10 million on March
31, 2010. However, at or prior to March 31, 2010, we intend voluntarily to file
a registration statement on Form 8-A. This will require us to file quarterly and
annual reports with the SEC and will also subject us to the proxy rules of the
SEC. In addition, our officers, directors and 10% stockholders will be required
to submit reports to the SEC on their stock ownership and stock trading
activity. If we do not file a registration statement on Form 8-A at or prior to
March 31, 2010, our securities can no longer be quoted on the OTC Bulletin
Board. We currently intend to voluntarily send an annual report to shareholders
containing audited financial statements.
46
Where You Can Find
Additional Information
We have
filed with the Securities and Exchange Commission a registration statement on
Form S-1. For further information about us and the shares of common
stock to be sold in the offering, please refer to the registration statement and
the exhibits and schedules thereto. The registration statement and exhibits may
be inspected, without charge, and copies may be obtained at prescribed rates, at
the SEC's Public Reference Room at 100 F St., N.E., Washington, D.C.
20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The
registration statement and other information filed with the SEC are also
available at the web site maintained by the SEC at
http://www.sec.gov.
EXECUTIVE
COMPENSATION
Summary Compensation
Table
The table
below summarizes all compensation awarded to, earned by, or paid to our
Principal Executive Officer, our two most highly compensated executive officers
other than our CEO who occupied such position at the end of our latest fiscal
year and up to two additional executive officers who would have been included in
the table below except for the fact that they were not executive officers at the
end of our latest fiscal year, by us, or by any third party where the purpose of
a transaction was to furnish compensation, for all services rendered in all
capacities to us or our subsidiary for the latest fiscal years ended March 31,
2009 and 2008.
Name
|
Title
|
Year
|
Salary
|
Bonus
|
Stock
awards
|
Option
awards
|
Non
equity
Incen-
tive
plan
com-
pen-
sation
|
Non
qualified
deferred
compensa-
tion
|
All other
Compensa-
tion
|
Total
|
||||||||||||||||||||||||||
Mr.
David
Gunawan
Ng
|
Chairman
and Executive Director
|
2009
|
$
|
22,436
|
0
|
0
|
0
|
0
|
0
|
0
|
$
|
22,436
|
||||||||||||||||||||||||
Ms.
Stella Wai Yau
|
COO
and CFO
|
2009
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
||||||||||||||||||||||||||
Mr.
Remus Hung Yat Lam
|
Sales
Director
|
2009
|
$
|
36,234
|
$
|
1,154
|
0
|
0
|
0
|
0
|
0
|
$
|
37,388
|
|||||||||||||||||||||||
Mr.
David Gunawan Ng
|
Chairman
and Executive Director
|
2008
|
$
|
38,462
|
0
|
0
|
0
|
0
|
0
|
0
|
$
|
38,462
|
||||||||||||||||||||||||
Ms.
Stella Wai Yau
|
COO
and CFO
|
2008
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
||||||||||||||||||||||||||
Mr.
Remus Hung Yat Lam
|
Sales
Director
|
2008
|
$
|
27,356
|
$
|
2,051
|
0
|
0
|
0
|
0
|
0
|
$
|
29,407
|
47
Summary Equity Awards
Table
The
following table sets forth certain information for our executive officers
concerning unexercised options, stock that has not vested, and equity incentive
plan awards as of March 31 2009.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END MARCH 31, 2009
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
Equity
Incentive
Plan
Awards:
Number
Of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($)
|
|||||||||||||||||||||||||||
Mr.
David Gunawan Ng
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
Ms.
Stella Wai Yau
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
Mr.
Remus Hung Yat Lam
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Narrative disclosure to
summary compensation and option tables
Set forth
below are the material terms of each named executive officer's employment
agreement or arrangement, whether written or unwritten:
We have
entered into employment arrangements only with Mr. Lam, as follows:
|
·
|
Commencement: December
1, 2006
|
48
|
·
|
Termination: One
month written notice or payment in lieu will be required to terminate the
appointment by the Company. He can quit with 30 day notice.
|
|
·
|
Compensation: $2,307.69
per month and Commission of 3% of the Sales Turnover
|
We
participate in a defined contribution pension scheme under the Mandatory
Provident Fund Schemes Ordinance (“MPF Scheme”) for all of our eligible
employees in Hong Kong.
The MPF
Scheme is available to all employees aged 18 to 64 with at least 60 days of
service in the employment in Hong Kong. Contributions are made by us at 5% of
the participants’ relevant income with a ceiling of HK$20,000. The participants
are entitled to 100% of the Company’s contributions together with accrued
returns irrespective of their length of service with us, but the benefits are
required by law to be preserved until the retirement age of 65. The total
contributions made for MPF Scheme were $11,275 and $8,214 for the years ended
March 31, 2009 and 2008, respectively.
Ms.
Stella Wai Yau has declined any salary for these periods indicating that she
wants to help build the business without causing additional financial burden on
the company. At no time during the last fiscal year with respect to any
person listed in the Table above was there:
|
·
|
any
outstanding option or other equity-based award repriced or otherwise
materially modified (such as by extension of exercise periods, the change
of vesting or forfeiture conditions, the change or elimination of
applicable performance criteria, or the change of the bases upon which
returns are determined;
|
|
·
|
any
waiver or modification of any specified performance target, goal or
condition to payout with respect to any amount included in non-stock
incentive plan compensation or
payouts;
|
|
·
|
any
option or equity grant;
|
|
·
|
any
non-equity incentive plan award made to a named executive
officer;
|
|
·
|
any
nonqualified deferred compensation plans including nonqualified defined
contribution plans; or
|
|
·
|
any
payment for any item to be included under All Other Compensation in the
Summary Compensation Table.
|
49
Board of
Directors
Director
Compensation
Name
|
|
Year
ended
March
31,
2009
|
|
|
Fees
earned
or paid
in cash
($)
|
|
|
Stock
awards
($)
|
|
|
Option
awards
($)
|
|
|
Non-equity
incentive plan
compensation
($)
|
|
|
Nonqualified
deferred
compensation
earnings
($)
|
|
|
All other
compensation
($)
|
|
|
Total
($)
|
|
||||||||
Mr.
David
Gunawan
Ng
and Ms.
Stella
Wai
Yau
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Narrative
to Director Compensation Table
We have no compensation arrangements (such as fees
for retainer, committee service, service as chairman of the board or a
committee, and meeting attendance) with directors. No separate compensation was
paid to Mr. Ng as director and all compensation paid to Mr. Ng is included in
the executive compensation table above.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
FINANCIAL DISCLOSURE
None.
50
HOME
TOUCH HOLDING COMPANY
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal
years ended March 31, 2009 and 2008
|
Page
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated
Balance Sheets
|
F-3
|
Consolidated
Statements of Operations
|
F-4
|
Consolidated
Statements of Cash Flows
|
F-5
|
Consolidated
Statements of Stockholders’ Equity (Deficit)
|
F-6
|
Notes
to Consolidated Financial Statements
|
F-7
– F-19
|
Three
months ended June 30, 2009
|
|
Condensed
Consolidated Balance Sheet as of June 30, 2009 (unaudited) and March 31,
2009 (audited)
|
F-20
|
Condensed
Consolidated Statements of Operations and Comprehensive Loss for the three
months ended June 30, 2009 and 2008 (unaudited)
|
F-21
|
Condensed
Consolidated Statements of Cash Flows for the three months ended June 30,
2009 and 2008 (unaudited)
|
F-22
|
Condensed
Consolidated Statement of Stockholders’ (Deficit) Equity for the three
months ended June 30, 2009 (unaudited)
|
F-23
|
Notes
to Condensed Consolidated Financial Statements
|
F-24
– F-33
|
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors and Stockholders of
Home
Touch Holding Company
We have
audited the accompanying consolidated balance sheets of Home Touch Holding
Company and its subsidiary (“the Company”) as of March 31, 2009 and 2008, and
the related consolidated statements of operations, cash flows and stockholders’
equity (deficit) for the years ended March 31, 2009 and 2008. The consolidated
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits include consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of March 31,
2009 and 2008, and the results of operations and cash flows for the years then
ended and in conformity with accounting principles generally accepted in the
United States of America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred substantial losses,
all of which raise substantial doubt about its ability to continue as a going
concern. Management’s plans in regard to these matters are also described in
Note 2. These consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ ZYCPA Company
Limited
ZYCPA
Company Limited
(Formerly
Zhong Yi (Hong Kong) C.P.A. Company Limited)
Certified
Public Accountants
Hong
Kong, China
July 22,
2009
F-2
HOME
TOUCH HOLDING COMPANY
CONSOLIDATED
BALANCE SHEETS
AS
OF MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
As
of March 31,
|
||||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 17,391 | $ | 108,000 | ||||
Restricted
cash held in escrow
|
- | 47,436 | ||||||
Accounts
receivable, trade
|
17,111 | 7,913 | ||||||
Accounts
receivable, related party
|
6,108 | - | ||||||
Inventories
|
116,713 | 141,753 | ||||||
Deposits
and other current assets
|
35,378 | 18,128 | ||||||
Total
current assets
|
192,701 | 323,230 | ||||||
Non-current
assets:
|
||||||||
Plant
and equipment, net
|
21,718 | 9,432 | ||||||
TOTAL
ASSETS
|
$ | 214,419 | $ | 332,662 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 1,347 | $ | 15,675 | ||||
Current
portion of long-term bank loans
|
14,221 | 38,222 | ||||||
Amounts
due to related parties
|
- | 382,702 | ||||||
Accrued
liabilities and other payables
|
129,676 | 123,162 | ||||||
Total
current liabilities
|
145,244 | 559,761 | ||||||
Long-term
liabilities:
|
||||||||
Note
payable, related party
|
- | 205,128 | ||||||
Long-term
bank loans
|
- | 14,010 | ||||||
Total
long-term liabilities
|
- | 219,138 | ||||||
Total
liabilities
|
145,244 | 778,899 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity (deficit):
|
||||||||
Preferred
stock, $0.001 par value, 10,000,000 shares authorized; no shares issued
and outstanding
|
- | - | ||||||
Common
stock, $0.001 par value; 100,000,000 shares authorized; issued and
outstanding: 40,000,000 shares
|
40,000 | 40,000 | ||||||
Additional
paid-in capital
|
539,394 | - | ||||||
Accumulated
deficit
|
(510,219 | ) | (486,237 | ) | ||||
Total
stockholders’ equity (deficit)
|
69,175 | (446,237 | ) | |||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
$ | 214,419 | $ | 332,662 |
See
accompanying notes to consolidated financial statements.
F-3
HOME
TOUCH HOLDING COMPANY
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
Years
ended March 31,
|
||||||||
2009
|
2008
|
|||||||
REVENUES,
NET:
|
||||||||
Product
sales
|
$ | 37,337 | $ | 81,138 | ||||
Product
sales, related party
|
13,682 | - | ||||||
Project
revenue
|
572,784 | 178,684 | ||||||
Project
revenue, related party
|
131,689 | - | ||||||
Technical
service
|
127,193 | - | ||||||
Total
revenues, net
|
882,685 | 259,822 | ||||||
COST
OF REVENUE:
|
||||||||
Cost
of products sold
|
29,793 | 20,741 | ||||||
Cost
of projects
|
448,290 | 124,837 | ||||||
Cost
of technical service
|
31,273 | - | ||||||
Total
cost of revenue
|
509,356 | 145,578 | ||||||
GROSS
PROFIT
|
373,329 | 114,244 | ||||||
Operating
expenses:
|
||||||||
Selling,
general and administrative
|
391,237 | 338,972 | ||||||
Total
operating expenses
|
391,237 | 338,972 | ||||||
LOSS
FROM OPERATIONS
|
(17,908 | ) | (224,728 | ) | ||||
Other
income (expense):
|
||||||||
Interest
income
|
7 | 430 | ||||||
Interest
expense
|
(6,081 | ) | (4,663 | ) | ||||
Other
income
|
- | 6,348 | ||||||
Total
other (expense) income
|
(6,074 | ) | 2,115 | |||||
LOSS
BEFORE INCOME TAXES
|
(23,982 | ) | (222,613 | ) | ||||
Income
tax expense
|
- | - | ||||||
NET
LOSS
|
$ | (23,982 | ) | $ | (222,613 | ) | ||
Net
loss per share – Basic and diluted
|
$ | (0.00 | ) | $ | (0.00 | ) | ||
Weighted
average shares outstanding – Basic and diluted
|
40,000,000 | 40,000,000 |
See
accompanying notes to consolidated financial statements.
F-4
HOME
TOUCH HOLDING COMPANY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
Years
ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (23,982 | ) | $ | (222,613 | ) | ||
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
||||||||
Depreciation
|
4,957 | 8,106 | ||||||
Loss
on disposal of plant and equipment
|
4,303 | - | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Restricted
cash held in escrow
|
47,436 | (47,436 | ) | |||||
Accounts
receivable, trade
|
(9,198 | ) | 10,181 | |||||
Accounts
receivable, related party
|
(6,108 | ) | - | |||||
Inventories
|
25,040 | (105,179 | ) | |||||
Deposits
and other current assets
|
(17,250 | ) | 381 | |||||
Accounts
payable
|
(14,328 | ) | 15,675 | |||||
Accrued
liabilities and other payables
|
6,514 | 79,179 | ||||||
Net
cash provided by (used in) operating activities
|
17,384 | (261,706 | ) | |||||
Cash
flows from investing activities:
|
||||||||
Purchase
of plant and equipment
|
(21,546 | ) | (1,262 | ) | ||||
Net
cash used in investing activities
|
(21,546 | ) | (1,262 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Advances
from related parties
|
66,949 | 91,062 | ||||||
Proceeds
from note payable
|
153,846 | 230,769 | ||||||
Payment
on note payable
|
(269,231 | ) | (25,641 | ) | ||||
Proceeds
from long-term bank loans
|
- | 76,923 | ||||||
Payment
on long-term bank loans
|
(38,011 | ) | (24,691 | ) | ||||
Net
cash (used in) provided by financing activities
|
(86,447 | ) | 348,422 | |||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
(90,609 | ) | 85,454 | |||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
108,000 | 22,546 | ||||||
CASH
AND CASH EQUIVALENTS, END OF YEAR
|
$ | 17,391 | $ | 108,000 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
||||||||
Cash
paid for income tax
|
$ | - | $ | - | ||||
Cash
paid for interest
|
$ | 6,081 | $ | 4,663 | ||||
NON-CASH
TRANSACTIONS IN INVESTING AND FINANCING ACTIVITIES
|
||||||||
Forfeiture
of amounts due to related parties
|
$ | 449,651 | $ | - | ||||
Forfeiture
of note payable due to a related party
|
$ | 89,743 | $ | - |
See
accompanying notes to consolidated financial statements.
F-5
HOME
TOUCH HOLDING COMPANY
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
Preferred Stock | Common Stock | |||||||||||||||||||||||||||
No.
of share
|
Amount
|
No.
of share
|
Amount
|
Additional
paid-in
capital
|
Accumulated
deficit
|
Total
stockholders’
(deficit)
equity
|
||||||||||||||||||||||
Balance
as of April 1, 2007
|
- | $ | - | 40,000,000 | $ | 40,000 | $ | - | $ | (263,624 | ) | $ | (223,624 | ) | ||||||||||||||
Net
loss for the year
|
- | - | - | - | - | (222,613 | ) | (222,613 | ) | |||||||||||||||||||
Balance
as of March 31, 2008
|
- | - | 40,000,000 | 40,000 | - | (486,237 | ) | (446,237 | ) | |||||||||||||||||||
Net
loss for the year
|
- | - | - | - | - | (23,982 | ) | (23,982 | ) | |||||||||||||||||||
Forfeiture
of note payable and amounts due to related parties
|
- | - | - | - | 539,394 | - | 539,394 | |||||||||||||||||||||
Balance
as of March 31, 2009
|
- | $ | - | 40,000,000 | $ | 40,000 | $ | 539,394 | $ | (510,219 | ) | $ | 69,175 |
See
accompanying notes to consolidated financial statements.
F-6
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
1.
ORGANIZATION
AND BUSINESS BACKGROUND
Home
Touch Holding Company (“Hometouch” or “the Company”) was incorporated in the
State of Nevada on January 26, 2009.
On
January 26, 2009, the Company entered into a stock exchange transaction with the
shareholders of Home Touch Limited (“HTL”), whereby the Company issued
40,000,000 shares of common stock in exchange for 100% of the ownership interest
in HTL, for the purpose of re-domiciling HTL as a Nevada corporation in the
United States. As a result of the merger, the Company became the legal entity of
the HTL while the business of HTL survives. Unless otherwise
indicated, all references to the Company throughout the financial statements
include the operations of HTL.
HTL was
incorporated as a limited liability company in Hong Kong Special Administrative
Region of China (“Hong Kong”) on July 23, 2004, with its principal place of
business in Hong Kong. The issued and paid-up share capital of the Company is
$1,282 (equivalent to Hong Kong dollars ("HK$") 10,000).
HTL is
principally engaged in the provision of a variety of smart home system products
and solutions, which enable to centrally control home systems with wireless or
non-wireless features by the means of radio frequency or European Installation
Bus, wireless electronic networking technology to integrate the various devices
and appliances that are mostly found in buildings, homes, hotels and offices.
Generally, the Company sells the intelligent home hardware products to the
individual end users and provides intelligent home system solutions to the
interior designers and property developers. Intelligent home hardware products
include wireless products series (including the touch panel, smart switch
series, telephone controller, curtain controller, transceiver, remote controller
and intelligent socket) and the wired products series (visiomatic intelligent
home system).
Intelligent
home system solutions include system design and programming, installation of
products and devices, training and technical support. The Company has a team of
computer engineering professionals to provide with intelligence home system
design and consulting services. The Company’s customers mainly include
individual end users, interior designers and property developers and all of its
customers are located in Hong Kong.
Hometouch
and its subsidiary are hereinafter referred to as (the “Company”).
2.
GOING
CONCERN UNCERTAINTIES
The
accompanying consolidated financial statements have been prepared using the
going concern basis of accounting, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of
business.
From its
inception, the Company has suffered from continuous losses with an accumulated
deficit of $510,219 as of March 31, 2009. The continuation of the Company as a
going concern through March 31, 2010 is dependent upon the continued financial
support from its stockholders and credit facility from the revolving lines of
credit. The Company has executed a growing strategy by setting up a showroom to
attract and promote their products and solutions and plans to institute the
cost-saving strategy to reduce all non-essential costs. Also, the Company is
currently pursuing the additional financing for its operations. However, there
is no assurance that the Company will be successful in securing sufficient funds
to sustain the operations.
These and
other factors raise substantial doubt about the Company’s ability to continue as
a going concern. These consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets and liabilities that may result in the Company not
being able to continue as a going concern.
F-7
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
l
|
Basis
of presentation
|
These
accompanying consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of America
(“US GAAP”).
l
|
Basis
of consolidation
|
The
consolidated financial statements include the financial statements of Hometouch
and its subsidiary.
All
significant inter-company balances and transactions within the Company have been
eliminated upon consolidation.
l
|
Use
of estimates
|
In
preparing these consolidated financial statements, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities in
the balance sheets and revenues and expenses during the years reported. Actual
results may differ from these estimates.
l
|
Cash
and cash equivalents
|
Cash and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.
l
|
Accounts
receivable
|
Accounts
receivable are recorded at the invoiced amount and do not bear interest. The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. An allowance for doubtful accounts is
established and determined based on managements’ assessment of known
requirements, aging of receivables, payment history, the customer’s current
credit worthiness and the economic environment. The Company did not record any
allowance for doubtful accounts for both fiscal years.
l
|
Inventories
|
Inventories
are stated at the lower of first-in, first-out ("FIFO") cost or market value,
which are primarily comprised of home hardware devices and appliances necessary
for the development of the home system solutions or re-sale to the customers.
The Company periodically reviews historical sales activity to determine excess,
slow moving items and potentially obsolete items and also evaluates the impact
of any anticipated changes in future demand. The Company provides inventory
allowances based on excess and obsolete inventories determined principally by
customer demand.
As of
March 31, 2009 and 2008, the Company did not record an allowance for obsolete
inventories, nor have there been any write-offs.
F-8
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
l
|
Plant
and equipment
|
Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become
fully operational:
Depreciable
life
|
|
Leasehold
improvements
|
Shorter
of 3 years or term of lease
|
Furniture,
fixtures and office equipment
|
5
years
|
Expenditure
for maintenance and repairs is expensed as incurred. The gain or loss on the
disposal of plant and equipment is the difference between the net sales proceeds
and the carrying amount of the relevant assets and is recognized in the
statement of operations.
l
|
Impairment
of long-lived assets
|
Long-lived
assets primarily include plant and equipment. In accordance with the Statement
of Financial Accounting Standard ("SFAS") No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, the Company reviews its long-lived assets
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable. If the total of the
expected undiscounted future net cash flows is less than the carrying amount of
the asset, a loss is recognized for the difference between the fair value and
carrying amount of the asset. There has been no impairment as of March 31, 2009
and 2008.
l
|
Revenue
recognition
|
In
accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition”, the
Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable, and
collectibility is reasonably assured.
(a) Sale
of products
The
Company generally sells its products with no general rights of return and no
price protection, including lighting and curtain switch, lighting components,
video door phone, remote controller and computer accessories, etc. The Company
recognizes product revenue when persuasive evidence of an arrangement exists,
the product has been delivered upon shipment, the sales price is fixed or
determinable and collectibility is reasonably assured.
(b) Projects
revenue
Under the
intelligent home system solutions arrangement, the Company is obligated to
deliver to its customers multiple products and/or services (“multiple
elements”), which include two elements: (1) hardware and software; and (2)
provision of design, customized implementation system and technical supports,
under the customers’ requirement on significant modification of hardware and
customization of software.
The
Company offers multiple solutions to their customers' needs. Those solutions may
involve the delivery or performance of multiple products and services and
performance may occur at different points in time or over different periods of
time. In general, its sale arrangements include initial installation of
hardware, technical support or implementation services and involve consideration
in the form of a fixed fee with no general rights of return.
Fee is
negotiated in a fixed amount and concluded upon the signing the contract, which
provides for a customer deposit upon contract execution, milestone billings. The
Company classifies hardware and its related implementation fees together as
project revenue in the statement of operation and considers multiple element
arrangements. Revenue from the sales of the Company’s hardware are recognized
upon shipment or delivery of the hardware provided that persuasive evidence of
an arrangement exists, collection is probable, payment terms are fixed and
determinable and no significant obligations remain. Revenues from providing
implementation services or technical supports are recognized when services are
rendered and accepted by the customers.
F-9
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
The
Company adopted the Emerging Issues Task Force Issue No. 00-21, “Revenue Arrangements with Multiple
Deliverables” (“EITF 00-21”) to allocates revenue for these transactions
that include multiple elements to each unit of accounting based on its relative
fair value and recognizes revenue for each unit of accounting when revenue
recognition criteria have been met. The price charged when the element is sold
separately generally determines fair value. When the Company has objective
evidence of the fair values of undelivered elements but not delivered elements,
the Company allocates revenue first to the fair value of the undelivered
elements, and the residual revenue is then allocated to the delivered elements.
If the fair value of any undelivered element included in a multiple element
arrangement cannot be objectively determined, revenue is deferred until all
elements are delivered or services have been performed, or until fair value can
objectively be determined for any remaining undelivered elements.
For fixed
fee long-term contracts, the Company recognizes project revenues using the
percentage-of-completion method of accounting upon completion of each contract
milestone, under the provisions of SOP No. 81-1, “Accounting for Performance of
Construction Type and Certain Production Type Contracts”, (“SOP
81-1”).
(c) Technical
service
Technical
service is primarily derived from the provision of technical development and
application on home system solutions to a single customer for a certain period
of time, which is considered as a long term contract. The Company recognizes
technical service income using the percentage-of-completion method of accounting
upon completion of each milestone, under the provisions of SOP No. 81-1, “Accounting for Performance of
Construction Type and Certain Production Type Contracts”, (“SOP 81-1”).
This service is generally billed on a time-cost plus basis in accordance with
each milestone under the contract.
(d) Interest
income
Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.
l
|
Cost
of revenue
|
Cost of
revenue consists primarily of material costs, direct labor and sub-contracting
fee.
l
|
Advertising
expenses
|
Advertising
costs are expensed as incurred under SOP 93-7, “Reporting for Advertising
Costs”. The Company incurred advertising expense of $3,888 and $1,774 for
the years ended March 31, 2009 and 2008.
l
|
Retirement
plan costs
|
Contributions
to retirement schemes (which are defined contribution plans) are charged to
general and administrative expenses in the statements of operations as and when
the related employee service is provided.
l
|
Product
warranty and post service support
|
The
Company generally offers product warranty and post-contract customer support
(“PCS”) to its customers for a period of twelve months, free of charge. The
Company periodically reviews actual warranty claims experience to determine a
reserve for warranty liabilities if necessary.
F-10
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
l
|
Income
taxes
|
The
Company accounts for income tax using SFAS No. 109 “Accounting for Income
Taxes”, which requires the asset and liability approach for financial
accounting and reporting for income taxes. Under this approach, deferred income
taxes are provided for the estimated future tax effects attributable to
temporary differences between financial statement carrying amounts of assets and
liabilities and their respective tax bases, and for the expected future tax
benefits from loss carry-forwards and provisions, if any. Deferred tax assets
and liabilities are measured using the enacted tax rates expected in the years
of recovery or reversal and the effect from a change in tax rates is recognized
in the statement of operations and comprehensive (loss) income in the period of
enactment. A valuation allowance is provided to reduce the amount of deferred
tax assets if it is considered more likely than not that some portion of, or all
of the deferred tax assets will not be realized.
The
Company also adopts Financial Accounting Standards Board ("FASB") Interpretation
No. (FIN) 48, "Accounting for
Uncertainty in Income Taxes" and FSP FIN 48-1, which amended certain
provisions of FIN 48. FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in the financial statements in accordance with SFAS No. 109,
“Accounting for Income
Taxes.” FIN 48 provides that a tax
benefit from an uncertain tax position may be recognized when it is more likely
than not that the position will be sustained upon examination, including
resolutions of any related appeals or litigation processes, based on the
technical merits. Income tax positions must meet a more-likely-than-not
recognition threshold at the effective date to be recognized upon the adoption
of FIN 48 and in subsequent periods. This
interpretation also provides guidance on measurement, derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
In
connection with the adoption of FIN 48, the Company analyzed the filing
positions in all of the federal, state and foreign jurisdictions where the
Company and its subsidiaries are required to file income tax returns, as well as
all open tax years in these jurisdictions. The Company adopted the policy of
recognizing interest and penalties, if any, related to unrecognized tax
positions as income tax expense. The Company did not have any unrecognized tax
positions or benefits and there was no effect on the financial condition or
results of operations for the years ended March 31, 2009 and 2008.
The
Company conducts major businesses in Hong Kong and is subject to tax in its own
jurisdiction. As a result of its business activities, the Company files separate
tax returns that are subject to examination by the foreign tax
authority.
l
|
Net
income (loss) per share
|
The
Company calculates net income (loss) per share in accordance with SFAS No.
128, “Earnings per
Share.” Basic income (loss) per share is computed by dividing the net
income (loss) by the weighted-average number of common shares outstanding during
the period. Diluted income (loss) per share is computed similar to basic income
(loss) per share except that the denominator is increased to include the number
of additional common shares that would have been outstanding if the potential
common stock equivalents had been issued and if the additional common shares
were dilutive.
l
|
Foreign
currencies translation
|
Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the statement of operations.
The
reporting currency of the Company is the United States dollars ("US$"). The
Company's subsidiary in Hong Kong maintains its books and records in its local
currency, Hong Kong Dollars ("HK$"), which is functional currency as being the
primary currency of the economic environment in which the entity
operates.
F-11
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
In
general, for consolidation purposes, assets and liabilities of its subsidiary
whose functional currency is not US$ are translated into US$, in accordance with
SFAS No. 52, “Foreign Currency
Translation”, using the exchange rate on the balance sheet date. Revenues
and expenses are translated at average rates prevailing during the period. The
gains and losses resulting from translation of financial statements of foreign
subsidiary are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders’ equity. For the years
ended March 31, 2009 and 2008, the impact of foreign currencies translation is
insignificant and no comprehensive income or loss is recorded.
l
|
Segment
reporting
|
SFAS No.
131, “Disclosures about
Segments of an Enterprise and Related Information” establishes standards
for reporting information about operating segments on a basis consistent with
the Company’s internal organization structure as well as information about
geographical areas, business segments and major customers in financial
statements. The Company operates in one reportable operating
segment.
l
|
Related
parties
|
Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.
l
|
Fair
value of financial instruments
|
The
Company values its financial instruments as required by SFAS No. 107, “Disclosures about Fair Value of
Financial Instruments”. The estimated fair value amounts have been
determined by the Company, using available market information and appropriate
valuation methodologies. The estimates presented herein are not necessarily
indicative of amounts that the Company could realize in a current market
exchange.
The
Company’s financial instruments primarily consist of cash and cash equivalents,
restricted cash, accounts receivable, deposits and other current assets,
accounts payable, amounts due to related parties, accrued liabilities and other
payables.
As of the
balance sheet dates, the estimated fair values of the financial instruments were
not materially different from their carrying values as presented due to the
short term maturities of these instruments and that the interest rates on the
borrowings approximate those that would have been available for loans of similar
remaining maturity and risk profile at respective year ends.
l
|
Recent
accounting pronouncements
|
The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its financial condition or the
results of its operations.
In June
2008, the FASB issued FASB Staff Position ("FSP") EITF 03-6-1, "Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities"
("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting, and therefore need to be included in the earnings
allocation in computing earnings per share under the two-class method as
described in SFAS No. 128, “Earnings per Share”. Under
the guidance of FSP EITF 03-6-1, unvested share-based payment awards that
contain nonforfeitable rights to dividends or dividend equivalents (whether paid
or unpaid) are participating securities and shall be included in the computation
of earnings-per-share pursuant to the two-class method. FSP EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008 and all prior-period earnings per share data presented shall
be adjusted retrospectively. Early application is not permitted. The Company
does not expect it to have an effect on the Company's financial position,
results of operations or cash flows.
F-12
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
Also in
June 2008, the FASB ratified EITF No. 07-5, "Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity's Own Stock" ("EITF
07-5"). EITF 07-5 provides that an entity should use a two-step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument's contingent
exercise and settlement provisions. EITF 07-5 is effective for financial
statements issued for fiscal years beginning after December 15, 2008. Early
application is not permitted. The Company is assessing the potential impact of
this EITF 07-5 on the financial condition and results of operations and does not
expect it to have an effect on the Company's financial position, results of
operations or cash flows.
In
September 2008, the FASB issued FSP 133-1 and FIN 45-4, “Disclosures about Credit
Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and
FASB Interpretation No. 45; and Clarification of the Effective Date of FASB
Statement No. 161” (“FSP FAS 133-1” and “FIN 45-4”). FSP FAS 133-1 and
FIN 45-4 amends disclosure requirements for sellers of credit derivatives and
financial guarantees. It also clarifies the disclosure requirements of SFAS No.
161 and is effective for quarterly periods beginning after November 15, 2008,
and fiscal years that include those periods. The adoption of FSP FAS 133-1 and
FIN 45-4 did not have a material impact on the Company’s current financial
position, results of operation or cash flows.
In
October 2008, the FASB issued Staff Position (“FSP”) No. 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active” (“FSP FAS
157-3.”) FSP FAS 157-3 clarifies the application of SFAS No. 157 in an inactive
market. It illustrated how the fair value of a financial asset is determined
when the market for that financial asset is inactive. FSP FAS 157-3 was
effective upon issuance, including prior periods for which financial statements
had not been issued. The adoption of FSP FAS 157-3 did not have a material
impact on the Company’s current financial position, results of operations or
cash flows.
In
December 2008, the FASB issued Staff Position (“FSP”) No. 140-4 and FIN 46(R)-8,
“Disclosures by Public
Entities about Transfers of Financial Assets and Interests in Variable Interest
Entities”. The purpose of this FSP is to promptly increase disclosures by
public entities and enterprises until the pending amendments to SFAS No. 140,
“Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities ”,
(“SFAS No. 140”) and FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest
Entities”, (“FIN 46(R)”) are finalized and approved by the FASB. The FSP
is effective for reporting periods (interim and annual) ending after December
15, 2008. This adoption did not have any impact on the consolidated financial
statements.
On
January 12, 2009, the FASB issued FSP EITF 99-20-01, “Amendment to the Impairment
Guidance of EITF Issue No. 99-20”. This FSP amends the impairment
guidance in EITF Issue No. 99-20, “Recognition of Interest Income and
Impairment on Purchased Beneficial Interests and Beneficial Interests That
Continue to be Held by a Transferor in Securitized Financial Assets,” to
achieve more consistent determination of whether an other-than-temporary
impairment has occurred. The FSP also retains and emphasizes the objective of an
other-than-temporary impairment assessment and the related disclosure
requirements in SFAS No. 115, “Accounting for Certain Investments
in Debt and Equity Securities ”, and other related guidance. The FSP is
shall be effective for interim and annual reporting periods ending after
December 15, 2008, and shall be applied prospectively. Retrospective application
to a prior interim or annual reporting period is not permitted. The Company does
not believe this pronouncement will impact its financial
statements.
4.
ACCOUNTS RECEIVABLE, TRADE
The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The
Company evaluates the need of an allowance for doubtful accounts based on
specifically identified amounts that management believes to be uncollectible. If
actual collections experience changes, revisions to the allowance may be
required. Based upon the aforementioned criteria, management has determined that
no allowance for doubtful accounts is required as of March 31, 2009 and
2008.
F-13
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
5.
RESTRICTED CASH
As of
March 31, 2008, the Company had $47,436 of restricted cash held in escrow with a
designated insurance company, Asia Insurance Co., Ltd, registered in Hong Kong,
being a cash collateral as required by the property developer in conjunction
with the Company’s home system solution projects with a major customer. The
escrowed funds are released upon the Company’s completion of the projects and
final acceptance by the property developer. For the year ended March 31, 2009,
the Company completed the related projects and the escrowed fund was
released.
6.
DEPOSITS AND OTHER CURRENT ASSETS
As
of March 31,
|
||||||||
2009
|
2008
|
|||||||
Rental
and utilities deposits
|
$ | 25,705 | $ | 18,128 | ||||
Purchase
deposit
|
9,673 | - | ||||||
$ | 35,378 | $ | 18,128 |
7.
PLANT AND
EQUIPMENT
Plant and
equipment consisted of the following:
As
of March 31,
|
||||||||
2009
|
2008
|
|||||||
Leasehold
improvements
|
$ | 15,761 | $ | 12,459 | ||||
Furniture
and fixtures
|
13,289 | 7,506 | ||||||
29,050 | 19,965 | |||||||
Less:
accumulated depreciation
|
(7,332 | ) | (10,533 | ) | ||||
Plant
and equipment, net
|
$ | 21,718 | $ | 9,432 |
Depreciation
expenses for the years ended March 31, 2009 and 2008 were $4,957 and $8,106,
respectively.
8.
AMOUNTS DUE TO RELATED PARTIES
As of
March 31, 2008, a balance of $382,702 due to related parties represented
temporary advances from a related company, which is controlled by Mr. David
Gunawan Ng and Ms. Stella Wai Yau. The balance was unsecured, non-interest
bearing and repayable on demand.
For the
year ended March 31, 2009, the Company received the additional advances of
$66,949 and the balance of $449,651 due to related parties was waived by the
related company subsequently.
F-14
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
9. ACCRUED
LIABILITIES AND OTHER PAYABLES
Accrued
liabilities and other payables consisted of the following:
As
of March 31,
|
||||||||
2009
|
2008
|
|||||||
Customer
deposits
|
$ | 13,785 | $ | 64,848 | ||||
Customer
deposits from related parties
|
52,956 | - | ||||||
Accrued
expenses
|
61,021 | 56,657 | ||||||
Other
payables
|
1,914 | 1,657 | ||||||
$ | 129,676 | $ | 123,162 |
Customer
deposits represent advanced payments received from the customer upon signing the
contracts with the Company.
10. NOTE
PAYABLE, RELATED PARTY
For the
year ended March 31, 2008, the Company obtained a note payable up to the
available amount of $384,615 (approximately HK$3,000,000) from a related party,
which was controlled by Mr. David Gunawan Ng and Ms. Stella Wai Yau, the
directors of the Company. The note payable was unsecured and carried with an
interest charge at a fixed sum of $12,820 payable upon its maturity due January
31, 2010, for working capital purposes to certain projects.
From its
initial drawdown date to March 31, 2009, the Company received the aggregate net
proceeds of $89,743 from note payable and was granted the forfeiture of the
outstanding balance of $89,743.
11. LONG-TERM
BANK LOANS
Long-term
bank loans consisted of the following:
As
of March 31,
|
||||||||
2009
|
2008
|
|||||||
Bank
loans, payable to financial institutions in Hong Kong:
|
||||||||
Equivalent
to HK$300,000 with interest rate at 6.84% per annum payable monthly,
repayable by April
24, 2009,
guaranteed by one director of the Company |
$ | 1,603 | $ | 20,833 | ||||
Equivalent
to HK$300,000 with interest rate at 7.8% per annum payable monthly,
repayable by October 4, 2009,
guaranteed by the directors of the Company |
12,618 | 31,399 | ||||||
Total
|
14,221 | 52,232 | ||||||
Less:
current portion of bank loans
|
(14,221 | ) | (38,222 | ) | ||||
Long-term
bank loans, net of current portion
|
$ | - | $ | 14,010 |
F-15
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
12. CAPITAL
TRANSACTION
(a) Common
stock
At the
date of inception on January 26, 2009, the Company entered into a stock exchange
transaction and issued a total of 40,000,000 shares of common stock, for the
purpose of re-domiciling HTL as a Nevada corporation in the United
States.
Pursuant
to stock exchange transaction on January 26, 2009, the weighted average number
of common shares issued and outstanding of 40,000,000 shares was adjusted to
account for the effects of the stock exchange transaction as re-domiciling HTL
as a Nevada corporation as fully described in Note 1, for all periods presented
as if the recapitalization had occurred at the beginning of the earliest period
presented.
(b) Additional
paid-in capital
For the
year ended March 31, 2009, the Company was granted the forfeiture of amounts due
to related parties totaling $449,651 and note payable to a related party
totaling $89,743, respectively. The aggregate amount of $539,394 was charged as
credit to additional paid-in capital.
13. INCOME
TAXES
For the
years ended March 31, 2009 and 2008, the Company generated net operating losses
and accordingly, no provision for income tax has been recorded. The Company has
an operating subsidiary that operates in Hong Kong that is subject to income tax
in the jurisdictions in which it operates, as follows:
United
States of America
Hometouch
is registered in the State of Nevada and is subject to United States of America
tax law.
Hong
Kong
The
Company’s operating subsidiary, HTL is subject to Hong Kong Profits Tax at the
statutory rate of 16.5% and 17.5% in for the year ended March 31, 2009 and 2008
on the assessable income for its tax reporting years. For the years ended March
31, 2009 and 2008, the Company incurred an operating loss of $23,982 and
$222,163 for income tax purposes. A reconciliation of loss before income taxes
to the effective tax rate as follows:
Years
ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Loss
before income taxes
|
$ | (23,982 | ) | $ | (222,613 | ) | ||
Statutory
income tax rate
|
16.5 | % | 17.5 | % | ||||
Income
tax at Hong Kong statutory tax rate
|
(3,957 | ) | (38,957 | ) | ||||
Tax
effect of non-taxable interest income
|
- | (75 | ) | |||||
Tax
effect of depreciation
|
(1,891 | ) | 691 | |||||
Tax
effect of non-deductible items
|
710 | - | ||||||
Net
operating loss carryforwards
|
5,138 | 38,341 | ||||||
Income
tax expense
|
$ | - | $ | - |
F-16
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
For the
years ended March 31, 2009 and 2008, the Company incurred net operating losses
and, accordingly, no provision for income taxes has been recorded. In addition,
no benefit for income taxes has been recognized due to the uncertainty of the
realization of any tax assets. As of March 31, 2009, the Company had
approximately $479,719 of net operating loss carryforwards for Hong Kong tax
purpose at no expiration.
The
following table sets forth the significant components of the aggregate net
deferred tax assets (liabilities) of the Company as of March 31, 2009 and
2008:
As
of March 31,
|
||||||||
2009
|
2008
|
|||||||
Deferred
tax asset (liabilities):
|
||||||||
Plant
and equipment
|
$ | (1,240 | ) | $ | (59 | ) | ||
Net
operating loss carryforward
|
75,018 | 74,014 | ||||||
Total
net deferred tax assets
|
73,778 | 73,955 | ||||||
Less:
valuation allowance
|
(73,778 | ) | (73,955 | ) | ||||
Net
deferred tax assets
|
$ | - | $ | - |
For
financial reporting purposes, the Company has incurred a loss since its
inception. Based on the available objective evidence, including the history of
losses, management believes that it is more likely than not that the net
deferred assets will not be fully realizable. Accordingly, the Company provided
for a full valuation allowance against its net deferred tax assets of $73,778
and $73,955 as of March 31, 2009 and 2008, respectively. For the year ended
March 31, 2009, the valuation allowance decreased by $177, primarily relating to
net operating loss carryforwards and plant and equipment.
14. PENSION
PLANS
The
Company’s subsidiary participates in a defined contribution pension scheme under
the Mandatory Provident Fund Schemes Ordinance (“MPF Scheme”) for
all of its eligible employees in Hong Kong.
15.
RELATED
PARTY TRANSACTIONS
(a)
|
For
the year ended March 31, 2009, the Company sold its products at its
current market value totaling $13,682 to a related company which is
controlled by Mr. David Gunawan Ng and Ms. Stella Wai Yau, the directors
of the Company in a normal course of
business.
|
(b)
|
For
the year ended March 31, 2009, the Company provided intelligent home
system solutions service at its current market value totaling $131,689 to
a related company which is controlled by Mr. David Gunawan Ng and Ms.
Stella Wai Yau, the directors of the Company in a normal course of
business, with $6,108 of accounts receivable at
year-end.
|
(c)
|
For
the year ended March 31, 2009, the Company purchased certain products at
its current market value totaling $17,397 from a related company which is
controlled by Mr. David Gunawan Ng and Ms. Stella Wai Yau, the directors
of the Company in a normal course of
business.
|
(d)
|
As
of March 31, 2009, the Company received the customer deposits of $52,956
from the related company which is controlled by Mr. David Gunawan Ng and
Ms. Stella Wai Yau, the directors of the Company, relating to the service
agreement of intelligent home system solutions with the contract value of
$158,059 at its current market value in a normal course of
business.
|
F-17
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
16. CONCENTRATIONS
OF RISK
The
Company is exposed to the following concentrations of risk:
(a)
Major
customers
For the
years ended March 31, 2009 and 2008, the customer who accounts for 10% or more
of the revenues of the Company is presented as follows:
Year
ended March 31, 2009
|
March
31, 2009
|
|||||||||||
Revenues
|
Percentage
of
revenue
|
Accounts
receivable
|
||||||||||
Customer
E
|
$ | 382,050 | 43 | % | $ | 16,941 | ||||||
Customer
F
|
145,371 | 16 | % | 6,108 | ||||||||
Customer
G
|
127,193 | 14 | % | - | ||||||||
Total:
|
$ | 656,614 | 73 | % | $ | 23,049 |
Year
ended March 31, 2008
|
March
31, 2008
|
|||||||||||
Revenues
|
Percentage
of
revenue
|
Accounts
receivable
|
||||||||||
Customer
A
|
$ | 42,308 | 16 | % | $ | - | ||||||
Customer
B
|
38,034 | 15 | % | 3,914 | ||||||||
Customer
C
|
30,564 | 12 | % | - | ||||||||
Customer
D
|
29,897 | 11 | % | 2,990 | ||||||||
Total:
|
$ | 140,803 | 54 | % | $ | 6,904 |
(b) Major
vendors
For the
years ended March 31, 2009 and 2008, the vendor who accounts for 10% or more of
the purchases of the Company is presented as follows:
Year
ended March 31, 2009
|
March
31, 2009
|
|||||||||||
Purchases
|
Percentage
of
purchases
|
Accounts
payable
|
||||||||||
Vendor
A
|
$ | 43,669 | 11 | % | $ | - | ||||||
Vendor
B
|
51,481 | 12 | % | - | ||||||||
Vendor
D
|
56,532 | 14 | % | - | ||||||||
Total:
|
$ | 151,682 | 37 | % | $ | - |
Year
ended March 31, 2008
|
March
31, 2008
|
|||||||||||
Purchases
|
Percentage
of
purchases
|
Accounts
payable
|
||||||||||
Vendor
A
|
$ | 73,158 | 47 | % | $ | - | ||||||
Vendor
B
|
64,199 | 41 | % | - | ||||||||
Vendor
C
|
18,259 | 12 | % | 15,675 | ||||||||
Total:
|
$ | 155,616 | 100 | % | $ | 15,675 |
F-18
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(c) Credit
risk
Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and trade accounts receivable. The
Company performs ongoing credit evaluations of its customers’ financial
condition, but does not require collateral to support such
receivables.
(d) Interest
rate risk
The
Company’s interest-rate risk arises from long-term bank borrowings. Borrowings
issued at variable rates expose the Company to cash flow interest-rate risk.
Borrowings issued at fixed rates expose the Company to fair value interest-rate
risk. Company policy is to maintain approximately all of its borrowings in fixed
rate instruments. As of March 31, 2009 and 2008, all of borrowings were at fixed
rates.
17. COMMITMENTS
AND CONTINGENCIES
(a) Operating
lease commitments
The
Company was committed under non-cancelable operating lease with fixed monthly
rentals, due through October 26, 2011. Total rent expenses for the years ended
March 31, 2009 and 2008 was $16,165 and $19,975, respectively. Future minimum
rental payments due under the non-cancelable operating lease agreement are as
follows:
Years
ending March 31,
|
||||
2010
|
$ | 53,846 | ||
2011
|
53,846 | |||
2012
|
31,410 | |||
Total:
|
$ | 139,102 |
(b) Reserve
for product warranties
The
Company has not experienced any material actual claims from product warranties
where it was under obligation to honor its standard warranty provision. As such,
no reserve for product warranties has been recognized in the statement of
operations for the years ended March 31, 2009 and 2008.
(c)
Revolving
lines of credit
During
2009, the Company obtained the revolving lines of credit with the available
outstanding balance of $14,221 (equivalent to HK$110,932). Advances under the
lines of credit are unsecured and bear interest at a rate of 3% per annum over
Hong Kong Best Lending Rate, payable monthly. The revolving lines of credit is
reviewed on a regular basis, subject to cancellation at the discretion of the
bank and requires a minimum monthly fee of $13 (equivalent to HK$100). There
were no borrowings under the revolving lines of credit as of March 31,
2009.
F-19
HOME
TOUCH HOLDING COMPANY
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF JUNE 30, 2009 AND MARCH 31, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
June
30, 2009
|
March
31, 2009
|
|||||||
(Unaudited)
|
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 16,213 | $ | 17,391 | ||||
Accounts
receivable, trade
|
170 | 17,111 | ||||||
Accounts
receivable, related party
|
- | 6,108 | ||||||
Inventories
|
129,244 | 116,713 | ||||||
Deposits
and other current assets
|
69,359 | 35,378 | ||||||
Total
current assets
|
214,986 | 192,701 | ||||||
Non-current
assets:
|
||||||||
Plant
and equipment, net
|
19,574 | 21,718 | ||||||
TOTAL
ASSETS
|
$ | 234,560 | $ | 214,419 | ||||
LIABILITIES
AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 1,347 | $ | 1,347 | ||||
Current
portion of long-term bank loans
|
56,527 | 14,221 | ||||||
Accrued
liabilities and other payables
|
127,849 | 129,676 | ||||||
Total
current liabilities
|
185,723 | 145,244 | ||||||
Long-term
liabilities:
|
||||||||
Long-term
bank loans
|
101,188 | - | ||||||
Total
long-term liabilities
|
101,188 | - | ||||||
Total
liabilities
|
286,911 | 145,244 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
(deficit) equity:
|
||||||||
Preferred
stock, $0.001 par value, 10,000,000 shares authorized; no shares issued
and outstanding
|
- | - | ||||||
Common
stock, $0.001 par value; 100,000,000 shares authorized; issued and
outstanding: 40,000,000 shares
|
40,000 | 40,000 | ||||||
Additional
paid-in capital
|
539,394 | 539,394 | ||||||
Accumulated
deficit
|
(631,745 | ) | (510,219 | ) | ||||
Total
stockholders’ (deficit) equity
|
(52,351 | ) | 69,175 | |||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
$ | 234,560 | $ | 214,419 |
See
accompanying notes to condensed consolidated financial statements.
F-20
HOME
TOUCH HOLDING COMPANY
CONDENSED
CONSOLIDATED STATEMENTS OF
OPERATIONS
AND COMPREHENSIVE LOSS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
Three
months ended June 30,
|
||||||||
2009
|
2008
|
|||||||
”REVENUES,
NET:
|
||||||||
Product
sales
|
$ | 126 | $ | 6,909 | ||||
Project
revenue
|
2,494 | 21,154 | ||||||
Project
revenue, related party
|
18,919 | - | ||||||
Total
revenues, net
|
21,539 | 28,063 | ||||||
COST
OF REVENUE:
|
||||||||
Cost
of products sold
|
23 | 1,279 | ||||||
Cost
of project
|
11,621 | 5,490 | ||||||
Total
cost of revenue
|
11,644 | 6,769 | ||||||
GROSS
PROFIT
|
9,895 | 21,294 | ||||||
Operating
expenses:
|
||||||||
Selling,
general and administrative
|
129,751 | 90,920 | ||||||
Total
operating expenses
|
129,751 | 90,920 | ||||||
LOSS
FROM OPERATIONS
|
(119,856 | ) | (69,626 | ) | ||||
Other
income (expense):
|
||||||||
Interest
income
|
4 | 1 | ||||||
Interest
expense
|
(1,674 | ) | (1,738 | ) | ||||
Total
other expense
|
(1,670 | ) | (1,737 | ) | ||||
LOSS
BEFORE INCOME TAXES
|
(121,526 | ) | (71,363 | ) | ||||
Income
tax expense
|
- | - | ||||||
NET
LOSS
|
$ | (121,526 | ) | $ | (71,363 | ) | ||
Net
loss per share – Basic and diluted
|
$ | (0.00 | ) | $ | (0.00 | ) | ||
Weighted
average shares outstanding – Basic and diluted
|
40,000,000 | 40,000,000 |
See
accompanying notes to condensed consolidated financial statements.
F-21
HOME
TOUCH HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
Three
months ended June 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (121,526 | ) | $ | (71,363 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
|
2,144 | 1,507 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable, trade
|
16,941 | 4,753 | ||||||
Accounts
receivable, related party
|
6,108 | - | ||||||
Inventories
|
(12,531 | ) | (155,196 | ) | ||||
Deposits
and other current assets
|
(33,981 | ) | - | |||||
Accounts
payable, trade
|
- | 38,784 | ||||||
Accrued
liabilities and other payables
|
(1,827 | ) | (44,956 | ) | ||||
Net
cash used in operating activities
|
(144,672 | ) | (226,471 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Advances
from related parties
|
- | 32,051 | ||||||
Repayment
to a director
|
- | (1,025 | ) | |||||
Proceed
from note payable
|
- | 153,846 | ||||||
Proceeds
from long-term bank loans
|
153,846 | - | ||||||
Payment
on long-term bank loans
|
(10,352 | ) | (9,283 | ) | ||||
Net
cash provided by financing activities
|
143,494 | 175,589 | ||||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
(1,178 | ) | (50,882 | ) | ||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
17,391 | 108,000 | ||||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$ | 16,213 | $ | 57,118 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
||||||||
Cash
paid for income tax
|
$ | - | $ | - | ||||
Cash
paid for interest
|
$ | 1,674 | $ | 1,738 |
See
accompanying notes to condensed consolidated financial statements.
F-22
HOME
TOUCH HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ (DEFICIT) EQUITY
FOR
THE THREE MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
Preferred
Stock
|
Common
Stock
|
|||||||||||||||||||||||||||
No.
of share
|
Amount
|
No.
of share
|
Amount
|
Additional
paid-in
capital
|
Accumulated
deficit
|
Total
stockholders’
equity
(deficit)
|
||||||||||||||||||||||
Balance
as of April 1, 2009
|
- | $ | - | 40,000,000 | $ | 40,000 | $ | 539,394 | $ | (510,219 | ) | $ | 69,175 | |||||||||||||||
Net
loss for the period
|
- | - | - | - | - | (121,526 | ) | (121,526 | ) | |||||||||||||||||||
Balance
as of June 30, 2009
|
- | $ | - | 40,000,000 | $ | 40,000 | $ | 539,394 | $ | (631,745 | ) | $ | (52,351 | ) |
See
accompanying notes to condensed consolidated financial statements.
F-23
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
NOTE-1
|
BASIS
OF PRESENTATION
|
The
accompanying unaudited condensed consolidated financial statements have been
prepared by the Company in accordance with both accounting principles generally
accepted in the United States (“GAAP”), and the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Certain information and note disclosures normally
included in audited consolidated financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations, although the Company believes that the
disclosures made are adequate to make the information not
misleading.
In the
opinion of management, the consolidated balance sheet as of March 31, 2009 has
been derived from the audited consolidated financial statements and these
unaudited condensed consolidated financial statements reflect all normal and
recurring adjustments considered necessary to state fairly the results for the
periods presented. The results of operation for the three months ended June 30,
2009 are not necessarily indicative of the results to be expected for the entire
fiscal year ending March 31, 2010 or for any future period.
These
unaudited condensed consolidated financial statements and notes thereto should
be read in conjunction with the audited consolidated financial statements and
notes for the year ended March 31, 2009 and 2008.
NOTE-2
|
ORGANIZATION
AND BUSINESS BACKGROUND
|
Home
Touch Holding Company (“Hometouch” or “the Company”) was incorporated in the
State of Nevada on January 26, 2009.
The
Company through its operating subsidiary, is principally engaged in the
provision of a variety of smart home system products and solutions, which enable
to centrally control home systems with wireless or non-wireless features by the
means of radio frequency or European Installation Bus, wireless electronic
networking technology to integrate the various devices and appliances that are
mostly found in buildings, homes, hotels and offices. Generally, the Company
sells the intelligent home hardware products to the individual end users and
provides intelligent home system solutions to the interior designers and
property developers. Intelligent home hardware products include wireless
products series (including the touch panel, smart switch series, telephone
controller, curtain controller, transceiver, remote controller and intelligent
socket) and the wired products series (visiomatic intelligent home
system).
Intelligent
home system solutions include system design and programming, installation of
products and devices, training and technical support. The Company has a team of
computer engineering professionals to provide with intelligence home system
design and consulting services. The Company’s customers mainly include
individual end users, interior designers and property developers and all of its
customers are located in Hong Kong.
HTL was
incorporated as a limited liability company in Hong Kong Special Administrative
Region of China (“Hong Kong”) on July 23, 2004, with its principal place of
business in Hong Kong.
Hometouch
and its subsidiary are hereinafter referred to as (the “Company”).
NOTE-3
|
GOING
CONCERN UNCERTAINTIES
|
The
accompanying consolidated financial statements have been prepared using the
going concern basis of accounting, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of
business.
For the
period ended June 30, 2009, the Company has incurred a net loss of $121,526 and
experienced negative cash flows from operations of $144,672 with an accumulated
deficit of $631,745 as of that date. The continuation of the Company as a going
concern through March 31, 2010 is dependent upon the continued financial support
from its stockholders and credit facility from the revolving lines of credit.
The Company is currently pursuing the additional financing for its operations.
However, there is no assurance that the Company will be successful in securing
sufficient funds to sustain the operations.
These
factors raise substantial doubt about the Company’s ability to continue as a
going concern. These consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets and liabilities that may result in the Company not
being able to continue as a going concern.
F-24
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
NOTE-4
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
The
accompanying condensed consolidated financial statements reflect the application
of certain significant accounting policies as described in this note and
elsewhere in the accompanying condensed consolidated financial statements and
notes.
l
|
Use
of estimates
|
In
preparing these condensed consolidated financial statements, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities in the balance sheets and revenues and expenses during the periods
reported. Actual results may differ from these estimates.
l
|
Basis
of consolidation
|
The
condensed consolidated financial statements include the accounts of Hometouch
and its subsidiary, after elimination of significant intercompany balances and
transactions within the Company.
l
|
Cash
and cash equivalents
|
Cash and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.
l
|
Accounts
receivable
|
Accounts
receivable are recorded at the invoiced amount and do not bear interest. The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. An allowance for doubtful accounts is
established and determined based on managements’ assessment of known
requirements, aging of receivables, payment history, the customer’s current
credit worthiness and the economic environment.
The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The
Company evaluates the need of an allowance for doubtful accounts based on
specifically identified amounts that management believes to be uncollectible.
Based upon the aforementioned criteria, management has determined that no
allowance for doubtful accounts is required as of June 30, 2009.
l
|
Inventories
|
Inventories
are stated at the lower of first-in, first-out ("FIFO") cost or market value,
which are primarily comprised of home hardware devices and appliances necessary
for the development of the home system solutions or re-sale to the customers.
The Company periodically reviews historical sales activity to determine excess,
slow moving items and potentially obsolete items and also evaluates the impact
of any anticipated changes in future demand. The Company provides inventory
allowances based on excess and obsolete inventories determined principally by
customer demand.
For the
period ended June 30, 2009 and 2008, the Company did not record an allowance for
obsolete inventories, nor have there been any write-offs.
l
|
Plant
and equipment
|
Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become
fully operational:
Depreciable
life
|
|
Leasehold
improvements
|
Shorter
of 3 years or term of lease
|
Furniture,
fixtures and office equipment
|
5
years
|
Expenditure
for maintenance and repairs is expensed as incurred. The gain or loss on the
disposal of plant and equipment is the difference between the net sales proceeds
and the carrying amount of the relevant assets and is recognized in the
statement of operations.
Depreciation
expenses for the period ended June 30, 2009 and 2008 were $2,144 and $1,507,
respectively.
F-25
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
l
|
Impairment
of long-lived assets
|
Long-lived
assets primarily include plant and equipment. In accordance with the Statement
of Financial Accounting Standard ("SFAS") No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, the Company reviews its long-lived assets
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable. If the total of the
expected undiscounted future net cash flows is less than the carrying amount of
the asset, a loss is recognized for the difference between the fair value and
carrying amount of the asset. There has been no impairment as of June 30,
2009.
l
|
Revenue
recognition
|
In
accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition”, the
Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable, and
collectibility is reasonably assured.
(a) Sale
of products
The
Company generally sells its products with no general rights of return and no
price protection, including lighting and curtain switch, lighting components,
video door phone, remote controller and computer accessories, etc. The Company
recognizes product revenue when persuasive evidence of an arrangement exists,
the product has been delivered upon shipment, the sales price is fixed or
determinable and collectibility is reasonably assured.
(b) Projects
revenue
Under the
intelligent home system solutions arrangement, the Company is obligated to
deliver to its customers multiple products and/or services (“multiple
elements”), which include two elements: (1) hardware and software; and (2)
provision of design, customized implementation system and technical supports,
under the customers’ requirement on significant modification of hardware and
customization of software.
The
Company offers multiple solutions to their customers' needs. Those solutions may
involve the delivery or performance of multiple products and services and
performance may occur at different points in time or over different periods of
time. In general, its sale arrangements include initial installation of
hardware, technical support or implementation services and involve consideration
in the form of a fixed fee with no general rights of return.
Fee is
negotiated in a fixed amount and concluded upon the signing the contract, which
provides for a customer deposit upon contract execution, milestone billings. The
Company classifies hardware and its related implementation fees together as
project revenue in the statement of operation and considers multiple element
arrangements. Revenue from the sales of the Company’s hardware are recognized
upon shipment or delivery of the hardware provided that persuasive evidence of
an arrangement exists, collection is probable, payment terms are fixed and
determinable and no significant obligations remain. Revenues from providing
implementation services or technical supports are recognized when services are
rendered and accepted by the customers.
The
Company adopted the Emerging Issues Task Force Issue No. 00-21, “Revenue Arrangements with Multiple
Deliverables” (“EITF 00-21”) to allocate revenue for these transactions
that include multiple elements to each unit of accounting based on its relative
fair value and recognizes revenue for each unit of accounting when revenue
recognition criteria have been met. The price charged when the element is sold
separately generally determines fair value. When the Company has objective
evidence of the fair values of undelivered elements but not delivered elements,
the Company allocates revenue first to the fair value of the undelivered
elements, and the residual revenue is then allocated to the delivered elements.
If the fair value of any undelivered element included in a multiple element
arrangement cannot be objectively determined, revenue is deferred until all
elements are delivered or services have been performed, or until fair value can
objectively be determined for any remaining undelivered elements.
For fixed
fee long-term contracts, the Company recognizes project revenues using the
percentage-of-completion method of accounting upon completion of each contract
milestone, under the provisions of SOP No. 81-1, “Accounting for Performance of
Construction Type and Certain Production Type Contracts”, (“SOP
81-1”).
F-26
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
(c) Interest
income
Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.
l
|
Product
warranty and post service support
|
The
Company generally offers product warranty and post-contract customer support
(“PCS”) to its customers for a period of twelve months, free of charge. The
Company periodically reviews actual warranty claims experience to determine a
reserve for warranty liabilities if necessary.
l
|
Income
taxes
|
The
Company accounts for income tax using SFAS No. 109 “Accounting for Income
Taxes”, which requires the asset and liability approach for financial
accounting and reporting for income taxes. Under this approach, deferred income
taxes are provided for the estimated future tax effects attributable to
temporary differences between financial statement carrying amounts of assets and
liabilities and their respective tax bases, and for the expected future tax
benefits from loss carry-forwards and provisions, if any. Deferred tax assets
and liabilities are measured using the enacted tax rates expected in the years
of recovery or reversal and the effect from a change in tax rates is recognized
in the statement of operations and comprehensive loss in the period of
enactment. A valuation allowance is provided to reduce the amount of deferred
tax assets if it is considered more likely than not that some portion of, or all
of the deferred tax assets will not be realized.
The
Company also adopts Financial Accounting Standards Board ("FASB") Interpretation
No. (FIN) 48, "Accounting for
Uncertainty in Income Taxes" and FSP FIN 48-1, which amended certain
provisions of FIN 48. FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in the financial statements in accordance with SFAS No. 109,
“Accounting for Income
Taxes.” FIN 48 provides that a tax benefit from an uncertain tax position
may be recognized when it is more likely than not that the position will be
sustained upon examination, including resolutions of any related appeals or
litigation processes, based on the technical merits. Income tax positions must
meet a more-likely-than-not recognition threshold at the effective date to be
recognized upon the adoption of FIN 48 and in subsequent periods. This
interpretation also provides guidance on measurement, derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
In
connection with the adoption of FIN 48, the Company analyzed the filing
positions in all of the federal, state and foreign jurisdictions where the
Company and its subsidiaries are required to file income tax returns, as well as
all open tax years in these jurisdictions. The Company adopted the policy of
recognizing interest and penalties, if any, related to unrecognized tax
positions as income tax expense. The Company did not have any unrecognized tax
positions or benefits and there was no effect on the financial condition or
results of operations for the period ended June 30, 2009 and 2008.
The
Company conducts major businesses in Hong Kong and is subject to tax in its own
jurisdiction. As a result of its business activities, the Company files separate
tax returns that are subject to examination by the foreign tax
authority.
l
|
Net
loss per share
|
The
Company calculates net loss per share in accordance with SFAS No. 128, “Earnings per Share.” Basic
loss per share is computed by dividing the net loss by the weighted-average
number of common shares outstanding during the period. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common stock equivalents had been issued and if the
additional common shares were dilutive.
l
|
Foreign
currencies translation
|
Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the statement of operations.
F-27
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
The
reporting currency of the Company is the United States dollars ("US$"). The
Company's subsidiary in Hong Kong maintains its books and records in its local
currency, Hong Kong Dollars ("HK$"), which is functional currency as being the
primary currency of the economic environment in which the entity
operates.
In
general, for consolidation purposes, assets and liabilities of its subsidiary
whose functional currency is not US$ are translated into US$, in accordance with
SFAS No. 52, “Foreign Currency
Translation”, using the exchange rate on the balance sheet date. Revenues
and expenses are translated at average rates prevailing during the period. The
gains and losses resulting from translation of financial statements of foreign
subsidiary are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders’ equity. For the
period ended June 30, 2009 and 2008, the impact of foreign currencies
translation is insignificant and no comprehensive income or loss is
recorded.
l
|
Segment
reporting
|
SFAS No.
131, “Disclosures about
Segments of an Enterprise and Related Information” establishes standards
for reporting information about operating segments on a basis consistent with
the Company’s internal organization structure as well as information about
geographical areas, business segments and major customers in financial
statements. The Company operates in one reportable operating
segment.
l
|
Related
parties
|
Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.
l
|
Fair
value measurement
|
The
Company adopted SFAS No. 157, “Fair Value Measurements” (FAS
157), for all financial instruments and non-financial instruments accounted for
at fair value on a recurring basis. The Company also adopted SFAS 157 for all
non-financial instruments accounted for at fair value on a non-recurring basis.
FAS 157 establishes a new framework for measuring fair value and expands related
disclosures. Effective April 1, 2009, the Company adopted FASB FSP FAS 157-4,
Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly. Adoption of
the FSP had an insignificant effect on the Company’s financial
statements.
FAS 157
establishes a new framework for measuring fair value and expands related
disclosures. Broadly, FAS 157 framework requires fair value to be determined
based on the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants. FAS 157 establishes a three-level valuation hierarchy based upon
observable and non-observable inputs. These tiers include: Level 1, defined as
observable inputs such as quoted prices in active markets; Level 2, defined as
inputs other than quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs in which
little or no market data exists, therefore requiring an entity to develop its
own assumptions.
For
financial assets and liabilities, fair value is the price the Company would
receive to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets or liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
l
|
Recent
accounting pronouncements
|
The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its financial condition or the
results of its operations.
F-28
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements- an amendment of ARB No. 51” (FAS 160).
The objective of FAS 160 is to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements in the accounting treatment and financial
reporting of noncontrolling interests. This standard is effective for financial
statements issued for fiscal years and interim periods within those fiscal
years, beginning on or after November 15, 2008 (i.e. April 1, 2009 for the
Company). The Company implemented FAS 160, effective April 1, 2009 and its
adoption did not have a material impact on the consolidated financial
statements.
In April
2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4),
and FSP FASB 107-1 and Accounting Principles Board (APB) 28-1, Interim Disclosures about Fair Value
of Financial Instruments (FSP 107-1). These two staff positions relate to
fair value measurements and related disclosures. The FASB also issued a third
FSP relating to the accounting for impaired debt securities titled FSP FAS 115-2
and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments (FSP 115-2). These
standards are effective for interim and annual periods ending after
June 15, 2009. The Company has determined that FSP 157-4 and FSP 115-2 do
not currently apply to its activities and has adopted the disclosure
requirements of FSP 107-1.
In May
2009, the FASB issued Statement No. 165, “Subsequent Events” (FAS 165),
which establishes general standards of accounting for, and requires disclosure
of, events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. The Company adopted the
provisions of FAS 165 for the quarter ended June 30, 2009. The adoption of these
provisions did not have a material effect on the Company’s consolidated
financial statements.
In June
2009, the FASB issued SFAS No. 166, Accounting for Transfers of
Financial Assets, an
amendment to SFAS No. 140 (FAS 166). SFAS 166 eliminates the concept of a
“qualifying special-purpose entity,” changes the requirements for derecognizing
financial assets, and requires additional disclosures in order to enhance
information reported to users of financial statements by providing greater
transparency about transfers of financial assets, including securitization
transactions, and an entity’s continuing involvement in and exposure to the
risks related to transferred financial assets. FAS 166 is effective for fiscal
years beginning after November 15, 2009. The Company will adopt FAS 166 in
fiscal 2010 and is evaluating the impact it will have on the consolidated
results of the Company.
In June
2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation
No. 46(R) (FAS 167). The amendments include: (1) the elimination of the
exemption for qualifying special purpose entities, (2) a new approach for
determining who should consolidate a variable-interest entity, and (3) changes
to when it is necessary to reassess who should consolidate a variable-interest
entity. FAS 167 is effective for the first annual reporting period beginning
after November 15, 2009 and for interim periods within that first annual
reporting period. The Company will adopt FAS 167 in fiscal 2010 and is
evaluating the impact it will have on the consolidated results of the
Company.
In June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles (FAS 168). FAS 168 replaces FASB Statement No. 162, The Hierarchy of Generally Accepted
Accounting Principles, and establishes the “FASB Accounting Standards
Codification TM“ (the Codification) as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with generally accepted accounting principles (GAAP). FAS 168 is
effective for interim and annual periods ending after September 15, 2009. The
Company will begin to use the new Codification when referring to GAAP in its
quarterly report on Form 10-Q for the quarter ending September 30, 2009. This
will not have an impact on the consolidated results of the Company.
NOTE-5
|
DEPOSITS
AND OTHER CURRENT ASSETS
|
June
30, 2009
|
March
31, 2009
|
||||||||
(Unaudited)
|
(Audited)
|
||||||||
Rental
and utilities deposits
|
$ | 32,762 | $ | 25,705 | |||||
Purchase
deposit
|
36,597 | 9,673 | |||||||
$ | 69,359 | $ | 35,378 |
F-29
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
NOTE-6
|
LONG-TERM
BANK LOANS
|
Long-term
bank loans consist of the following:
June
30, 2009
|
March
31, 2009
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Bank
loans, payable to financial institutions in Hong Kong:
|
||||||||
Equivalent
to HK$300,000 with interest rate at 6.84% per annum payable monthly,
repayable by April
24, 2009, guaranteed by one director of the Company
|
$ | - | $ | 1,603 | ||||
Equivalent
to HK$300,000 with interest rate at 7.8% per annum payable monthly,
repayable by October 4, 2009, guaranteed by the directors of the
Company
|
7,810 | 12,618 | ||||||
Equivalent
to HK$1,200,000 with annual interest rate at 0.5% over Hong Kong prime
rate payable monthly, repayable by May 3, 2012, guaranteed by the local
government of Hong Kong Special Administrative Region and the directors of
the Company
|
149,905 | - | ||||||
Total
|
157,715 | 14,221 | ||||||
Less:
current portion of bank loans
|
(56,527 | ) | (14,221 | ) | ||||
Bank
loans, net of current portion
|
$ | 101,188 | $ | - |
As of
June 30, 2009, the maturities of the long term bank loan for the next three
years are as follows:
Years
ending June 30:
|
||||
2010
|
$ | 56,527 | ||
2011
|
51,465 | |||
2012
|
49,723 | |||
Total
long term bank loan
|
$ | 157,715 |
For the
period ended June 30, 2009, Hong Kong prime rate is 5 % per annum.
NOTE-7
|
ACCRUED
LIABILITIES AND OTHER PAYABLES
|
Accrued
liabilities and other payables consist of the following:
June
30, 2009
|
March
31, 2009
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Customer
deposits
|
$ | 181 | $ | 13,785 | ||||
Customer
deposits from related parties
|
52,956 | 52,956 | ||||||
Accrued
operating expenses
|
72,744 | 61,021 | ||||||
Other
payables
|
1,968 | 1,914 | ||||||
$ | 127,849 | $ | 129,676 |
F-30
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
NOTE-8
|
INCOME
TAXES
|
For the
period ended June 30, 2009 and 2008, the Company and its subsidiary operate in
various countries: United States of America and Hong Kong that are subject to
income tax in the jurisdictions in which it operates, as follows:
United
States of America
Hometouch
is registered in the State of Nevada and is subject to United States of America
tax law.
Hong
Kong
The
Company’s operating subsidiary, HTL is subject to Hong Kong Profits Tax at the
statutory rate of 16.5% and 17.5% for the three months ended June 30, 2009 and
2008. During the period ended June 30, 2009 and 2008, the Company incurred an
operating loss of $122,224 and $72,670, accordingly, no provision for income
taxes has been recorded.
The
following table sets forth the significant components of the aggregate net
deferred tax assets and liabilities of the Company as of June 30, 2009 and March
31, 2009:
June
30, 2009
|
March
31, 2009
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Deferred
tax asset (liabilities):
|
||||||||
Plant
and equipment
|
$ | (1,355 | ) | $ | (1,240 | ) | ||
Net
operating loss carryforward
|
99,321 | 75,018 | ||||||
Total
net deferred tax assets
|
97,966 | 73,778 | ||||||
Less:
valuation allowance
|
(97,966 | ) | (73,778 | ) | ||||
Net
deferred tax assets
|
$ | - | $ | - |
Based on
the available objective evidence, including the history of losses, management
believes that it is more likely than not that the net deferred assets will not
be fully realizable. Accordingly, the Company provided for a full valuation
allowance against its net deferred tax assets of $97,966 and $72,441 as of June
30, 2009 and March 31, 2009, respectively. For the three months ended June 30,
2009, the valuation allowance increased by $24,188 mainly relating to net
operating loss carryforwards.
NOTE-9
|
RELATED
PARTY TRANSACTIONS
|
(a)
|
For
the period ended June 30, 2009, the Company provided intelligent home
system solutions at its current market value totaling $18,919 to a related
company which is controlled by Mr. David Gunawan Ng and Ms. Stella Wai
Yau, the directors of the Company in a normal course of business, with
zero accounts receivable at
year-end.
|
(b)
|
For
the period ended June 30, 2009, the Company leased out some portion of the
office premises to and reimbursed rental charge of $11,538 from a related
company, which is controlled by Mr. David Gunawan Ng and Ms. Stella Wai
Yau, the directors of the Company, at the market price in accordance with
the lease agreement in a normal course of
business.
|
(c)
|
As
of June 30, 2009, the Company received the customer deposits of $52,956
from the related company which is controlled by Mr. David Gunawan Ng and
Ms. Stella Wai Yau, the directors of the Company, relating to the service
agreement of intelligent home system solutions with the contract value of
$158,059 at its current market value in a normal course of
business.
|
F-31
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
NOTE-10
|
CONCENTRATIONS
OF RISK
|
The
Company is exposed to the following concentrations of risk:
(d)
|
Major
customers
|
For the
three months ended June 30, 2009, the customer who accounts for 10% or more of
the Company’s revenue is presented as follows:
Three
months ended June 30, 2009
|
June
30, 2009
|
|||||||||||
Revenue
|
Percentage
of
revenue
|
Accounts
receivable
|
||||||||||
Customer
A
|
$ | 18,919 | 88 | % | $ | - | ||||||
Customer
B
|
2,217 | 10 | % | - | ||||||||
Total:
|
$ | 21,136 | 98 | % | $ | - |
For the
three months ended June 30, 2008, one customer represented more than 10% of the
Company’s revenue. This customer accounts for 75% of revenue amounting to
$21,154, with $0 of accounts receivable.
(b) Major
vendors
For the
three months ended June 30, 2009, one vendor represented more than 10% of the
Company’s purchases. This vendor accounts for 100% of purchase amounting to
$9,215, with $1,347 of accounts payable.
For the
three months ended June 30, 2008, one vendor represented more than 10% of the
Company’s purchases. This vendor accounts for 96% of purchase amounting to
$35,973, with $0 of accounts payable.
(c) Credit
risk
Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and trade accounts receivable. The
Company performs ongoing credit evaluations of its customers’ financial
condition, but does not require collateral to support such
receivables.
(d) Interest
rate risk
The
Company’s interest-rate risk arises from long-term bank borrowings. Borrowings
issued at variable rates expose the Company to cash flow interest-rate risk.
Borrowings issued at fixed rates expose the Company to fair value interest-rate
risk. The Company manages interest rate risk by varying the issuance and
maturity dates variable rate debt, limiting the amount of variable rate debt,
and continually monitoring the effects of market changes in interest rates. As
of June 30, 2009, the borrowings were at fixed and variable rates in Note
6.
NOTE-11
|
COMMITMENTS
AND CONTINGENCIES
|
(a) Operating
lease commitments
The
Company was committed under non-cancelable operating lease with fixed monthly
rentals, due through October 26, 2011. Total rent expenses for the period ended
June 30, 2009 and 2008 was $1,923 and $4,994, respectively. As of June 30, 2009,
future minimum rental payments due under the non-cancelable operating lease
agreement are as follows:
Years
ending June 30,
|
||||
2010
|
$ | 53,846 | ||
2011
|
53,846 | |||
2012
|
17,949 | |||
Total:
|
$ | 125,641 |
F-32
HOME
TOUCH HOLDING COMPANY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
(e)
|
Reserve
for product warranties
|
The
Company has not experienced any material actual claims from product warranties
where it was under obligation to honor its standard warranty provision. As such,
no reserve for product warranties has been recognized in the statement of
operations for the three months ended June 30, 2009 and 2008.
(f)
|
Revolving
lines of credit
|
The
Company obtained the revolving lines of credit with the available outstanding
balance of $19,230 (equivalent to HK$150,000). Advances under the lines of
credit are unsecured and bear interest at a rate of 3% per annum over Hong Kong
Best Lending Rate, payable monthly. The revolving lines of credit is reviewed on
a regular basis, subject to cancellation at the discretion of the bank and
requires a minimum monthly fee of $13 (equivalent to HK$100). There were no
borrowings under the revolving lines of credit as of June 30, 2009.
F-33
PROSPECTUS
HOME
TOUCH HOLDING COMPANY
Dated
_____________, 2009
Selling
shareholders are offering up to 1,579,000 shares of common stock. The
selling shareholders will offer their shares at $0.05 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing
market prices or privately negotiated prices.
Our
common stock is not now listed on any national securities exchange, the NASDAQ
stock market or the OTC Bulletin Board.
Dealer Prospectus Delivery
Obligation
Until
_________ (90 days from the date of this prospectus) all dealers that effect
transactions in these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
Part
II-INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION
OF OFFICERS AND DIRECTORS
Our
Articles of Incorporation and By-laws, subject to the provisions of Nevada law,
contain provisions that allow the corporation to indemnify any person under
certain circumstances.
Nevada
law provides the following:
17-16-851. Authority
to indemnify.
(a)
Except as otherwise provided in this section, a corporation may indemnify an
individual who is a party to a proceeding because he is a director against
liability incurred in the proceeding if:
(i)
He conducted himself in good faith; and
(ii)
He reasonably believed that his conduct was in or at least Not opposed to the
corporation's best interests; and
(iii)
In the case of any criminal proceeding, he had no reasonable cause to believe
his conduct was unlawful; or
(iv)
He engaged in conduct for which broader indemnification has been made
permissible or obligatory under a provision of the articles of incorporation, as
authorized by W.S. 17-16-202(b)(v).
(b)
A director's conduct with respect to an employee benefit plan for a purpose he
reasonably believed to be in the interests of the participants in and
beneficiaries of the plan is conduct that satisfies the requirement of paragraph
(a)(ii) of this section.
(c)
The termination of a proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent is not, of itself,
determinative that the director did not meet the standard of conduct described
in this section.
(d) Unless
ordered by a court under W.S. 17-16-854(a)(iii) a corporation may not indemnify
a director under this section:
(i)
In connection with a proceeding by or in the right of the corporation, except
for reasonable expenses incurred in connection with the proceeding if it is
determined that the director has met the standard of conduct under subsection
(a) of this section; or
(ii)
In connection with any proceeding with respect to conduct for which he was
adjudged liable on the basis that he received a financial benefit to which he
was not entitled.
(e)
Repealed By Laws 1997, ch. 190,ss.3.
17-16-852. Mandatory
indemnification.
II-1
A
corporation shall indemnify a director who was wholly successful, on the merits
or otherwise, in the defense of any proceeding to which he was a party because
he was a director of the corporation against reasonable expenses incurred by him
in connection with the proceeding.
17-16-853. Advance
for expenses.
(a)
A corporation may, before final disposition of a proceeding, advance funds to
pay for or reimburse the reasonable expenses incurred by a director who is a
party to a proceeding because he is a director if he delivers to the
corporation:
(i)
A written affirmation of his good faith belief that he has met the standard of
conduct described in W.S. 17-16-851 or that the proceeding involves conduct for
which liability has been eliminated under a provision of the articles of
incorporation as authorized by W.S. 17-16-202(b)(iv); and
(ii)
His written undertaking to repay any funds if he is not entitled to
mandatory indemnification under W.S. 17-16-852 and it is ultimately determined
that he has not met the standard of conduct described in W.S. 17-16-851.
(iii)
Repealed By Laws 1997, ch. 190,ss.3.
(b)
The undertaking required by paragraph (a)(ii) of this section shall be an
unlimited general obligation of the director but need not be secured and may be
accepted without reference to the financial ability of the director to make
repayment.
(c)
Authorizations under this section shall be made:
(i)
By the board of directors:
(A)
If there are two (2) or more disinterested directors, by a majority vote of all
the disinterested directors (a majority of whom shall for such purpose
constitute a quorum) or by a majority of the members of a committee of two (2)
or more disinterested directors appointed by such a vote; or
(B) If
there are fewer than two (2) disinterested directors, by the vote necessary for
action by the board in accordance with W.S. 17-16-824(c), in which authorization
directors who do not qualify as disinterested directors
may
participate; or
(ii)
By the shareholders, but shares owned by or voted under the control of a
director who at the time does not qualify as a disinterested director may not be
voted on the authorization.
17-16-854. Court-ordered
indemnification and advance for expenses.
(a)
A director who is a party to a proceeding because he is a director may apply for
indemnification or an advance for expenses to the court conducting the
proceeding or to another court of competent jurisdiction. After
receipt of an application and after giving any notice it considers necessary,
the court shall:
II-2
(i)
Order indemnification if the court determines that the director is entitled to
mandatory indemnification under W.S. 17-16-852;
(ii)
Order indemnification or advance for expenses if the court determines that the
director is entitled to indemnification or advance for expenses pursuant to a
provision authorized by W.S. 17-16-858(a); or
(iii)
Order indemnification or advance for expenses if the court determines, in view
of all the relevant circumstances, that it is fair and reasonable:
(A)
To indemnify the director; or
(B)
To advance expenses to the director, even if he has not met the standard of
conduct set forth in W.S. 17-16-851(a), failed to comply with W.S. 17-16-853 or
was adjudged liable in a proceeding referred to in
W.S. 17-16-851(d)(i) or (ii), but if he was adjudged so liable his
indemnification shall be limited to reasonable expenses incurred in connection
with the proceeding.
(b)
If the court determines that the director is entitled to indemnification under
paragraph (a)(i) of this section or to indemnification or advance for expenses
under paragraph (a)(ii) of this section, it shall also order the corporation to
pay the director's reasonable expenses incurred in connection with obtaining
court-ordered indemnification or advance for expenses. If the court determines
that the director is entitled to indemnification or advance for expenses under
paragraph (a)(iii) of this section, it may also order the corporation to pay the
director's reasonable expenses to obtain court-ordered indemnification or
advance for expenses.
17-16-855. Determination
and authorization of indemnification.
(a)
A corporation may not indemnify a director under W.S. 17-16-851 unless
authorized for a specific proceeding after a determination has been made that
indemnification of the director is permissible because he has met the standard
of conduct set forth in W.S. 17-16-851.
(b)
The determination shall be made:
(i)
If there are two (2) or more disinterested directors, by the board of directors
by majority vote of all the disinterested directors (a majority of whom shall
for such purpose constitute a quorum), or by a majority of the members of a
committee of two (2) or more disinterested directors appointed by such a vote;
(ii)
Repealed By Laws 1997, ch. 190,ss.3.
(iii)
By special legal counsel:
(A) Selected
in the manner prescribed in paragraph (i) of this subsection; or
(B)
If there are fewer than two (2) disinterested directors, selected by the board
of directors (in which selection directors who do not qualify as disinterested
directors may participate); or
II-3
(iv)
By the shareholders, but shares owned by or voted under the control of a
director who at the time does not qualify as a disinterested director may not be
voted on the determination.
(c) Authorization
of indemnification shall be made in the same manner as the determination that
indemnification is permissible, except that if there are fewer than
two (2) disinterested directors, authorization of indemnification shall be made
by those entitled under paragraph (b)(iii) of this section to select special
legal counsel.
17-16-856. Officers.
(a) A
corporation may indemnify and advance expenses under this subarticle to an
officer of the corporation who is a party to a proceeding because he is an
officer of the corporation:
(i)
To the same extent as a director; and
(ii)
If he is an officer but not a director, to such further extent as may be
provided by the articles of incorporation, the bylaws, a resolution of the board
of directors or contract, except for:
(A)
Liability in connection with a proceeding by or in the right of the corporation
other than for reasonable expenses incurred in connection with the proceeding;
or
(B)
Liability arising out of conduct that constitutes:
(I)
Receipt by him of a financial benefit to which he is not entitled;
(II)
An intentional infliction of harm on the corporation or the shareholders; or
(III)
An intentional violation of criminal law.
(iii)
A corporation may also indemnify and advance expenses to a Current or former
officer, employee or agent who is not a director to the Extent, consistent with
public policy that may be provided by its articles of incorporation, bylaws,
general or specific action of its board of directors or contract.
(b)
The provisions of paragraph (a)(ii) of this section shall apply to an officer
who is also a director if the basis on which he is made a party to the
proceeding is an act or omission solely as an officer.
(c)
An officer of a corporation who is not a director is entitled to mandatory
indemnification under W.S. 17-16-852, and may apply to a court under W.S.
17-16-854 for indemnification or an advance for expenses, in each case to the
same extent to which a director may be entitled to indemnification or advance
for expenses under those provisions.
II-4
With
regard to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933, as amended,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by a director, officer or controlling person of the Corporation in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by us is against
public policy as expressed in the Securities Act of 1933, as amended, and will
be governed by the final adjudication of such case.
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table is an itemization of all expenses, without consideration to
future contingencies, incurred or expected to be incurred by us in connection
with the issuance and distribution of the securities being offered by this
prospectus. Items marked with an asterisk (*) represent estimated expenses. We
have agreed to pay all the costs and expenses of this offering. Selling security
holders will pay no offering expenses.
ITEM
|
AMOUNT
|
|||
SEC
Registration Fee*
|
$ | 4 | ||
Legal
Fees and Expenses
|
20,000 | |||
Accounting
Fees and Expenses*
|
100,000 | |||
Total*
|
$ | 120,004 |
*
Estimated Figure
RECENT
SALES OF UNREGISTERED SECURITIES
We
acquired Home Touch Limited, a Hong Kong China in share exchange in which we
exchanged 40,000,000 shares of our common stock for 10,000 shares of Home Touch
Limited. The purpose of this transaction was solely to form a U.S.
holding company for our business.
We relied
upon Section 4(2) of the Securities Act of 1933, as amended for the above
issuances to 9 US citizens or residents, including our attorney and his
affiliates who were issued stock in Home Touch Limited prior to the exchange
offer as it was initially contemplated that Home Touch Limited would file this
registration statement on its own account. Thirty selling
shareholders who are not U.S. citizens or residents also acquired their shares
by purchase exempt from registration under Regulation S under the Securities Act
of prior to the exchange offer as it was initially contemplated that Home Touch
Limited would file this registration statement on its own
account. These 30 selling shareholders paid $.05 per share for
519,000 shares for aggregate consideration of $25,950. We valued the
additional 9,965,000 shares issued 10 service providers, including to our
attorney, at $.05 per share for aggregate consideration of $498,250 based upon
these cash sales.
We
believed that Section 4(2) of the Securities Act of 1933 was available
because:
·
|
None
of these issuances involved underwriters, underwriting discounts or
commissions.
|
|
·
|
Restrictive
legends were and will be placed on all certificates issued as described
above.
|
·
|
The
distribution did not involve general solicitation or
advertising.
|
|
·
|
The
distributions were made only to investors who were sophisticated enough to
evaluate the risks of the
investment.
|
We relied
upon Regulation S of the Securities Act of 1933, as amended for the above
issuances to non US citizens or residents.
II-5
We
believed that Regulation S was available because:
·
|
None
of these issuances involved underwriters, underwriting discounts or
commissions;
|
|
·
|
We
placed Regulation S required restrictive legends on all certificates
issued;
|
·
|
No
offers or sales of stock under the Regulation S offering were made to
persons in the United States;
|
|
·
|
No
direct selling efforts of the Regulation S offering were made in the
United States.
|
In
connection with the above transactions, although some of the investors may have
also been accredited, we provided the following to all investors:
·
|
Access
to all our books and records.
|
|
·
|
Access
to all material contracts and documents relating to our
operations.
|
·
|
The
opportunity to obtain any additional information, to the extent we
possessed such information, necessary to verify the accuracy of the
information to which the investors were given
access.
|
Prospective
investors were invited to review at our offices at any reasonable hour, after
reasonable advance notice, any materials available to us concerning our
business. Prospective Investors were also invited to visit our
offices.
EXHIBITS
Item
2
1.
|
Articles
of Share Exchange
|
|
2.
|
Share
Exchange Agreement
|
Item
3
1.
|
Articles
of Incorporation Home Touch Holding Company
|
|
2.
|
Bylaws
of Home Touch Holding Company
|
3.
|
Memorandum
and Articles of Association of Home Touch Limited and Amendment to
Memorandum and Articles of Association of Home Touch
Limited
|
Item
4
1.
|
Form
of common stock Certificate of the Home Touch Holding Company (1)
|
Item
5
1.
|
Legal
Opinion of Williams Law Group, P.A.
|
Item
10
1.
|
Employment
Agreement - Mr. Lam
|
|
2.
|
Distribution
Agreement - ABB
|
3.
|
Distribution
Agreement – Basalte
|
|
4.
|
Distribution
Agreement - Basalte
|
5.
|
Distribution
Agreement – Elcom
|
|
6.
|
Distribution
Agreement – Visiomatic
|
7.
|
Bank
loan BEA
|
|
8.
|
Bank
loan HSBC
|
9.
|
Line
of Credit HSBC
|
|
10.
|
Property
Lease with Smartway
|
|
11.
|
OEM
Agreement with Shenzhen Bochuang Hi-Tech Company
Limited
|
|
12
|
Invoice
for charges in Appendix to OEM Agreement with Shenzhen Bochuang Hi-Tech
Company Limited
|
|
13.
|
Penflow
Technology (Asia) Limited *
|
|
14.
|
Terms
of Oral Loan Agreement with Technics Group Limited
*
|
|
15.
|
Terms
of oral agreement with Mr. David Gunawan Ng and Ms. Stella Wai Yau
*
|
|
16.
|
Cancellation
of Agreement with Home Touch Singapore *
|
|
17.
|
Distribution
Agreement with Home Touch Solutions Sdn Bhd
*
|
II-6
Item 21
Subsidiary: Home
Touch Limited, a Hong Kong Corporation
Item
23
1.
|
Consent
of ZYCPA Company Limited, Certified Public Accountants. (formerly Zhong Yi
[Hong Kong] C.P.A. Company Limited) *
|
|
2.
|
Consent of Williams Law Group,
P.A. (included in Exhibit 5.1)
|
* Filed
herewith
All other Exhibits called for by Rule 601 of Regulation SK are not applicable to this filing.
(1)
Information pertaining to our common stock is contained in our Articles of
Incorporation and Bylaws.
UNDERTAKINGS
The
undersigned registrant hereby undertakes:
1.
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
i.
|
To
include any prospectus required by section
10(a)(3) of the Securities Act of
1933;
|
ii.
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement.
|
II-7
iii.
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
|
2.
|
That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
|
3.
|
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
|
4.
|
That,
for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities: The undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such
purchaser:
|
i.
|
Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
|
|
ii.
|
Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
|
iii.
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
|
iv.
|
Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
|
5. That,
for the purpose of determining liability under the Securities Act of 1933 to any
purchaser: Each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such
date of first use.
II-8
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to our directors, officers and controlling persons, we have been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by a director, officer or controlling person of the
corporation in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by us is
against public policy as expressed in the Securities Act of 1933, as amended,
and will be governed by the final adjudication of such case.
SIGNATURES
Pursuant
to the requirements of the Securities Act, the Registrant has duly caused this
Registration Statement to be signed on our behalf by the undersigned, thereunto
duly authorized, in Hong Kong China on October
9, 2009.
Home Touch Holding
Company
Name
|
Date
|
Signature
|
||||
By:
|
David
Gunawan Ng, Chairman and Executive Director, Chief Executive Officer and
Principal Executive Officer
|
October 9 , 2009
|
/s David Gunawan
Ng
Chairman
and Executive Director, Chief Executive Officer and Principal Executive
Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the date
indicated.
SIGNATURE
|
NAME
|
TITLE
|
DATE
|
|||
/s/
David Gunawan Ng
|
David
Gunawan Ng
|
Chairman
and Executive Director, Chief Executive Officer and Principal Executive
Officer
|
October 9, 2009
|
|||
/s/
Stella Wai Yau
|
Stella
Wai Yau
|
COO,
Chief Financial Officer, Secretary, Principal Accounting Officer and
Director
|
October 9 ,
2009
|
II-9