Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - Centurytouch Ltd | Financial_Report.xls |
| EX-32.2 - CERTIFICATION - Centurytouch Ltd | cntu_ex321.htm |
| EX-31.1 - CERTIFICATION - Centurytouch Ltd | cntu_ex311.htm |
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended December 31, 2013
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number
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CenturyTouch Ltd, Inc.
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(Name of small business issuer in its charter)
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Delaware
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6500
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46-1585936
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(State or other Employer jurisdiction of
Identification incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S.
Number)
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Eric YK Wong
Chief Executive Officer
Stanton House
31 Westgate
Grantham NG31 6LX
Tel: 01476 591111
(Address and telephone number of registrant's principal executive offices and principal place of business)
Please send a copy of all correspondence to:
Jillian Ivey Sidoti, Esq
38730 Sky Canyon Drive – Ste A
Murrieta, CA 92563
PHONE 323-799-1342
jillian@jilliansidoti.com
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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|||
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
At May 20, 2014, there were 31,390,000 shares outstanding of the registrant’s common stock.
CENTURYTOUCH LTD, INC.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED December 31, 2013
|
Page
Number |
|||||
| PART I. FINANCIAL INFORMATION | |||||
| Item 1. | Financial Statements | F-1 | |||
| Balance Sheets as of June 30, 2013 and December 31, 2013 | F-1 | ||||
| Statements of Operations for the three and six months ended December 31, 2013 and December 31, 2012 | F-2 | ||||
| Statements of Cash Flows for the three and six months ended December 31, 2013 and December 31, 2012 and for the year ended June 30, 2013 | F-3 | ||||
| Notes to Financial Statements | F-4 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
3 | |||
| Item 3. |
Controls and Procedures
|
6 | |||
| PART II. OTHER INFORMATION | |||||
| Item 1. |
Legal Proceedings
|
8 | |||
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
8 | |||
| Item 3. |
Defaults upon senior securities
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8 | |||
| Item 4. |
Submissions of matters to a vote of securities holders
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8 | |||
| Item 5. |
Other Information
|
8 | |||
| Item 6. |
Exhibits
|
9 | |||
| Exhibit 31.1 | |||||
| Exhibit 32.1 | |||||
2
PART I — FINANCIAL INFORMATION
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CenturyTouch Ltd Inc. and subsidiary
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||||||||||||
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Unaudited Consolidated Balance Sheets
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||||||||||||
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As of December 31, 2013 and June 30, 2013
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December 31,
2013
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June 30,
2013
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|||||||
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(Unaudited)
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(Audited)
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|||||||
| ASSETS | ||||||||
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CURRENT ASSETS
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||||||||
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Cash and cash equivalents
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$
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6,322
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$
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50,164
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||||
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Other Assets
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7,229
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6,634
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||||||
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Other Assets - related parties
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40,829
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15,877
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||||||
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TOTAL CURRENT ASSETS
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54,380
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72,675
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||||||
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FIXED ASSETS
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||||||||
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Property, plant, and equipment
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4,171,824
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3,828,221
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||||||
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Land
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461,326
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423,330
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||||||
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Accumulated depreciation
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(320,352
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)
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(232,212
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)
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||||
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NET FIXED ASSETS
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4,312,798
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4,019,339
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||||||
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TOTAL ASSETS
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$
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4,367,178
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$
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4,092,014
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||||
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LIABILITIES AND STOCKHOLDERS' (DEFICIT) / EQUITY
|
||||||||
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CURRENT LIABILITIES
|
||||||||
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Bank loans - current portion
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$
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65,423
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$
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65,429
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||||
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Loans payable - related party
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2,641,654
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2,383,413
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||||||
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Accounts payable
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10,220
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24,023
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||||||
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TOTAL CURRENT LIABILITIES
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2,717,297
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2,472,865
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||||||
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LONG-TERM LIABILITIES
|
||||||||
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Bank loans - non current portion
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2,095,793
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1,949,882
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||||||
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TOTAL LONG-TERM LIABILITIES
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2,095,793
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1,949,882
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||||||
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TOTAL LIABILITIES
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4,813,090
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4,422,747
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||||||
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COMMITMENTS AND CONTINGENCIES
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—
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—
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||||||
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STOCKHOLDERS' (DEFICIT) / EQUITY
|
||||||||
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Preferred stock ($.0001 par value, 20,000,000 shares authorized, none issued and outstanding
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—
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—
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||||||
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as of December 31, 2013 and June 30, 2013, respectively)
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||||||||
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Common stock ($.0001 par value, 500,000,000 shares authorized, 31,390,000 shares,
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3,139
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3,139
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||||||
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issued and outstanding as of December 31, 2013 and June 30, 2013, respectively)
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||||||||
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Additional paid in capital
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262,762
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199,671
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||||||
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Accumulated other comprehensive income (loss)
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(23,166
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)
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11,069
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|||||
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Retained earnings
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(688,647
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)
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(544,612
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)
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||||
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TOTAL STOCKHOLDERS' (DEFICIT) / EQUITY
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(445,912
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)
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(330,733
|
)
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||||
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TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) / EQUITY
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$
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4,367,178
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$
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4,092,014
|
||||
See accompanying notes to financial statements.
F-1
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CenturyTouch Ltd Inc. and subsidiary
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||||||||||||||||||||
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Unaudited Consolidated Statements of Operation and Comprehensive Income
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||||||||||||||||||||
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For the three and six months ended December 31, 2013 and 2012
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|
For the Three months ended
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For the Six months ended
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|||||||||||||||
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December 31, 2013
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December 31, 2012
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December 31, 2013
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December 31, 2012
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|||||||||||||
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Revenues
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||||||||||||||||
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Rental income
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$
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76,824
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$
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63,559
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$
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155,084
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$
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118,708
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||||||||
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Cost of revenues
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38,155
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40,139
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74,860
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78,622
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||||||||||||
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Gross profits
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38,669
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23,420
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80,224
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40,086
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||||||||||||
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Operating expenses
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||||||||||||||||
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General and administrative
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57,547
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39,063
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102,296
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75,502
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||||||||||||
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Total Operating Expenses
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57,547
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39,063
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102,296
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75,502
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||||||||||||
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Income from operations
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(18,878
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)
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(15,643
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)
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(22,072
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)
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(35,416
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)
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||||||||
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Other income (expenses)
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||||||||||||||||
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Interest expenses
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(63,767
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)
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(61,823
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)
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(121,963
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)
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(125,821
|
)
|
||||||||
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Total other income (expense)
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(63,767
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)
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(61,823
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)
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(121,963
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)
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(125,821
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)
|
||||||||
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(Loss) income before income taxes
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(82,645
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)
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(77,466
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)
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(144,035
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)
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(161,237
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)
|
||||||||
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Income taxes
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—
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—
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—
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—
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||||||||||||
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Net (loss)
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$
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(82,645
|
)
|
$
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(77,466
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)
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$
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(144,035
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)
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$
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(161,237
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)
|
||||
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Other comprehensive income
|
||||||||||||||||
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Foreign currency translation adjustment
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(11,813
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)
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(1,587
|
)
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(34,235
|
)
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(5,037
|
)
|
||||||||
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Comprehensive income
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$
|
(94,458
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)
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$
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(79,053
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)
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$
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(178,270
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)
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$
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(166,274
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)
|
||||
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Earnings per common share
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||||||||||||||||
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Basic
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**
|
**
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**
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$
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(0.01
|
)
|
||||||||||
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Fully diluted
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**
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**
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**
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$
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(0.01
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)
|
||||||||||
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Weighted average common shares outstanding
|
||||||||||||||||
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Basic
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31,390,000
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31,390,000
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31,390,000
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31,390,000
|
||||||||||||
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Fully diluted
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31,390,000
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31,390,000
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31,390,000
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31,390,000
|
||||||||||||
** Less than $.01
See accompanying notes to financial statements.
F-2
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Unaudited Consolidated Statements of Cash Flows
|
||||||||||||
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For the six months ended December 31, 2013 and 2012
|
|
For the six months ended
|
||||||||
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December 31, 2013
|
December 31, 2012
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|||||||
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CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
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Net (loss)
|
(144,035
|
)
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(161,237
|
)
|
||||
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Adjustments to reconcile net income to net cash provided by
|
||||||||
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(used in) operating activities:
|
||||||||
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Depreciation
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64,358
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64,683
|
||||||
|
Imputed interest
|
63,091
|
58,079
|
||||||
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Changes in operating assets and liabilities:
|
||||||||
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Trade accounts receivable
|
—
|
2,071
|
||||||
|
Other receivables
|
—
|
38,835
|
||||||
|
Prepaid Expense
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(22,499
|
)
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(41,509
|
)
|
||||
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Accounts payable
|
(15,262
|
)
|
—
|
|||||
|
Other payables and accrued liabilities
|
—
|
41,380
|
||||||
|
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
|
(54,347
|
)
|
2,302
|
|||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
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(Repayments) to bank loan
|
(33,451
|
)
|
(27,121
|
)
|
||||
|
(Repayments to) proceeds from related party loans
|
42,381
|
37,998
|
||||||
|
Contributions from shareholders
|
—
|
81
|
||||||
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
8,930
|
10,958
|
||||||
|
Foreign currency adjustment
|
1,575
|
478
|
||||||
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(43,842
|
)
|
13,738
|
|||||
|
CASH AND CASH EQUIVALENTS:
|
||||||||
|
Beginning of period
|
50,164
|
5,505
|
||||||
|
End of period
|
$
|
6,322
|
$
|
19,243
|
||||
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
||||||||
|
Cash paid during the quarters ended for:
|
||||||||
|
Interest
|
$
|
58,872
|
$
|
67,742
|
||||
|
Taxes
|
$
|
—
|
$
|
—
|
||||
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
|
Incurrence of bank note payable for purchase of building
|
$
|
—
|
$
|
—
|
||||
See accompanying notes to financial statements.
F-3
CENTURYTOUCH LTD INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2013 AND 2012
(Expressed in USD)
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with both generally accepted accounting principles for interim financial information, and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
The unaudited condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to the Company’s annual audited consolidated financial statements for the preceding fiscal year. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the years ended June 30, 2013 and 2012 thereto contained in the registration statement in Form S-11.
2. ORGANIZATION AND BUSINESS BACKGROUND
CenturyTouch Ltd Inc. (the "Company") was incorporated under the laws of the State of Delaware on August 12, 2010. The Company intended to serve as a vehicle to effect an asset acquisition, merger, and exchange of capital stock or other business combination with a domestic or foreign business. The Company has been inactive until its Share Purchase Agreement (the “SPA”) was entered with Centurytouch Ltd., a corporation organized and existing under the laws of United Kingdom (“CTL”) on April 12, 2012.
Pursuant to the SPA, William Tay, the sole shareholder of the Company, consummated a sale of 31,390,000 shares of the Company’s common stock to CTL for an aggregate purchase price of $69,990. Simultaneously, CTL entered into a share exchange agreement with all the stockholders of CTL, pursuant to which 53 shares of CTL, representing 100% of the issued and outstanding ordinary shares of CTL, were exchanged for 17,703,960 shares of common stock of the Company. Upon completion of the exchange, CTL became a wholly-owned subsidiary of the Company and Eric Y. K. Wong, the founder and majority shareholder of CTL, then owned a ‘controlling interest’ in the Company representing 61% of the issued and outstanding shares of Common Stock. On April 21, 2012, the Company changed its name from Kallisto Ventures, Inc. to CenturyTouch Ltd Inc. to more accurately reflect its business after the share exchange transaction with CTL aforementioned.
F-4
The share exchange transaction has been accounted for as a reverse acquisition and recapitalization of the Company whereby CTL is deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal acquirer). The accompanying consolidated financial statements are in substance those of CTL, with the assets and liabilities, and revenues and expenses, of the Company being included effective from the date of share exchange transaction. The Company is deemed to be a continuation of the business of CTL, which owns and operates multi-unit properties throughout the Midlands area of England. Accordingly, the accompanying consolidated financial statements include the following:
(1) The balance sheet consists of the net assets of the accounting acquirer at historical cost and the net assets of the accounting acquiree at historical cost;
(2) The financial position, results of operations, and cash flows of the accounting acquirer for all periods presented as if the recapitalization had occurred at the beginning of the earliest period presented and the operations of the accounting acquiree from the date of share exchange transaction.
The Company and CTL are hereafter collectively referred to as the “Company”.
3. RECENTLY ISSUED ACCOUNTING STANDARDS
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements up to ASU 2014-05, and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.
4. OTHER ASSETS – RELATED PARTIES
As of December 31, 2013, the balance in other assets – related parties was $40,829. The Company received services in connection with its daily operations from the companies owned by Mr. Eric Wong, the Company’s President and Chief Executive Officer. Other Assets – related parties is to record the prepayments the Company made for these services.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following amounts at the respective dates:
|
As of
|
||||||||
|
December 31,
2013
|
June 30,
2013
|
|||||||
|
Cost:
|
||||||||
|
Rental properties – commercial and residential
|
$
|
4,151,936
|
$
|
3,809,971
|
||||
|
Land
|
461,326
|
423,330
|
||||||
|
Furniture and fixture
|
19,888
|
18,250
|
||||||
|
Total
|
4,633,150
|
4,251,551
|
||||||
|
Accumulated depreciation
|
(320,352
|
)
|
(232,212
|
)
|
||||
|
Net
|
$
|
4,312,798
|
$
|
4,019,339
|
||||
The value of land is evaluated by the Company periodically to determine the recoverability rather than depreciated over time. No impairments of land were recognized during the periods ended December 31, 2013 and 2012, respectively.
During the periods ended December 31, 2013 and 2012, the Company had depreciation expenses of $64,358 and $64,683, respectively, included in cost of revenues.
F-5
6. NOTES PAYABLE – RELATED PARTIES
The Company had outstanding balances on its notes payable to Eric Y. K. Wong (“Mr. Wong”), the President and majority shareholder of the Company, in amount of $2,641,654 and $2,383,413 as of December 31, 2013 and June 30, 2013, respectively. The funds borrowed from the Company’s President were to fund the Company’s purchase of properties and daily operations. There are no formal promissory notes but rather an oral agreement between the President and the Company. The notes are unsecured, due on demand with imputed interest at the rate of 5% per annum. Accordingly, the imputed interest expenses of $63,091 and $58,079 during the periods ended December 31, 2013 and 2012, respectively, were credited to additional paid in capital as shareholder’s contribution.
7. NOTES PAYABLE
The Company had outstanding balances on its notes payable of the following amounts as of December 31, 2013 and June 30, 2013:
|
As of
|
||||||||
|
|
December 31,
2013
|
June 30,
2013
|
||||||
|
Aldermore Bank PLC, interest rate of 5.35%+LIBOR*, due on December 20, 2031
|
2,161,216 | 2,015,311 | ||||||
|
Total notes payable
|
$ | 2,161,216 | $ | 2,015,311 | ||||
|
Less: Current portion of notes payable
|
(65,423 | ) | (65,429 | |||||
|
Total long-term notes payable
|
$ | 2,095,793 | $ | 1,949,882 | ||||
* LIBOR = London Interbank Offered Rate
The mortgage finance with Aldermore Bank PLC commenced on February of 2012 and secured by the following properties with total book value of approximately $3,652,627 as of December 31, 2013.
240 Derby Road, Nottingham, NG7 1NX
27-29 Westgate & 61-63 Welby Street, Grantham, Lincolnshire, NG34 6LX
310, 312, 314, & 343 Carlton Hill, Nottingham, NG4 1JE
53 High Street, King’s Lynn, Norfolk, PE30 1BE
62 Gold Street, Northampton, NN1 1RS
453 Firth Park Road, Sheffield, S5 6QQ
8. CAPITAL STRUCTURE
As of December 31, 2013, the Company was authorized to issue 500,000,000 shares of common stock, par value $.0001 per share, of which 31,390,000 shares issued and outstanding, and was authorized to issue 20,000,000 shares of preferred stock, par value $.0001 per share, none of which issued and outstanding.
F-6
9. INCOME TAXES
United States
The Company was incorporated under the laws of the State of Delaware and is subject to U.S. tax. No provisions for income taxes had been made as the Company had no taxable income for the years presented.
United Kingdom
The Company’s subsidiary is located in United Kingdom, which is subject to United Kingdom corporate tax. Provisions for corporate taxes had been accrued.
The Company uses the asset and liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. There were no material timing differences and therefore no deferred tax asset or liability as of December 31, 2013 and June 30, 2013. There was a net operating loss carry forward as of December 31, 2013 of approximately $688,647.
The effective income tax expense for the periods ended December 31, 2013 and 2012 are as follows:
|
December 31, 2013
|
December 31, 2012
|
|||||||
|
Current taxes
|
$ | 0 | $ | 0 | ||||
|
Deferred taxes
|
0 | 0 | ||||||
| $ | 0 | $ | 0 | |||||
10. COMMITMENT AND CONTINGENCIES
Neither does the Company own any property for the use of administration nor does it have any plans to lease any property in the future for such use since the majority workload in administration was outsourced to third parties. There were no rental expenses during the periods ended December 31, 2013 and 2012, respectively.
11. GOING CONCERN
These financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. As of December 31, 2013, the Company had net working capital deficiency of $2,662,917 and accumulated deficit of $688,647, and required capital for its contemplated operation and marketing activities to take place. The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company's ability to continue as a going concern.
Future issuances of the Company's equity or debt securities will be required in order for the Company to continue to finance its operations and continue as a going concern. The Company's present revenues are insufficient to meet operating expenses. The financial statements do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
12. SUBSEQUENT EVENTS
In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to December 31, 2013 to the date these financial statements were issued, and has determined that it does not have other material subsequent events to disclose in these financial statements.
F-7
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in this report and those in our S-11 registration statement most recently filed on December 10, 2013. This discussion contains forward-looking statements that involve risks and uncertainties.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
With the exception of historical matters, the matters discussed herein are forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning anticipated trends in revenues and net income, projections concerning operations and available cash flow. Our actual results could differ materially from the results discussed in such forward-looking statements. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto appearing elsewhere herein.
Background Overview
CenturyTouch Ltd, Inc. a Delaware company, was incorporated in the State of Delaware in August 2010. We were previously Kallisto Ventures, Inc. In April 2013, we merged, in a share exchange agreement with CenturyTouch Limited, a British private company. The name of the Company was changed to CenturyTouch Ltd and Dr. Eric Wong became our CEO. We currently own all of the assets of CenturyTouch Limited and owned eight (8) various properties throughout the Midlands area of England. We plan to continue purchasing residential and commercial properties throughout the world for rental. Specifically, we look to purchase properties in England, Malaysia, and Australia. Our properties currently carry debt of up to 50% of the appraised or purchase value of the property with one bank, Aldermore Bank who holds a first position interest in the properties with the exception of our Bridge Street property which is owned free of encumbrances.
We believe that rental income and loans from our officer will be sufficient to support the limited costs associated with our initial ongoing operations for the next twelve months. We may sell additional shares in a private offering or other offering if we are unable to obtain funds from another source such as a shareholder loan. If sufficient funds cannot be raised, none of the Company’s plans may be implemented. There can be no assurance that the actual expenses incurred will not materially exceed our estimates or that cash flows from listing fees will be adequate to maintain our business. As a result, our independent auditors have expressed substantial doubt about our ability to continue as a going concern in the independent auditors’ report to the financial statements included in the registration statement.
Results of Operations for the Quarter ending December 31, 2013
Background Overview
CenturyTouch Ltd, Inc. a Delaware company, was incorporated in the State of Delaware in August 2010. We were previously Kallisto Ventures, Inc. In April 2012, we merged, in a share exchange agreement with CenturyTouch Limited, a British private company. The name of the Company was changed to CenturyTouch Ltd and Dr. Eric Wong became our CEO. We currently own all of the assets of CenturyTouh Limited and owned eight (8) various properties throughout the Midlands area of England. We plan to continue purchasing residential and commercial properties throughout the world for rental. Specifically, we look to purchase properties in England, Malaysia, and Australia. Our properties currently carry debt of up to 50% of the appraised or purchase value of the property with one bank, Aldermore Bank who holds a first position interest in the properties with the exception of our Bridge Street property which is owned free of encumbrances.
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For the three months ended December 31, 2013, we generated $76,824 in rental income. We also recognized $36,705 in cost of revenues for the three months ended December 31, 2013. Our revenues were derived from the rental income of our properties. The cost of revenues was a result of maintenance (labor and materials) on our properties, depreciation, and other costs associated with generating our rental income. Total operating expenses for the three months ended December 31, 2013 were $57,547. Net loss for the three months ended December 31, 2013 was $(82,645).
For the fiscal year ended June 30, 2013 we generated revenues of $238,765 and cost of revenues of $153,408 resulting in gross profit of $85,357. The cost of revenues was a result of maintenance (labor and materials) on our properties, depreciation, and other costs associated with generating our rental income. During this time, we incurred operating expenses of $217,812, which included general and administrative costs, and interest expenses of $247,233 resulting in a net loss of $379,688. We believe that rental income and loans from our officer will be sufficient to support the limited costs associated with our initial ongoing operations for the next twelve months. We may sell additional shares in a private offering or other offering if we are unable to obtain funds from another source such as a shareholder loan. If sufficient funds cannot be raised, none of the Company’s plans may be implemented. There can be no assurance that the actual expenses incurred will not materially exceed our estimates or that cash flows from listing fees will be adequate to maintain our business. As a result, our independent auditors have expressed substantial doubt about our ability to continue as a going concern in the independent auditors’ report to the financial statements included in the registration statement.
Results of Operations
For the quarter ending December 31, 2013
Assets
At December 31, 2013 we had $6,322 in cash and $4,312,798 in net fixed assets which included our properties throughout Great Britain, less depreciation.
Revenue
For the three months ended December 31, 2013, we generated $76,824 in rental income compared to $63,559 for the three months ended December 31, 2012. We also recognized $38,155 in cost of revenues for the three months ended December 31, 2013 compared to cost of revenues in amount of $40,139 for the three months ended December 31, 2012.
Operating Expense
Total operating expenses for the three ended December 31, 2013 were $57,547 compared to expenses of $39,063 for the three ended December 31, 2012. The increase was due mostly to our expenses related to our S-11 registration statement.
Interest Expense
For the three months ended December 31, 2013, we recognized $63,767 in interest expense, consisting of the interest of $22,938 paid on the mortgages on our real properties, and interest of $40,829 imputed on related parties’ loan. Comparatively, we recognized $61,823 in interest expense for the three months ended December 31, 2012, consisting of the interest of $3,744 paid on the mortgages on our real properties, and interest of $58,079 imputed on related parties’ loan.
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Net Loss
Net loss for the three months ended December 31, 2013 was $(82,645) compared to net loss of $(77,466) for the three months ended December 31, 2012.
Long Term Liabilities
We have bank loans on our properties totaling $2,125,510, of which $73,351 payable within one year. We also have $2,528,679 owed to related parties and due on demand. The funds were borrowed from our President, Dr. Eric Wong and were to fund our purchase of properties and daily operations. There are no formal promissory notes but rather an oral agreement with Mr. Wong. The notes are unsecured, due on demand with imputed interest at the rate of 5% per annum. Accordingly, the imputed interest expenses of $63,091 and $58,079 during the periods ended December 31, 2013 and 2012, respectively, were credited to additional paid in capital as shareholder’s contribution.
Liquidity and Capital Resources
The Company had $6,322 in cash as of December 31, 2013. Our financial statements include an explanatory paragraph of our auditor’s uncertainty as to our ability to continue as a going concern. As of December 31, 2013, the Company had net working capital deficiency of $2,662,917 and accumulated deficit of $668,647, and required capital for its contemplated operation and marketing activities to take place. The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company's ability to continue as a going concern. We believe we will need cash for travel costs for Dr. Wong to manage properties (approximately $10,000), capital improvements for our properties (approximately $50,000), and costs associated with general operating expenses including legal, accounting, and other expenses. We estimate that these general costs will be approximately $110,000. Thus we will need to generate cash in order to cover all of our expenses. We do believe that approximately $75,000 will come from our rental income based on our historical financials. We are not sure if this will be sufficient to meet our operating requirements for the next 12 months.
The investigation of prospective financing candidates involves the expenditure of capital. The Company will likely have to look to Dr. Wong or to third parties for additional capital. There can be no assurance that the Company will be able to secure additional financing or that the amount of any additional financing will be sufficient to conclude its business objectives or to pay ongoing operating expenses.
If Dr. Wong is unable to lend additional funds to the Company in the event that Company needs additional funds, we may need to deploy a plan to sell additional shares or look to a third party to lend funds to the Company. If the Company is to borrow funds from a third party, the terms and conditions of such a loan may not be on favorable terms. If we are unable to address our liquidity issues, there is a great chance that the Company will not have adequate funding to continue its business plan and will thus, fail.
We may also sell a property in order to cover cash short falls.
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Related Party Transactions
The Company had outstanding balances on its notes payable to Eric Y. K. Wong (“Mr. Wong”), the President and majority shareholder of the Company, in amount of $2,528,679 and $2,383,413 as of December 31, 2013 and June 30, 2013, respectively. The funds borrowed from the Company’s President were to fund the Company’s purchase of properties and daily operations. There are no formal promissory notes but rather an oral agreement between the President and the Company. The notes are unsecured, due on demand with imputed interest at the rate of 5% per annum. Accordingly, the imputed interest expenses of $30,582 and $28,701 during the periods ended December 31, 2013 and 2012, respectively, were credited to additional paid in capital as shareholder’s contribution.
The Company may elect, with the consent of Dr. Wong, at some date in the future, convert the note into equity of the Company. Currently there is no plan of conversion.
To acquire the shares of the Kallisto that resulted in our merger, Dr. Wong paid $69,992.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Item 3. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2013. This evaluation was accomplished under the supervision and with the participation of our chief executive officer / principal executive officer, and chief financial officer / principal financial officer who concluded that our disclosure controls and procedures are currently not effective to ensure that all material information required to be filed in the quarterly report on Form 10-Q has been made known to them.
For purposes of this section, the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seg.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure, controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by in our reports filed under the Securities Exchange Act of 1934, as amended (the "Act") is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based upon an evaluation conducted for the period ended December 31, 2013, our Chief Executive Officer and Chief Financial Officer as of December 31, 2013, and as of the date of this Report, has concluded that as of the end of the periods covered by this report, he has identified material weakness of Company internal controls.
Corporate expenses incurred are processed and paid by the officer of the Company. The current number of transactions is not sufficient to justify the retaining of additional accounting personnel.
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Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on its evaluation, our management concluded that, as of December 31, 2013, that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan.
This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to the attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this quarterly report.
Changes in Internal Controls over Financial Reporting
We have not yet made any changes in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Item 1. LEGAL PROCEEDINGS
None.
None.
None.
None.
None.
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Item 6. EXHIBITS
(a) Exhibits:
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Number
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Description
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31.1
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Certification of Chief Executive and Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
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32.1
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Certification of Chief Executive and Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CENTURYTOUCH LTD, INC. | |||
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Date: May 20, 2014
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By:
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/s/ Dr. Y.K. Wong | |
| Dr. Y.K. Wong | |||
| President and Director | |||
| (Principal Executive Officer) | |||
| Date: May 20, 2014 |
By:
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/s/ Dr. Y.K. Wong | |
| Dr. Y.K. Wong | |||
| Treasurer and Chief Financial Officer | |||
| (Principal Financial Officer, and Principal Accounting Officer) | |||
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