Notes to the Consolidated Financial Statements (Unaudited)
June 30, 2018 and March 31, 2018
NOTE 1 ORGANIZATION AND BUSINESS
On June 13, 2012, the Board of Directors of Geo Point Technologies, Inc., a Utah corporation (Geo Point Utah), approved a stock dividend that resulted in a spin-off (Spin-Off) of Geo Point Resources, Inc. (the Company) common stock to the Geo Point Utah stockholders, pro rata, on the record date (the Record Date). Prior to the Spin-Off, the Company was a wholly-owned subsidiary of Geo Point Utah. The Company was incorporated on June 13, 2012, comprising all of Geo Point Utahs Environmental and Engineering Divisions assets, business, operations, rights or otherwise, along with its Hydrocarbon Identification Technology License Agreement with William C. Lachmar dated January 31, 2008. The Spin-Off had a Record Date of January 17, 2013; an ex-dividend date of January 15, 2013; and a Spin-Off payment date of April 22, 2013.
On November 22, 2017, the Company entered into a Share Exchange Agreement (the Agreement), the transaction closed on December 4, 2017, with TORtec Group, a Wyoming corporation (TORtec) and all of the shareholders of TORtec, pursuant to which the Company acquired 100% of the issued and outstanding shares of common stock of TORtec. Under the terms of the Agreement, a total of 90,000,000 shares of the Companys common stock were issued to the TORtec shareholders as consideration in exchange for all 10,000,000 issued and outstanding shares of TORtec common stock being transferred to the Company, making TORtec a wholly-owned subsidiary of the Company. As a result, the TORtec shareholders collectively own ninety percent (90.0%) of our issued and outstanding shares of our common stock immediately following the acquisition.
Stephen Smoot was a former consultant and officer of Capital Vario CR S.A. ("Capital Vario"), which was the controlling shareholder of the Company prior to the acquisition, but resigned from his affiliation with Capital Vario prior to a $500,000 debt-to-equity conversion by Capital Vario with the Company. Stephen Smoot became the President/CEO and Director of TORtec Group on September 8, 2017. At the date of acquisition, TORtec's assets and liabilities were recorded at their fair market value, which was consistent with the carrying value of those assets. The consideration in excess of the net assets was expensed as an additional cost of the acquisition. At the time of acquisition, TORtec had recently been incorporated and didn't have significant operations for which would constitute a business. Thus, the Company treated the transaction similar to an asset purchase with no goodwill being recorded in connection with the transaction. In addition, the historical financials will represent those of the Company's and the operations of TORtec will be included from December 4, 2017 forward. No goodwill was recorded in connection with the transactions. In addition, pro-forma consolidated financial statements haven't been provided due to the limited operations of TORtec. The Company acquired TORtec to expand its operations and felt it was a good compliment to the entering services currently provided.
In connection with the transaction, the Company valued the 90,000,000 shares of common stock provided to the TORTec shareholders at $5,203,643. This value was based upon the conversion rate of $0.0578 which was used to convert the Capital Vario line of credit into shares of the Company's common stock. In addition, $25,000 was provided to the Company prior to the date of acquisition. The transaction was a recapitalization of the Company through a share exchange for which the consideration provided was recorded at fair market value. The following is a summary of the carrying value of TORtec's asset and liabilities as of December 4, 2017 and the additional amount of consideration recorded:
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Assets (Liabilities):
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Cash
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$
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72,910
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Deposits - Related Party
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461,458
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Short-term Advances
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(20,000)
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Net assets
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$
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514,368
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Consideration paid - common stock
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(5,203,643)
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Additional consideration
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$
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(4,689,275)
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TORtec Group, Inc.
On September 9, 2017, TORtec entered into General Agreement No. US-17 on cooperation and joint activities on commercialization of TOR-technologies, introduction of new productions, products and services in the markets of North, Central and South America (the Exclusive License Agreement) with the parties that invented the TOR-technology. The Exclusive License Agreement grants to TORtec an exclusive license to utilize the technology for certain purposes throughout North, Central and South America.
The TOR-technology equipment is best described as a cascaded adiabatic resonance vortex mill utilizing compressed air as the energy in the system. This proprietary technology includes the ability to size and classify material processed by elemental composition and specific gravity.
In some cases, the quality and composition of the materials and liquids processed are new. This TOR-technology has the potential to influence the efficiency and quality of the micro-pulverization industry for re-mineralizing soil, conserve energy, cleanup and extract value from mining waste piles and to create new bio-products and metal-ceramic composites.
Discontinued Operations
In February 2018, due to the untimely death of Bill Lachmar, Geo Point Resources, Inc.'s president, the Company ceased the operations of the Environmental and Engineering Divisions. The Company has reflected these operations as discontinued operations in the accompanying consolidated financial statements. The consolidated financial statements for the three months ended June 30, 2017 have been retroactively restated to reflect the discontinued operations. The following is a summary of discontinued operations included within the consolidated financial statements as of June 30, 2018 and March 31, 2018:
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June 30,
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March 31,
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2018
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2018
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ASSETS
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Furniture and equipment, net of accumulated depreciation of $0 and
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$24,324, respectively
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$ -
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$ -
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Other assets
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-
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-
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Total Assets - Discontinued Operations
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$ -
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$ -
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LIABILITIES
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Current Liabilities
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Accounts payable and accrued liabilities
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$ 9,064
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$ 9,064
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Total Current Liabilities - Discontinued Operations
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$ 9,064
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$ 9,064
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The following is a summary of discontinued operation for the three months ended June 30, 2018 and 2017:
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For the Three Months Ended
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June 30,
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2018
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2017
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Sales
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$ -
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$ 6,890
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Sales - Related Party (Note 7)
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-
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-
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Total Sales
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-
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6,890
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Operating Expenses
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Cost of sales
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-
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2,492
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General and administrative
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-
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31,222
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Total Operating Expenses
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-
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33,714
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Operating Loss - Discontinued Operations
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$ -
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$ (26,824)
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For the three months ended June 30, 2018, discontinued operations did not have an impact on the cash flow statements. For the three months ended June 30, 2017, significant item within the cash flow statement related to discontinued operations were depreciation expense of $3,500 and the use of prepaids of $1,250.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the consolidated financial statements, the Company has incurred significant current period losses, negative cash flows from operating activities, has negative working capital, and an accumulated deficit. These conditions, among others, raise substantial doubt about the Companys ability to continue as a going concern. Managements plans regarding these matters, if needed, include raising additional debt or equity financing. The terms of which might not be acceptable to the Company. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Interim Condensed Consolidated Financial Statements
The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The accompanying condensed consolidated balance sheet as of June 30, 2018, and the condensed consolidated statements of operations and cash flows for the three months ended June 30, 2018, and 2017, are unaudited. The condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Companys consolidated financial position, results of operations, and cash flows for such periods. The financial data and other information disclosed in these notes to the condensed consolidated financial statements related to the three month period are unaudited. The results of the three months ended June 30, 2018, are not necessarily indicative of the results to be expected for the year ending March 31, 2019, any other interim period, or any other future year.
Basis of Accounting
Our consolidated financial statements are stated in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary TORtec. All significant intercompany transactions have been eliminated in the consolidation. TORtec's operations have been included from its date of acquisition, see Note 1 for additional information.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes to consolidated financial statements. Actual results could differ from those estimates. Significant estimates made by management include allowance for doubtful accounts and the useful life of property and equipment.
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Fair Value of Financial Instruments
The Company complies with the accounting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820-10,
Fair Value Measurements,
as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The guidance also establishes a fair value hierarchy for measurements of fair value as follows:
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Level 1 - quoted market prices in active markets for identical assets or liabilities
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Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
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Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
As of June 30, 2018, and March 31, 2018, the Company did not have Level 1, 2, or 3 financial assets or liabilities. Financial instruments consist of cash, accounts receivable, payables, and a line of credit. The fair value of financial instruments approximated their carrying values as of June 30, 2018, and March 31, 2018, due to the short-term nature of these items.
Revenue Recognition
The Company recognizes revenue when the earnings process is complete. This generally occurs as services are performed, see below for a description of former services. On April 1, 2018, the Company determined that the adoption of Accounting Standards Update No. 2014-09 (ASU 2014-09),
Revenue from Contracts with Customers
(ASC 606) had no material impact to the Companys consolidated financial statements.
The Companys primary source of revenue had been in its environmental division, providing historical site data searches, preliminary investigation and drilling, site characterization modeling, regulatory agency liaison, and full environmental clean-ups using such methods as vapor extraction, air sparging, bio-remediation, ORC (Oxygen Release Compound) and HRC (Hydrogen Release Compound) injection treatment, air stripping, and ionic exchange. Revenues from providing historical site data searches, preliminary investigation and drilling, site characterization modeling, regulatory agency liaison, and full environmental clean-ups using such methods as vapor extraction, air sparging, bio-remediation, ORC (Oxygen Release Compound) and HRC (Hydrogen Release Compound) injection treatment, air stripping, and ionic exchange are recognized after services have been performed. See Note 1 for discussion regarding the discontinuance of the Company's Environmental and Engineering Divisions.
Basic and Diluted (Income) Loss per Common Share
Basic income (loss) per common share is calculated by dividing net loss by the weighted average common shares outstanding during the period. Diluted income (loss) per common share reflects the potential dilution to basic earnings per share that could occur upon conversion or exercise of securities, options, or other such items to common shares using the treasury stock method, based upon the weighted average fair value of the Companys common shares during the period. For the three months ended June 30, 2018, and 2017, the Company did not have any dilutive securities.
Recent Accounting Pronouncements
The Financial Accounting Standards Board issued Accounting Standard Updates (ASUs) to amend the authoritative literature in Accounting Standards Codification (ASC). There have been a number of ASUs to date that amend the original text of ASC. The Company believes those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company's operations.
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NOTE 3 FINANCIAL STATEMENT ELEMENTS
Loans Receivable Construction Project
In July 2015, the Company loaned $75,000 to an unrelated third party. The loan does not incur interest and is due on demand. The loan is intended to be a short term loan used for a construction project by the borrower. During the year ended March 31, 2018, due to the delays in repayment, the Company reserved 100% of this receivable. During the year ended March 31, 2018, the Company received $20,000 from the unrelated third party.
On November 9, 2015, the Company loaned $100,000 to an unrelated third party. The loan incurs interest at 2% per annum and is due upon the earlier of October 31, 2018, or completion by the borrower of one or more projects having an aggregate value of not less than $40 million. The loan is intended to be a short term bridge loan used for working capital for the third party. During the year ended March 31, 2018, the Company reserved 100% of this receivable.
NOTE 4 LINE OF CREDIT AND SHORT TERM ADVANCES
On January 1, 2013, the Company entered into a $100,000 revolving line of credit with an unrelated third party. Under the terms of the agreement the outstanding principal incurs interest at 24% per annum with principal and interest due nine months from the date of the agreement or July 1, 2013. The revolving line of credit is unsecured and currently in default; however, no demands for repayment have been made. Subsequent to the agreement date, the third party has continued to advance additional funds as needed under the same terms of the initial revolving line of credit. Proceeds from the revolving line of credit were used for operations. On August 24, 2017, the Company and the holder of the revolving line of credit agreed to convert the outstanding principal of $302,399 and accrued interest of $197,601 into 8,647,796 shares of common stock. The Company determined that the per share amount of $0.0578 was most representative of the fair market value. This determination was based upon the fact that although the Companys common stock is publically traded there has not been an active public trade of the Companys common stock in a significant period of time, indicating no market for the Companys common stock. In addition, the number of shares issued was negotiated between the Company and the third party.
During the year ended March 31, 2018, the Company received short term advances of $21,000 from two shareholders of the Company. The advances do not incur interest and are due on demand. In addition, the Company assumed a $20,000 advance from Capital Vario, a shareholder of the Company, in connection with the acquisition of TORtec, see Note 1. The advances have been reflected as "short term advances - related parties" on the accompanying consolidated balance sheets.
NOTE 5 COMMITMENTS AND CONTINGENCIES
The Company does not have any pending or threatened litigation.
NOTE 6 - SHAREHOLDERS DEFICIT
On August 24, 2017, the Company issued 250,000 shares to a third party for legal services rendered. The Company valued the shares at $14,455, based upon the conversion rate of the line of credit discussed above. The fair value was immediately expensed to general and administrative expense as the performance commitment was complete.
On August 24, 2017, the Company also issued 100,000 shares of common stock to a third party in settlement of $21,852 in amounts due in connection with accounting services. The Company valued these shares at $5,782, based upon the conversion rate of the line of credit discussed above. The difference between the fair market value of the shares and the amount forgiven of $16,070 was recorded as a gain on extinguishment of liabilities on the accompanying statement of operations.
See Note 1 for disclosure of additional shares.
NOTE 7 - RELATED PARTY TRANSACTION
On September 9, 2017, TORtec entered into an agreement with MTM Center GmbH, a former shareholder of TORtec, a member of the board of directors and a significant shareholder of the Company, for the construction of equipment utilizing the TORtec technology, referred to as the Tornado M. The total purchase price is 394,000 Euros for which the Company has paid in full at $474,978. The Company expects to receive the equipment in second quarter of fiscal 2019. The Tornado M will be used in the Company's operations.
On June 18, 2018, TORtec Group entered into License Agreement No. W-1/18 with Forschunginstitut GmbH pursuant to which it was granted a license to use the TOR technology and the utility model Tornado documentation for certain purposes, for which TORtec Group paid an initial royalty of 30,000 Euros, and agreed to pay an annual royalty equal to 10% of any after tax profit received by TORtec Group (and any subsidiaries) by the years result. This License Agreement expanded the licensed territory from North, Central and South America to the entire world. The License Agreement was an amendment of the original agreement entered into on September 9, 2017. The $35,947.38 (30,000 Euros) payment was made in November 2017. The amounts paid were included within the total amounts disclosed above.
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See Notes 1 and 4, for additional related party transactions.
NOTE 8 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events after June 30, 2018, through the date of this filing, noting no additional items which need to be disclosed within the accompanying notes to the consolidated financial statements other than those disclosed above.
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Item 2.