This Annual Report includes forward-looking statements based on managements beliefs, assumptions and plans for the future, information currently available to management and other statements that are not historical in nature. Forward-looking statements include statements in which words such as expect, anticipate, intend, plan, believe, estimate, consider, or similar expressions are used. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions, including among others: a general economic downturn; a downturn in the securities markets; regulations that affect trading in the securities of penny stocks; the enactment or amendment of laws, rules and regulations that could have a materially adverse impact on current and intended operations; and other risks and uncertainties.
Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. We may be required to update these forward-looking statements from time to time as circumstances change; however, we undertake no duty to do so.
References to we, our or us and words of similar import under this heading refer to TORtec Group Corporation, the Registrant, unless the context implies otherwise.
ITEM 1. BUSINESS
Business Development
On February 24, 2015, we filed a Form 8-A Registration Statement with the SEC, and we are now required to file reports under Section 13 of the Securities Exchange Act of 1934, as amended (the Exchange Act); and our directors, officers, 10% and 5% shareholders are required to file beneficial ownership reports with the SEC on applicable Forms.
Introduction
Past Plan of Operations
On June 13, 2012, we were formed as a wholly-owned subsidiary of Geo Point Technologies, Inc., a Utah corporation (Geo Point Utah), and into which Geo Point Utah simultaneously authorized the conveyance of the segment of its business comprising all of its Environmental and Engineering Divisions assets, business, operations, rights or otherwise, along with its Hydrocarbon Identification Technology (HI Technology) License Agreement dated January 31, 2008 (the License Agreement), subject to the assumption by us of all related liabilities and the indemnification of Geo Point Utah by us from any liabilities relating to these assets and operations. Also on June 13, 2012, the Board of Directors of Geo Point Utah approved a stock dividend that resulted in a spin-off of all of our shares of common stock to the Geo Point Utah stockholders, pro rata, on a one share for one share basis, on the record date (the Spin-Off). The Spin-Off had a record date of January 17, 2013; and ex-dividend date of January 15, 2013; and a Spin-Off payment date of April 22, 2013. On the effective date of the Spin-Off, there were approximately 1,002,167 outstanding shares of our co
mmon stock. For additional information about the Spin-Off, see our Prospectus dated January 7, 2013, and filed with the SEC on January 8, 2013; and our 8-K Current Report dated April 22, 2013, and filed with the SEC on such date. See Part IV, Item 15.
The Environmental and Engineering Divisions comprised the initial operations of Geo Point Utah at its inception and were commenced as a DBA in 1997, by Geo Point Utahs founder, William C. Lachmar, who then served as our President and sole director, in the State of California. The Company operated this business until February 2018 when Mr. Lachmar died. The Company has no plans to continue this business following Mr. Lachmars death.
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Acquisition of TORtec Group
On November 22, 2017, (the Company entered into a Share Exchange Agreement (the Agreement) with TORtec Group, a Wyoming corporation (TORtec Group) and all of the shareholders of TORtec Group, pursuant to which the Company acquired 100% of the issued and outstanding shares of common stock of TORtec Group. The acquisition of TORtec Group by the Company was successfully consummated on December 4, 2017.
Under the terms of the Agreement, a total of 90,000,000 shares of the Companys restricted common stock were issued to the seventeen TORtec Group shareholders as consideration in exchange for all 10,000,000 issued and outstanding shares of TORtec Group common stock being transferred to the Company, making TORtec Group a wholly-owned subsidiary of the Company. As a result, the TORtec Group shareholders collectively own ninety percent (90.0%) of our issued and outstanding shares of our common stock immediately following the acquisition. New directors and officers of the Company were appointed in connection with the acquisition.
Stephen Smoot was a former 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. Smoot became the President/CEO and Director of TORtec Group on September 8, 2017.
As part of the closing of the acquisition, the Companys then sole director (William C. Lachmar) elected Franc Smidt, Alex Schmidt, Maksim Goncharenko, Jeffrey R. Brimhall, Stephen H. Smoot, and Irina Kochetkova to the Companys Board of Directors before resigning as an officer and director of the Company. The following persons were then elected as officers of the Company: Franc Smidt Chairman of the Board of Directors, Stephen H. Smoot - President and CEO, Alex Schmidt Vice President, and Irina Kochetkova Secretary and Treasurer. Jeffrey R. Brimhall resigned as an officer of the Company but has been appointing to serve as a director. Maksim Goncharenko subsequently resigned as a director on July 3, 2018.
For additional information concerning the acquisition of TORtec Group, see the Companys Current Report on Form 8-K dated December 4, 2017 and filed with the SEC on December 8, 2017, as amended in a Form 8-K/ Amendment dated June 22, 2018 and filed with the SEC on June 22, 2018.
Future Plan of Operations
Now that the acquisition of TORtec Group is complete, we will become engaged, through our subsidiary TORtec Group, in the business of harnessing the natural implosion forces of a vortex (tornado), employing resonating frequencies, to disintegrate soft to ultra-hard materials into micron or nano-sized particles.
On September 9, 2017, TORtec Group entered into General Agreement No. US-17 with Scientific Research Institute of Technological Progress, Limited, a limited company organized under the laws of Cyprus (SRITP) for the 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 Group 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. A more detailed description of the acquisition is included in the Companys two Current Reports on Form 8-K: (a) dated November 22, 2017 and filed with the SEC on November 29, 2017; and (b) dated December 4, 2017 and filed with the SEC on December 8, 2017, as amended in a Form 8-K/ Amendment dated June 22, 2018 and filed with the SEC on June 22, 2018; both of which are incorporated herein by this reference.
On June 18, 2018, TORtec Group entered into License Agreement No. W-1/18 with Forschunginstitut GmbH a limited liability company registered in Switzerland, the successor-in-interest to SRITP
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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 shall pay an initial royalty of 30,000 Euros, and an annual royalty equal to 10% of any
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after tax profit received by TORtec Group (and any subsidiaries) by the years result. A copy of this License Agreement is attached to our Annual Report on Form 10-K for the fiscal year ended March 31, 2018 as Exhibit 10.1.
On September 9, 2017, TORtec Group entered into an agreement with MTM Center GmbH, then a shareholder of TORtec, for the construction of a mobile machine that utilizes the TOR-technology, referred to as the Tornado M. The total purchase price is 394,000 Euros ($474,159 as of September 9, 2017 date of the agreement). On March 3, 2018 the agreement was amended to the amount of 305,535 Euros or $367,696 representing the original amount of 394,000 Euros or $474,159 less the amount of 88,465 Euros or $106,463 originally allocated to the Kaeser screw-compressor, plus the additional amount of 48,040 Euros or $57,814 in the form of prepayment for transportation and expenses of technical personnel to come to the USA to commission the mobile TORNADO M unit and payment in advance for an additional vortex chamber with resonating frequency rings for additional applications for the mobile TORNADO M unit, including transportation & insurance to Idaho.
On February 19, 2019, TORtec Group entered into an agreement with TORtec Forschungsinstitut GmbH, the successor-in-interest to SRITP. This license enlarged the original license with TORtec Forschungsinstitut GmbH and SRITP and granted exclusive worldwide rights to use the TOR-technology in the following applications:
Mining industry and mineral processing, including: methods of disintegration of mineral raw materials, methods and technologies of further enrichment of rocks, minerals and processing of technogenic accumulations under the code name "TOR-technology"; exploitation of specialized mineral processing "Tornado" utility models and the subsequent recipience of the products by the disintegration of mineral raw materials, mechanical activation, mechanochemical activation and mechanosynthesis to receive a large range of finished products, blends, composites and solutions; commercialization of licensor's technological solutions and projects in the mining industry and in the processing of mineral raw materials and technogenic accumulations to wit:
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methods, techniques and technologies of disintegration of materials, minerals and rocks, mining;
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industrial waste with subsequent enrichment and/or with the recipience of the product;
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methods and technologies of mechanical activation, mechanochemical activation, and;
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mechanosynthesis of mineral raw materials, obtaining materials with new properties and new;
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materials, composites, mixtures, solutions;
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methods and technologies of deep processing and decontamination of contaminated materials, waste, and water reclamation;
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methods and technologies of restoration of the fertility of the land, obtaining new classes of mineral and biomineral fertilizers and mixtures and mineral protection of soil and plants;
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all or some know-hows, trademarks, design development and technical knowledge.
The Company has paid the total amount of two (2) payments totaling 354,600 Euros or $425,510 plus an additional payment of 30,000 Euros or $35,947 for the one-time License fee above. The Company received the Tornado M machine in the second fiscal quarter of the fiscal year ended March 31, 2019. The Tornado M is currently being prepared to be used in the Company's operations.
On April 11, 2019 TORtec Group entered into a general, exclusive, unlimited, irrevocable and perpetual license to use the technology, know-how, development and technical knowledge with TORtec Forschungsinstitut GmbH
for industrial and commercial applications of the complex TOR-technology and utility model Tornado in the project Titan+ materials science and production of micro- and nano-structured micropowders for laser (3d-printing, am-technology), powder and plasma metallurgy for the following applications:
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Field of disintegration (micronization) of various non-mineral material
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Production of non-mineral micro- and nano-structured micro powders of metal ceramics, carbides, metal oxides and their mixtures for powder, laser and plasma metallurgy
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Related documentation, development and production of unique installations of resonant gas-dynamic grinding of different types of non-mineral materials, united under a common understanding "tornado"
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The technologies for grinding non-mineral materials, including multi-component and various-phase materials, their functionalization and modification, their mechanical, mechanochemical activation and mechanosynthesis
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The production of dispersed new non-mineral materials and non-mineral materials with new properties.
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All know-hows, trademarks, design development and technical knowledge relating to the applications above
Business
The TORtec Technology Business
As described above, the Companys wholly-owned subsidiary, TORtec Group, entered into two (2) Exclusive License Agreements on cooperation and joint activities for the commercialization of TOR-technologies, introduction of new productions, products and services throughout the world with the parties that invented the TOR-technology. The Exclusive License Agreements grant to TORtec Group an exclusive license to utilize the technology for certain purposes worldwide. 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.
The TOR-technology
A new technology is being used inside the resonance Tornado mills, a noncontact material grinding, where the grinding processes are performed by means of an air vortex, artificially produced in an enclosed space within the processing chamber.
As an energy carrier (fuel), the following may be used:
pressurized air (compressor or a turbine);
any inert gas supplied under pressure
high-pressure steam (superheated steam);
the medium in the supercritical state (fluids), such as (CO2);
cooling agents
The resonant vortex TORNADO installation is a gas-dynamic mill in which the technology of cascaded adiabatic resonance impact grinding is implemented, impact velocities of which are close to a breakdown threshold. The installation is designed in a way so that any particle of the input material gets literally torn by the repeated crossing of the differential pressure zones in the inter-vortex vacuum chamber, which produces ultrahigh gradient (pressure drops) at the interface (up to hundreds of thousands atmospheres).
When the material is injected into such area of pressure differential, a rupture of the materials structure and clusters occurs. Such mechanism can be compared to the mechanism of materials sample destruction, which is done in order to determine its strength characteristics at tensile test plants. That is, the grinding occurs not due to the friction or any other mechanic force, but by air and resonances, which provide a high and efficient performance, great flow rate of raw material as well as inexpensive exploitation (no rubbing parts) with low power consumption.
The TOR technology can be used for: (1) micropulverization; (2) blending of materials; and (3) concentrating of materials.
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Principal Products or Services and their Markets
The Company has no present contracts to provide any products or services. The Company has been in contact with companies that sell zeolites about the possibility of using the TOR technology to break down or reduce the size of zeolites to approximately 3 to 5 microns in size, which can then be used for different commercial purposes. The Company tested the Tornado M machine on zeolites. The technology was successful in pulverizing the Zeolite, however, it was determined that the cyclone and air filtration systems were inadequate to handle the amount of air introduced into the vortex mill. Without the properly sized air filtration system, the Company will not be able to process material and comply with air quality industry standards. After the purchase and installation of additional air handling and filtration equipment, the Company may pursue a contract with third parties to generate revenues.
According to Explainthatstuff.com, zeolites are hydrated aluminosilicate minerals made from interlinked tetrahedra of alumina (AlO4) and silica (SiO4). In simpler words, they're solids with a relatively open, three-dimensional crystal structure built from the elements aluminum, oxygen, and silicon, with alkali or alkaline-Earth metals (such as sodium, potassium, and magnesium) plus water molecules trapped in the gaps between them. Zeolites form with many different crystalline structures, which have large open pores (sometimes referred to as cavities) in a very regular arrangement and roughly the same size as small molecules. There are about 40 naturally occurring zeolites, forming in both volcanic and sedimentary rocks; according to the US Geological Survey, the most commonly mined forms include chabazite, clinoptilolite, and mordenite. Dozens more artificial, synthetic zeolites (around 150) have been designed for specific purposes, the best known of which are zeolite A (commonly used as a laundry detergent), zeolites X and Y (two different types of faujasites, used for catalytic cracking), and the petroleum catalyst ZSM-5 (a branded name for pentasil-zeolite).
Distribution Methods of the Products or Services
We have not yet commenced active operations with our TOR technologies business. We do not advertise our services in any publications. We may choose to seek customers through advertising in the future, or we may use cold calling, or possibly demonstrate our services at trade shows. We hope to obtain customers through referrals once we commence active operations.
Status of any Publicly Announced New Product or Service
In a Current Report on Form 8-K filed by the Company on May 29, 2019 and amended on May 31, 2019, the Company announced that on May 22, 2019, the Company entered into a Share Exchange Agreement with TORtec Central Asia, a Wyoming corporation, and the sole shareholder of TORtec Central Asia pursuant to which the Company has agreed to acquire 100% ownership of the outstanding shares of TORtec Central Asia stock in exchange for issuing 2,000,000 shares of the Companys common stock to the sole shareholder of TORtec Central Asia, Mr. Merdan Atayev. Mr. Atayev is the President, sole director and sole shareholder of TORtec Central Asia, a newly formed Wyoming corporation. The Share Exchange Agreement is subject to certain terms and conditions, including the transfer of: (a) a 99 year Lease Agreement to a new office, warehouse facility and land in Ashgabat, Turkmenistan (Target Land); and (b) any furniture, tools, machinery and equipment for maintenance and lifting located at the facility (Target Assets). TORtec Central Asia must first have acquired leasehold ownership to the Target Land based on a ninety-nine year lease from the government of Turkmenistan, free and clear from all mortgages, trust deeds, liens or other encumbrances, and TORtec Central Asia shall have acquired undisputed ownership of the Target Assets free and clear from all security interests, liens or other encumbrances. The Share Exchange Agreement also provides that the Company will elect Merdan Atayev as a Vice President of the Company as a condition to the Closing of the proposed acquisition.
The property to which the Lease Agreement pertains includes an industrial building and office of approximately 7,300 square meters including a warehouse and plant facility of 1,535.55 square meters and an office building of approximately 1,205 square meters which is located in the Ak-bugday District industrial free zone. The lease payments total approximately USD$500 per year. The Company intends to use the property for the following purposes: Collect and prepare bio material, including plants, herbs and minerals for shipment to the Companys facilities in Murg, Germany for further processing into valuable products with the Companys TOR-technologies. Later, the Company plans to process soil substrates for sale in Central Asia and the Middle East.
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The conditions to the closing of the acquisition of TORtec Central Asia have not yet been satisfied, so the
Closing has not yet occurred.
Competitive Business Conditions and Smaller Reporting
Companys Competitive Position in the Industry and Methods of Competition
We are not aware of any companies that have access to the TOR technology in our licensed territory. However, there are companies that have other technologies that can be used for (1) micropulverization; (2) blending of materials; and (3) concentrating of materials. These competitors use planetary jet mills that can reduce the size of materials. These competitors include mostly large and well-funded entities whose businesses and subsidiaries focus on the industries in which we intend to operate. In this respect, we are at a distinct disadvantage to these competitors. We believe our competitive position in this industry as a whole is not presently significant.
However, we believe that the other existing technologies are more expensive to operate than the projected costs of using the TOR technology. If we are correct in our assessment, and if the TOR technology proves to work well commercially in the business areas that we intend to target, we believe that we may have a competitive advantage based on reduced cost.
Seasonal Nature of Our Business
Our business is not a seasonal business since we can process material which is mined and delivered year-round.
Dependence on One or a Few Major Customers
As of the present time, we have no customers. Once we commence active operations, we will target our first customer, and hope to grow from there. We expect that in the first year or two of our active operations, we will likely rely on a few customers for the success of our business, and that the loss of any customer may have a material adverse effect on our business.
Patents, Trademarks, Licenses, Franchises, Concessions,
Royalty Agreements or Labor Contracts, including Duration
On June 5, 2018 the United States Patent and Trademark Office issued TORtec Group, the Companys wholly-owned subsidiary, the Trademark TORtec as Registration Number 5,484,711 under International Class 7 (Crushing machines for industrial purposes; Machines, namely, crushers, impact mills, breakers, pulverizers, mixers and blenders and parts therefor, for industrial and commercial applications).
We do not hold any patents; however, through our TORtec Group subsidiary, we have a Exclusive License Agreements with TORtec Forschungsinstitut GmbH,, TOR Biologos GmbH, and Vortex Technologies Ltd. (related parties that invented the TOR-technology collectively referred to as Party 1). The Exclusive License Agreements granted to TORtec Group exclusive licenses to utilize the technology for certain purposes worldwide.
The material terms of the Exclusive License Agreements are as follows:
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Party 1 will ensure the joint activity under the Agreements through exclusive, general, irrevocable and perpetual, worldwide licenses for applications in the mining industry, the enrichment of rocks, the processing of mineral raw materials and technogenic accumulations; exploitation of processing powder metals in the materials science industry and production of micro- and nano-structured micropowders for laser (3d-printing, AM-technology) and powder and plasma metallurgy;
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Party 1 guarantees the effectiveness of the technology and the production of an assortment of products and services in the areas of application of TOR-technologies and useful models of "Tornado" and projects identified in the Exclusive License Agreements;
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The parties jointly determine the strategy of development and the selection of priorities for the implementation of projects;
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The parties agree that the dividend policy, program of action and budget of the Company will be approved by a separate document;
Need for any Governmental Approval of Principal Products or Services
We are not aware of any governmental approval of our licensed TOR technology or our services, other than obtaining a standard business license in each jurisdiction where we will operate.
Effect of Existing or Probable Governmental Regulations on the Business
We are not aware of any existing or probable governmental regulation of our business that is unique to our industry.
Estimate of the Amount Spent during each of the last two Fiscal Years (or since Inception if shorter)
Until January 2019, we had not spent any funds on research and development since TORtec Groups inception.
Costs and Effects of Compliance with Environmental Laws
At this time, we do not anticipate having to spend funds on compliance with environmental laws in the industries that we intend to operate.
Number of Total Employees and Number of Full-Time Employees
At this time, we do not have any employees. Our officers and directors intend to provide services on an as needed basis until such time as the Company hires employees.
Our Former Environmental Remediation Business
As described above, the Company operated this business until February 2018 when Mr. Lachmar died. The Company has no plans to continue this business following Mr. Lachmars death.
Our former environmental remediation business was primarily comprised of services related to identifying any recognized environmental condition (REC) or the lack thereof as provided by the federal, state or local governmental agencies in any real property of any owner, potential owner or lender, governmental agency or other person that may have a concern or may have or be seeking an interest in the subject property. Once our services were engaged, we contracted with a drilling company to drill into the ground locations selected by us to collect a physical soil sample; if the project was small and could be handled by our smaller drilling equipment, this service is not contracted out. During the fiscal year ended March 31, 2015, the field technician that was trained by Mr. Lachmar and who was subcontracted to be onsite during our drilling operations, left the Company, and Mr. Lachmar was required to resume those duties, which he had been responsible for in earlier fiscal years. During the first part of fiscal 2017, Mr. Lachmar determined to move the Company from conducting the physical operations that had been previously conducted by it to a company focused strictly on the professional management the REC services and the leasing of environmental equipment for REC services rather than a contracting company for these services. The Company acquired and obtained access to some limited drilling and environmental remediation equipment as part of this change in course and pursued this new course of business through February 2018. This change in the scope of our business operations limited the services available for bid by the Company. Mr. Lachmar would review the Scope of Work for particular proposals that came within the Companys business focus, and if a particular proposal was one that required the physical efforts of Mr. Lachmar onsite, he would not bid on the project, but would refer the proposed project to another party for contracting, with the understanding that such party would lease the equipment of the Company for any such project to the extent that the Company had the equipment necessary to perform the required field work on the project. Once the soil sample was obtained, it was submitted to a State of California certified laboratory for analysis of the existence of hazardous materials. Based upon the laboratorys analysis, William C. Lachmar prepared a written report that was sanctioned by the particular laboratory that conducted the analysis. Mr. Lachmars licensing as a Professional Geologist was a requirement to prepare any such report. If an REC was identified to exist, then we would provide project management and engineering conclusions and recommendations necessary to remediate the property and bring it back into regulatory compliance
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based upon the California tables of acceptable levels of product contamination. Acceptable levels were further qualified based upon residential, commercial and industrial zoned properties, with the residential levels being the most stringent. Examples of contaminations that result in concern included those that were inadvertently or otherwise inoculated into the shallow subsurface soils or groundwater, like gasoline, diesel fuel, dry cleaning fluid, rocket fuel, arsenic, mercury, lead and other toxic substances. These services were basically the same in each project: examine the property; drill or have it drilled for soil samples; submit the soil samples to a State of California certified laboratory; prepare a report on the soil samples; and if an REC was found to exist, provide the described services, directly or through subcontractors, by or under the supervision of Mr. Lachmar. Sometimes, we merely assessed the environmental impact of any hazardous materials found and prepared the requested report.
We also provided consulting and compliance services for new utility installation and general site erosion control for housing tracts and updating service station underground storage tanks and fuel dispensing systems to comply with continually changing California Air Resources Board (CARB) regulations.
Principal Products or Services and their Markets
Our environmental remediation services generally included:
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Construction and Emergency Response;
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Demolition, Remediation and Restoration;
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Subsurface Investigation;
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Water and Wastewater Treatment;
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Engineering and Environmental Consulting;
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Environmental Permitting and Compliance; and
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Litigation Support.
Distribution Methods of the Products or Services
We did not advertise our services in any publications, and we relied primarily on past customers for repeat business, including large property management companies, wholesale fuel distributors and automobile dealers, among others, for referrals. Most of our referrals came from two long standing clients; or three major commercial real estate management companies in California; or two health specialists to whom we paid commissions for referrals.
All chemicals required for our services were supplied by subcontractors and were readily available. We did not store any regulated chemicals or waste at our facilities; nor did we manufacture any such products.
We had no real suppliers of products other than some environmental hand held equipment that was competitively marketed by numerous distributors, and there was little chance that any equipment that was necessary to conduct our environmental services would not be available to rent or purchase.
Status of any Publicly Announced New Product or Service
We have not had any recent public announcement of any new product or service.
Competitive Business Conditions and Smaller Reporting
Companys Competitive Position in the Industry and Methods of Competition
Our competitors in the environmental remediation business included mostly large and well-funded entities whose businesses and subsidiaries focused solely on the industries in which we operated. In this respect, we were at a distinct disadvantage to those competitors. Our services were limited to smaller projects by reason of our limited financial resources and staff. We believe our competitive position in this industry as a whole was not significant.
Our principal competitors included AECOM Technology Corporation, URS, Kleinfelter, Levine Fricke, CH2M Hill Companies, Ltd., The Reynolds Group and Geosyntec, most all of which were larger, well financed multinational publicly-held companies or divisions or subsidiaries of large, well financed multinational companies.
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Seasonal Nature of Our Business
The second quarter of our fiscal year (July 1 to September 30) was typically our strongest quarter in the environmental remediation business. The U.S. federal government has historically authorized more work during the period preceding the end of its fiscal year, September 30. In addition, many U.S. state governments with fiscal years ending on June 30 have historically accelerated spending during the fiscal first quarter when new funding budgets become available.
Dependence on One or a Few Major Customers
During the fiscal year ended March 31, 2018, services provided to two customers accounted for 66.3% (related party) and 28.4% of total revenues. One of these customers, which represented 66.3%, is a related party (see Note 7 of our audited financial statements that accompany this Annual Report for additional information, in Part II, Item 8, below). Management believed the loss of these customers would have a material adverse impact on the Company
Patents, Trademarks, Licenses, Franchises, Concessions,
Royalty Agreements or Labor Contracts, including Duration
We do not hold any patents; however, we have proprietary technology applications related to our hydrocarbon- indicating methods and technology (the HI Technology), which was developed and licensed by Mr. Lachmar to our predecessor parent, Geo Point Utah, and assigned to us on our formation on June 13, 2012.
The material terms of the License Agreement are as follows:
Mr. Lachmar granted to us an exclusive, world-wide license to use the HI Technology for commercial exploitation, including subleasing the HI Technology to other parties.
The intellectual property associated with the HI Technology, as well as any additional related intellectual property developed by Mr. Lachmar, is included within the scope of the license. Currently, the intellectual property is maintained as trade secrets and protected by the confidentiality provisions of the License Agreement; however, any patents, trademarks or copyrights or applications therefore, related to the HI Technology, will also be included within the scope of the License Agreement.
Upon execution of the License Agreement, Geo Point Utah, the original licensee under the License Agreement, paid Mr. Lachmar a one-time license fee of $125,000. Except as otherwise provided therein and as discussed below, the License Agreement is irrevocable.
Mr. Lachmar retained the right to exploit the Hi Technology and processes.
The License Agreement may be terminated by either party, subject to a 60-day notice period, upon a breach of the License Agreement that remains uncured during the notice period.
The License Agreement may be terminated by Mr. Lachmar in the event we become insolvent or unable to pay our debts as they come due, become the subject of a bankruptcy proceeding (voluntary or involuntary), other than a reorganization, or enter into a general assignment for the benefit of our creditors.
The HI Technology underlying the License Agreement, which is related to petroleum geology, has not been promoted to customers and requires substantial research and development of hydrocarbon-indicating methods and technology. No funds were expended for research and development of the HI Technology during the fiscal years ended March 31, 2019, and 2018.
Need for any Governmental Approval of Principal Products or Services
We have the necessary licenses and qualifications, singly or through our subcontractors, to conduct our business operations, without government approval, except to the extent of compliance with applicable governmental
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regulations related to our business, which are summarized below under the heading Effect of Existing or Probable Governmental Regulations on Our Business, below.
Effect of Existing or Probable Governmental Regulations on the Business
Federal and State Law
We are regulated in a number of fields in which we operate. In the United States, we deal with numerous U.S. and California state governmental agencies and entities, including the U.S. Environmental Protection Agency, the Carpenter-Presley-Tanner Hazardous Substance Account Act (the California Superfund Act), the Porter-Cologne Water Quality Control Act (the California Water Control Act) and CARB. When working with these governmental agencies and entities, we must comply with laws and regulations relating to the formation, administration and performance of our contracts.
Risk assessment practices under these acts include the most current sound scientific methods for data evaluation, exposure assessment, toxicity assessment and risk characterization, documentation of all assumptions, methods, models and calculations used in the assessment including any health risk assessment. These assessments generally include:
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Evaluation of risks posed by acutely toxic hazardous substances based on levels at which no known or anticipated adverse effects on health will occur, with an adequate margin of safety.
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Evaluation of risks posed by carcinogens or other hazardous substances that may cause chronic disease based on a level that does not pose any significant risk to health.
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Consideration of possible synergistic effects resulting from exposure to, or interaction with, two or more hazardous substances.
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Consideration of the effect of hazardous substances upon subgroups that comprise a meaningful portion of the general population, including, but not limited to, infants, children, pregnant women, the elderly, individuals with a history of serious illness, or other subpopulations, that are identifiable as being at greater risk of adverse health effects due to exposure to hazardous substances than the general population.
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Consideration of exposure and body burden level that alter physiological function or structure in a manner that may significantly increase the risk of illness and of exposure to hazardous substances in all media, including, but not limited to, exposures in drinking water, food, ambient and indoor air, and soil.
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If currently available scientific data is insufficient to determine the level of a hazardous substance at which no known or anticipated adverse effects on health will occur, with an adequate margin of safety, or the level that poses no significant risk to public health, the risk assessment prepared in conjunction with a response action taken or approved shall be based on the level that is protective of public health, with an adequate margin of safety. This level shall be based exclusively on public health considerations; shall, to the extent scientific data are available, take into account the factors set forth; and shall be based on the most current principles, practices and methods used by public health professionals who are experienced practitioners in the fields of epidemiology, risk assessment, fate and transport analysis, and toxicology.
Compliance with federal, state and local laws enacted for the protection of the environment has to date had no significant effect on our capital expenditures, earnings or competitive position. These costs are an integral part of the services that we provide. In the future, compliance with environmental laws could materially adversely affect us. We will continue to monitor the impact of such laws on our business and will develop appropriate compliance programs.
Emerging Growth Company
We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. As long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not an emerging growth
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company, like those applicable to a smaller reporting company, including, but not limited to, a scaled down description of our business in SEC filings; no requirements to include risk factors in the Exchange Act filings; no requirement to include certain selected financial data and supplementary financial information in SEC filings; not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements that we file under the Exchange Act; no requirement for Sarbanes-Oxley Act Section 404(b) auditor attestations of internal control over financial reporting; and exemptions from the requirements of holding an annual nonbinding advisory vote on executive compensation and seeking nonbinding shareholder approval of any golden parachute payments not previously approved. We are also only required to file audited financial statements for the previous two fiscal years when filing registration statements, together with reviewed financial statements of any applicable subsequent quarter.
We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We can remain an emerging growth company for up to five years. We would cease to be an emerging growth company prior to such time if we have total annual gross revenues of $1 billion or more and when we become a larger accelerated filer, have a public float of $700 million or more or we issue more than $1 billion of non-convertible debt over a three-year period.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Smaller Reporting Company
We became subject to the reporting requirements of Section 15(d) of the Exchange Act, subject to the disclosure requirements of Regulation S-K of the SEC, as a smaller reporting company, on the effective date of our Registration Statement. The designation of being a smaller reporting company relieves us of some of the more detailed informational requirements of Regulation S-K. See the heading Emerging Growth Company directly above for a brief summary of some of the principal reduced requirements available to a smaller reporting company.
Sarbanes/Oxley Act
We are subject to the Sarbanes-Oxley Act of 2002. The Sarbanes/Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members appointment, compensation and oversight of the work of public companies auditors; management assessment of our internal controls; prohibits certain insider trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes/Oxley Act will substantially increase our legal and accounting costs.
Exchange Act Reporting Requirements
Section 15(d) of the Exchange Act requires all companies that have filed a registration statement under the Securities Act to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC for a period of one year from the effective date of the Registration Statement, and we will be required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K.
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Research and Development Costs during the Last Two Fiscal Years
We had no research and development costs during our fiscal year ended March 31, 2018. During our fiscal year ended March 31, 2019, we incurred cost related to the improvement of our Tornado C.
Cost and Effects of Compliance with Environmental Laws
We do not maintain any hazardous chemicals on-site, and those chemicals we utilized in our remediation services were shipped directly to the impacted site from the supplier of chemicals, with all the proper manifests by a certified Hazardous Materials transporter. These chemicals are available from a wide array of suppliers.
We neither store nor manufacture any materials that require us to maintain any federal, state or local permits. Accordingly, the cost and effects of compliance with environmental laws on our business is negligible.
Number of Total Employees and Number of Full-Time Employees
We had only one employee, Mr. Lachmar, our former President; who died in February 2018.
Additional Information
You may read and copy any materials that we file with the SEC at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also find all of the reports or registration statements that we have filed electronically with the SEC at its Internet site at www.sec.gov. Please call the SEC at 1-202-551-8090 for further information on this or other Public Reference Rooms. Our SEC reports and registration statements are also available from commercial document retrieval services, such as CCH Washington Service Bureau, whose telephone number is 1-800-344-3734.