TORtec Group Corp - Quarter Report: 2014 December (Form 10-Q)

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FORWARD-LOOKING STATEMENTS

In this Quarterly Report on Form 10-Q, references to “Geo Point Resources,” the “Registrant,” the “Company,” “we,” “us,” “our” and words of similar import refer to Geo Point Resources, Inc., a Nevada corporation, unless the context requires otherwise.

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this report. These factors include, among others:

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our ability to raise capital;

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our ability to identify suitable acquisition targets;

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our ability to successfully execute acquisitions on favorable terms;

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declines in general economic conditions in the markets where we may compete;

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unknown environmental liabilities associated with any companies we may acquire; and

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significant competition in the markets where we may operate.

You should read any other cautionary statements made in this Quarterly Report as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report. We cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate, and therefore, prospective investors are encouraged not to place undue reliance on forward-looking statements. You should read this Quarterly Report completely, and it should be considered in light of all other information contained in the reports or registration statement that we file with the Securities and Exchange Commission, including all risk factors outlined therein. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

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JUMPSTART OUR BUSINESS STARTUPS ACT DISCLOSURE

We qualify as an “emerging growth company,” as defined in Section 2(a)(19) of the Securities Act by the Jumpstart Our Business Startups Act (the “JOBS Act”). An issuer qualifies as an “emerging growth company” if it has total annual gross revenues of less than $1.0 billion during its most recently completed fiscal year, and will continue to be deemed an emerging growth company until the earliest of:

As an emerging growth company, we are exempt from various reporting requirements. Specifically, we are exempt from the following provisions:

Under the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards that have different effective dates for public and private companies 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.

PART I –FINANCIAL INFORMATION

Item 1.  Financial Statements

The Financial Statements of the Company required to be filed with this 10-Q Quarterly Report were prepared by management and commence below, together with related notes. In the opinion of management, the Financial Statements fairly present the financial position of the Company.

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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 December 31, 2014 and March 31, 2014, 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 December 31, 2014 and March 31, 2014, due to the short-term nature of these items.

Concentration of Credit Risks and Customer Concentrations

During the nine months ended December 31, 2014, services provided to two customers respectively accounted for 49.9% and 37.0% of total revenues.  One of these customers is considered a related party.  See Note 6. During the nine months ended December 31, 2013, services provided to two customers respectively accounted for 54.8% and 37.8% of total revenues.  As of December 31, 2014, one customer accounted for 80.0% of the accounts receivable balance.  Management believes the loss of these customers would have a material impact on the Company.

Revenue Recognition

The Company recognizes revenue when it is realized and earned.  The Company considers revenue realized or realizable and earned when: (1) it has persuasive evidence of an arrangement; (2) services have been rendered and are invoiced; (3) the price is fixed or determinable; and (4) collectability is reasonably assured.

The Company’s primary source of revenue has 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.  The Company also has operations associated with the oil and gas segment that have limited activity and have not yet generated revenues.  All revenues are reported inclusive of shipping and handling costs billed and exclusive of any taxes billed to customers, if any.  Shipping and handling costs incurred, if any, are reported in cost of products sold.

See Note 6 for revenue transactions with a related party.

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 Company’s common shares during the period.  As of December 31, 2014 and 2013, the Company did not have any dilutive securities.

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NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, net of accumulated depreciation, and are comprised of the following at December 31, 2014 and March 31, 2014:

Depreciation expense for the nine months ended December 31, 2014 and 2013, was $1,500 and $2,701, respectively.

NOTE 4 – LINE OF CREDIT

On January 1, 2013, the Company entered into a $100,000 revolving line of credit with a third party.  Under the terms of the agreement the outstanding principal incurs interest at 24% per annum with principal and interest due six 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.  Proceeds from the revolving line of credit were used for operations and professional fees in connection with filing the Company's S-1 Registration Statement. As of December 31, 2014, the revolving line of credit had a principal and an accrued interest balance of $164,560 and $52,886, respectively. As of March 31, 2014, the revolving line of credit had a principal and an accrued interest balance of $118,750 and $27,525, respectively.

NOTE 5 – STOCKHOLDERS’ DEFICIT

Capital Contributed by the Former Parent

During the nine months ended December 31, 2014 and 2013, Geo Point Utah contributed $0 and $13,517, respectively, to the Company for use in operations. The contributions do not require repayment and thus are reflected as additional paid in capital.  No further contributions are expected.

NOTE 6 – RELATED PARTY TRANSACTION

During the nine months ended December 31, 2014, the Company recorded revenues of $93,336 for services performed for an entity partially owned by the Company’s Chief Executive Officer. The Company performs engineering services for the related entity and bills its services based upon time and expenses incurred. The Company’s management maintains that the fees charged to the related party are no less favorable than would be charged to unrelated parties for similar services.

NOTE 7 – INCOME TAXES

On an annualized basis, the Company does not expect to incur income taxes in excess of the minimum payable to the State of California.  Thus, no provision for income taxes has been presented during the three and nine months ended December 31, 2014.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes forward-looking statements based on management’s 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 of United States or foreign 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 stockholder 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.  

References to “we,” “our” or “us” and words of similar import under this heading refer to “Geo Point Nevada,” unless the context implies otherwise.

Plan of Operation

The Environmental and Engineering Divisions comprised the initial operations of Geo Point Technologies, Inc., a Utah corporation and our former parent (GPT”), at its inception and were commenced as a “DBA” in 1997, by GPT’s founder, William C. Lachmar, our President and sole director.  

The business operations of the Environmental Division are 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 are engaged, we contract with a drilling company to drill into the ground locations selected by us to collect a physical soil sample; if the project is small and can be handled by our smaller drilling equipment, this service is not contracted out.  Once the soil sample is obtained, it is submitted to a State of California certified laboratory for analysis of the existence of hazardous materials.  Based upon the laboratory’s analysis, William C. Lachmar, our President, who is a Licensed Professional Geologist in Texas and California, prepares a written report that is sanctioned by the particular laboratory that conducted the analysis.  Mr. Lachmar’s licensing as a “Professional Geologist” is required to prepare any such report.  If an REC is identified to exist, then we will provide project management and engineering conclusions and recommendations necessary to remediate the property and bring it back into regulatory compliance based upon the California tables of acceptable levels of product contamination.  Acceptable levels are 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 include those that are 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 are 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 is found to exist, provide the described services, directly or through subcontractors, by or under the supervision of Mr. Lachmar.  Sometimes, we merely assess the environmental impact of any hazardous materials found and prepare the requested report.  

The Engineering Division has 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 dispensing systems to comply with continually changing California Air Resources Board (“CARB”) regulations.  These services mostly comprise subsurface trench work where underground utilities are installed such as electrical, fiber optic, water and gas.  Other engineering services are for gasoline service stations where updated monitoring equipment must be installed or the monitoring equipment shows an error code that needs to be corrected before the gas station can begin to pump gas again; or where more crash posts must be installed around a propane tank, other fuel or similar dispenser island or a like setting.  

We have and intend to continue the business operations previously conducted by GPT through the Environmental and Engineering Divisions, along with attempting to fund additional research of the HI Technology that was licensed to GPT by William C. Lachmar, our President and sole director, as to which no assurance can be given. The research and

development contemplated relates to the efficacy of the HI Technology to locate oil and gas prospect areas.  It is estimated that approximately $15,000 will be needed for laboratory equipment to analyze attendant microwaves produced by the attendant process; and that an additional sum of approximately $80,000 will be needed for testing and software development for fast video processing boards.  Even then, assuming the HI Technology functions as hoped, the process to determine the best locations to drill for oil and gas will take about two years, after recording data and quantifying it, following the examination of zones or areas in oil and gas fields that are known to have oil and gas reserves.  The professional we had intended to utilize for our research and development of this technology has been and continues to be seriously ill.  We are attempting to find another person whom we believe has the qualifications necessary to assist in the research and development of this technology; however, with funding constraints, it is not anticipated that this research and development will begin in the near future.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Nine Months Ended December 31, 2014, Compared to the Nine Months Ended December 31, 2013

During the nine months ended December 31, 2014, we had sales of $174,170, compared to $187,440 for the nine months ended December 31, 2013, a decrease of $13,300.  Cost of sales for the nine months ended December 31, 2014, was $52,667, compared to $53,103 for the nine months ended December 31, 2013, a decrease of $436.  Cost of sales decreased during the nine months ended December 31, 2014, due primarily to decrease in revenues. The gross profit percentage decreased during the current year due to additional costs incurred for contract work paid to third parties for their assistance, in the previous period this assistance was not need.  Additionally, during the nine months ended December 31, 2014, we recorded revenues from related parties of $93,336.  The increase in revenues from related parties relates to additional contracts that could be obtained by the related entity due to certain ownership qualifications present in the related entity that the Company does not have to obtain for these additional contracts.  In addition, during fiscal 2014 and 2013, we have seen an increase in the need for our services due to increased activity in the construction industry in Southern California.  However, we are continuing to see significant pressure on fees within our industry due to competition.  Due to our overall low cost structure, we believe our ability to provide our services at a lower cost than most competitors is resulting in a greater level of bid acceptance.

General and administrative expenses during the nine months ended December 31, 2014, were $119,124, compared to $146,384, during the nine months ended December 31, 2013, a decrease of $27,260.  The decrease in general and administrative expenses during the nine months ended December 31, 2014 was directly related to a decrease in professional costs incurred in connection with the Company’s public filings. During fiscal 2013 and 2014, the Company incurred significant costs related to the filing of the Company’s initial S-1 Registration Statement and subsequent filings.

Three Months Ended December 31, 2014, Compared to the Three Months Ended December 31, 2013

During the three months ended December 31, 2014, we had sales of $75,790, compared to $66,955 for the three months ended December 31, 2013, an increase of $8,835.  Cost of sales for the three months ended December 31, 2014, was $20,822, compared to $16,377 for the three months ended December 31, 2013, an increase of $4,445.  Cost of sales increased during the three months ended December 31, 2014, due primarily to an increase in revenues. The gross profit percentage decreased during the current year due to additional costs incurred for contract work paid to third parties for their assistance, in the previous period this assistance was not needed.  Additionally, during the three months ended December 31, 2014, we recorded revenues from related parties of $46,056.  The increase in revenues from related parties relates to additional contracts that could be obtained by the related entity due to certain ownership qualifications present in the related entity that the Company does not have to obtain for these additional contracts.  In addition, during fiscal 2014 and 2013, we have seen an increase in the need for our services due to increased activity in the construction industry in Southern California. However, we are continuing to see significant pressure on fees within our industry due to competition.  Due to our overall low cost structure, we believe our ability to provide our services at a lower cost than most competitors is resulting in a greater level of bid acceptance.

General and administrative expenses during the three months ended December 31, 2014, were $39,182, compared to $28,940, during the three months ended December 31, 2013, an increase of $10,242.  The increase in general and administrative expenses during the three months ended December 31, 2014 was directly related to an increase in support staff hired during earlier in fiscal 2015 to support operations.

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Liquidity

Current assets at December 31, 2014, included cash of $161,513 and $1,100 in prepaid expenses and other current assets, and accounts receivable of $9,388, for total current assets of $172,001.  At December 31, 2014, we had a negative working capital of $121,739, as compared a negative working capital of $100,228 at March 31, 2014.  The negative working capital at December 31, 2014, is a result of the historical net losses incurred by the Company as revenues, at times, are still not sufficient to cover our minimum operating costs.

Capital Resources

During the nine months ended December 31, 2014, operating activities provided cash of $4,926 compared to $13,157 net cash used in the nine months ended December 31, 2013, or a positive increase of decrease of $18,083. The increase was primary related to the current period net income and payments received on accounts receivable. We funded operations during the nine months ended December 31, 2014, primarily through operations, the use of cash on hand and proceeds from our line of credit.

During the nine months ended December 31, 2014, we received cash from financing activities of $45,810 from proceeds on our line of credit as compared to $53,517 provided in financing activities for the nine months ended December 31, 2013, of which $13,517 were capital contributions. After the Spin-Off, we have not received any additional monies from our former parent.

We intend to fund future operations for the next 12 months through cash flows generated from operations and current cash on hand.  These contributions are expected to satisfy amounts in accounts payable and potentially be used for operations. If these cash flows are not sufficient to fund operations, we may be required to raise capital through either a debt or equity financing.  Currently, we cannot provide assurance that such financing will be available to us on favorable terms, or at all.  If, after utilizing the existing sources of capital available to us, further capital needs are identified and if we are not successful in obtaining the required financing, we may be forced to curtail our existing or planned future operations.  We believe our plans will enable us to continue our current operations for in excess of one year from the date of financial statements contained in this Quarterly Report.

Off-Balance Sheet Arrangements

We had no off balance sheet arrangements during the quarter ended December 31, 2014.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not required.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q.  In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.  In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.  The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2014, our disclosure controls and procedures were effective, and provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules, regulations and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

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Changes in Internal Control over Financial Reporting

Our management, with the participation of the chief executive officer and chief financial officer, has concluded there were no significant changes in our internal controls over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None; not applicable.

Item 1A.  Risk Factors.

Not required.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None; not applicable.

Item 3. Defaults Upon Senior Securities.

None; not applicable.

Item 4. Mine Safety Disclosures.

None, not applicable.

Item 5. Other Information.

None; not applicable.

Item 6. Exhibits.

Exhibit No.                         Identification of Exhibit

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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

Geo Point Resources, Inc.

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