TORtec Group Corp - Quarter Report: 2017 December (Form 10-Q)

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 Quarterly 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 (the “SEC”), 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.

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 PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

The accompanying balance sheets of Geo Point Resources, Inc. at December 31, 2017 and March 31, 2017, and the related statements of operations for the three and nine months ended December 31, 2017 and 2016 and the related statements of cash flows for the nine months ended December 31, 2017 and 2016 have been prepared by management in conformity with United States generally accepted accounting principles.  In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.  Operating results for the period ended December 31, 2017, are not necessarily indicative of the results that can be expected for the fiscal year ending March 31, 2018.

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GEO POINT RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

See accompanying notes to the consolidated financial statements.

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GEO POINT RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

See accompanying notes to the consolidated financial statements.

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GEO POINT RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

See accompanying notes to the consolidated financial statements.

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GEO POINT RESOURCES, INC.

Notes to the Consolidated Financial Statements (Unaudited)

December 31, 2017 and March 31, 2017

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 Utah’s 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 Company’s 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 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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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.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the financial statements, the Company has incurred significant current period losses, negative cash flows from operating activities, has negative working capital, an accumulated deficit, and a revolving line of credit from a third party in order to fund its operations. These conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s 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 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Interim Financial Statements

The accompanying unaudited interim financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  The accompanying balance sheet as of December 31, 2017, and the statements of operations and cash flows for the three and nine months ended December 31, 2017, and 2016, are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations, and cash flows for such periods.  The financial data and other information disclosed in these notes to the financial statements related to the three and nine month periods are unaudited. The results of the three and nine months ended December 31, 2017, are not necessarily indicative of the results to be expected for the year ending March 31, 2018, any other interim period, or any other future year.

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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes to 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 December 31, 2017, and March 31, 2017, 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, 2017, and March 31, 2017, due to the short-term nature of these items.

Concentration of Credit Risks and Customer Concentrations

During the nine months ended December 31, 2017, services provided to one customer, a related party, accounted for 61.4% of total revenues. During the nine months ended December 31, 2016, services provided to two customers accounted for 46.7% (related party) and 38.5% of total revenues.  One of these customers is considered a related party; see Note 7. 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 7 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

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weighted average fair value of the Company’s common shares during the period.  As of December 31, 2017, and 2016, 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.

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, 2017, due to the delays in repayment, the Company reserved 100% of this receivable.

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, 2017, the Company reserved 100% of this receivable.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation, and are comprised of the following at December 31, 2017, and March 31, 2017:

Depreciation expense for the nine months ended December 31, 2017, and 2016, was $11,527 and $3,500, respectively.

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.   As of March 31, 2017, the revolving line of credit had a principal and an accrued interest balance of $267,760 and $170,979, respectively. 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 Company’s common stock is publically traded there has not been an active public trade of the Company’s common stock in a significant period of time, indicating no market for the Company’s common stock. In addition, the number of shares issued was negotiated between the Company and the third party.

During the year ended March 31, 2017, two individuals advanced the Company a total of $40,000. The advances do not incur interest and are due on demand.  The proceeds were used to purchase drilling equipment, which was used on one of the Company’s projects. in November 2017, both advances were forgiven and are no longer due. One of the individuals, had recently become a shareholder of TORTec through services provided to that entity. Thus, the $20,000 advance forgiven by this individual was treated as a capital

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contribution and recorded within additional paid-in capital. The other individual is a vendor of the Company and was recorded within gain on extinguishment.

During the three months ended December 31, 2017, the Company received short term advances of $16,000 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 sheet.

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

During the three months ended December 31, 2017, and 2016, the Company recorded revenues of $30,840, and $70,997, and during the nine months ended December 31, 2017, and 2016, the Company recorded revenues of $37,730 and $174,809 for services performed for an entity partially owned by the Company’s former Chief Executive Officer, respectively. 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.

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 Torrnado M. The total purchase price is 394,000 Euros ($471,957 as of December 31, 2017) for which the Company has paid $461,458. The Company expects to receive the equipment in March or April 2018. The Tornado M will be used in the Company's operations.

See Notes 1 and 4, for additional related party transactions.

NOTE 8 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events after December 31, 2017, through the date of this filing, noting no additional items which need to be disclosed within the accompanying notes to the financial statements other than those disclosed above.

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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.  For additional forward-looking statement information, see the heading “Forward-Looking Statements” at the forepart of this Quarterly Report on page 4.

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 the “Company” unless the context implies otherwise.

Past Plan of Operation

In the past, our business has been 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 former 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 a requirement 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.  

We have 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.  Other engineering services provided are for soil dewatering for underground structure installations and small demolition and construction work.  These “utility landing” services comprise subsurface trench work where underground utilities are installed such as electrical, fiber optic, water and gas.  The 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.  Other engineering services are to plan and construct dewatering systems for the install of subsurface structures such as underground parking lots, underground storage tanks, etc. that are placed within a shallow groundwater zone and must be dewatered prior to construction, and “closure” of underground water treatment systems where a manufacturing plant has underground processed water systems that treat their production waste water streams prior to discharge to the common sewer system. Light construction work consists of tenant improvement build-outs and small American Disabilities Act (ADA), compliance issues such as wheelchair access ramp construction, hand rail design and installation, parking area upgrades and other related matters.

Acquisition of TORtec Group

On December 4, 2017, the Company acquired 100% of the issued and outstanding shares of common stock of TORtec Group, a Wyoming

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corporation (“TORtec”), in exchange for which the Company issued a total of 90,000,000 shares of the Company’s restricted common stock, making TORtec a wholly-owned subsidiary of the Company.  

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.   Smoot became the President/CEO and Director of TORtec Group on September 8, 2017.  

As part of the Closing of the acquisition, the Company’s then sole director (William C. Lachmar) elected Franc Smidt, Alex Schmidt, Maksim Goncharenko, Jeffrey R. Brimhall, Stephen H. Smoot, and Irina Kochetkova to the Company’s 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.

For additional information concerning the acquisition of TORtec, see the Company’s Current Report on Form 8-K dated December 4, 2017 and filed with the SEC on December 8, 2017.

Future Plan of Operations

In the future, the Company plans to focus its business efforts primarily on the business of TORtec, even though the Company is still currently engaged in identifying any RECs.  

On September 9, 2017, TORtec Group 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 Group an exclusive license to utilize the technology for certain purposes throughout North, Central and South America.    A copy of the Exclusive License Agreement is attached to the Agreement as Annex BB, and incorporated herein by this reference.

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.

Now that the acquisition of TORtec 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. Our first anticipated project utilizing our TOR-technologies will be to bring a mobile TORtec unit to the USA for processing micro-crystalline quartz material from tailings for the purpose of liberating, separating and capturing occluded refractory gold and other precious metals possibly contained therein.  We have identified several properties in the Western United States that might be suitable for our purposes.  We are in negotiations with the owners of those properties to secure long-term processing agreement(s), subject to independent analysis of the precious metal(s) content of their tailings.

Results of Operations

Three Months Ended December 31, 2017, Compared to the Three Months Ended December 31, 2016

During the three months ended December 31, 2017, we had sales of $39,310, compared to $86,662 for the three months ended December 31, 2016, a decrease of $47,352.  Cost of sales for the three months ended December 31, 2017, was $2,306, compared to $28,241 for the three months ended December 31, 2016, a decrease of $8,095.  Cost of sales decreased during the three months ended December 31, 2017, due to most of our services being primarily performed by our former chief executive officer. The gross profit percentage increased during the period due to lack of additional costs incurred for contract work paid to third parties for their assistance, and in the previous period, this assistance was needed.  In addition, during fiscal 2017, 78% of our sales were generated from a related party entity whereby approximately 81% was generated from a related party entity in the prior comparable period. 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.

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General and administrative expenses during the three months ended December 31, 2017, were $76,486, compared to $28,241, during the three months ended December 31, 2016, an increase of $48,245.  The increase in general and administrative expenses during the three months ended December 31, 2017, was directly related to additional compensation paid our former Chief Executive Officer and additional professional fees paid in connection with the TORtec acquisition.

Nine Months Ended December 31, 2017, Compared to the Nine Months Ended December 31, 2016

During the nine months ended December 31, 2017, we had sales of $61,423, compared to $215,241 for the nine months ended December 31, 2016, a decrease of $153,818.  Cost of sales for the nine months ended December 31, 2017, was $4,949, compared to $65,970 for the nine months ended December 31, 2016, a decrease of $61,021.  Cost of sales increased during the nine months ended December 31, 2017, 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, and in the previous period, this assistance was not needed.  In addition, during nine months ended December 31, 2017, 61% of our sales were generated from a related party entity whereby 81% of our sales were generated by this related party for the nine months ended December 31, 2016. 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.

General and administrative expenses during the nine months ended December 31, 2017, were $169,067, compared to $151,963, during the nine months ended December 31, 2016, an increase of $17,107.  The increase in general and administrative expenses during the nine months ended December 31, 2017, was directly related to additional compensation paid our former Chief Executive Officer and additional professional fees paid in connection with the TORtec acquisition.

Liquidity

Current assets at December 31, 2017, included cash of $67,340.  At December 31, 2017, we had a positive working capital of $16,974, as compared a negative working capital of $431,315 at March 31, 2016.  The positive working capital at December 31, 2017, is a result of the most of the Company's liabilities being either forgiven or converted into shares of common stock.

Capital Resources

During the nine months ended December 31, 2017, operating activities used cash of $95,508 compared to $986 net cash used in the nine months ended December 31, 2016, an increase of $94,522. The increase was primary related to the current period net loss being greater than the prior due to an increased amount of costs paid in connection with the TORtec acquisition.

During the nine months ended December 31, 2017, we cash provided by investing activities of $72,910 due to cash received from the TORtec acquisition.  During the nine months ended December 31, 2016, we used cash in investing activities of $64,980 due to the purchase of drilling equipment and vehicles to be used in our operations.

During the nine months ended December 31, 2017, we received cash from financing activities of $50,639 of which $16,000 was short term advances and $34,639 from Capital Vario prior to the conversion into common stock.  $78,100 was provided from proceeds on a line of credit of $38,100 and $40,000 advanced from two third parties which was used to purchase the equipment discussed in investing activities for the nine months ended December 31, 2016.

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, 2017.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

A “smaller reporting company” (as defined by Item 10 of Regulation S-K) is not required to provide the information required by this Item

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pursuant to Item 305(e) of Regulation S-K.

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, 2017, 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 (the “SEC”) 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.

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

The Company is not a party to any other material pending legal proceedings.  To the best of the Company’s knowledge, no governmental authority or other party has threatened or is contemplating the filing of any material legal proceeding against the Company.

Item 1A.

Risk Factors

A “smaller reporting company” (as defined by Item 10 of Regulation S-K) is not required to provide the information specified by this Item.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended December 31, 2017, a total of a total of 90,000,000 shares of the Company’s restricted common stock were issued without registration to the seventeen TORtec shareholders as consideration in exchange for the Company acquiring all 10,000,000 issued and outstanding shares of TORtec common stock, making TORtec a wholly-owned subsidiary of the Company.  As consideration for the acquisition, the holders of the 10,000,000 shares of issued and outstanding common stock of TORtec received nine (9) shares of our common stock for each one (1) share of TORtec common stock issued and outstanding.  This resulted in an aggregate of 90,000,000 shares of our common stock being issued on the Closing date, December 4, 2017.

The 90,000,000 shares of our common stock issued to the shareholders of TORtec were issued in reliance on one or more exemptions from securities registration.  Each shareholder to whom shares were issued represented to the Company that the shares of the Company being acquired were being acquired for its own account and for investment purposes and not with a view to the public resale or distribution of such shares and each stockholder has further acknowledged that the shares issued were not registered under the Securities Act and are "restricted securities" as that term is defined in SEC Rule 144 promulgated under the Securities Act and must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available.  The shares were issued in reliance on the exemptions provided in Section 4(2) of the Securities Act, SEC Rule 506 or SEC Regulation S, and any stock certificates representing those shares contain an appropriate restricted legend.

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There were no underwriters involved in the issuance of the shares, and there were no underwriting discounts or commissions paid in connection with the issuance of the shares.  All of these share issuances were reported in a Current Report on Form 8-K dated December 4, 2017, filed with the SEC on December 8, 2017.

For a description of any other sales of shares of the Company’s unregistered stock made in the past three years, please refer to the Company’s Annual Reports on Form 10-K, and the Company’s Quarterly Reports on Form 10-Q filed since March 31, 2014.

Item 3.

Defaults Upon Senior Securities

This Item is not applicable.

Item 4.

Mine Safety Disclosures

This Item is not applicable.

Item 5.

Other Information

This Item is not applicable.

Item 6.

Exhibits

(a)

Exhibits: