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Management's Discussion and Analysis of Financial Condition and Results of Operations.

11/23/2020 | 02:57pm EST

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: the unprecedented impact of COVID-19 pandemic on our business, customers, employees, subcontractors and supply chain, consultants, service providers, stockholders, investors and other stakeholders; 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," "us," or the "Company" and words of similar import under this heading refer to the TORtec Group Corporation, a Nevada corporation, unless the context implies otherwise.

Past Plan of Operation

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 common 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 Current Report on Form 8-K dated April 22, 2013, and filed with the SEC on such date.

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 Utah's 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 had no plans to continue this business following Mr. Lachmar's death.

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") 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. The acquisition of TORtec 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 Company's restricted common stock were issued to the 17 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



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Company. As a result, the former TORtec shareholders collectively owned 90% 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 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. Mr. Smoot became the President/CEO and Director of the Company 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 appointed to serve as a director. Maksim Goncharenko subsequently resigned as a director on July 3, 2018.

Franc Smidt resigned from the Company's Board of Directors on October 18, 2020 and his resignation was accepted on October 21, 2020 by the Company.

On November 9, 2020, Mr. Smoot was appointed as President, Asael T. Sorensen Jr. was appointed as Vice President and Secretary, and Irina Kochetkova was appointed as Vice President and Treasurer.

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, as amended in a Form 8-K/A dated June 22, 2018 and filed with the SEC on June 22, 2018.

Plan of Operations

Now that the acquisition of TORtec is complete, we have become engaged, through our subsidiary, in the business of harnessing the natural implosion forces of a vortex (tornado) and employing resonating frequencies, to disintegrate soft to ultra-hard materials into micron or nano-sized particles.

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. A more detailed description of the acquisition is included in the Company's 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/A 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 entered into License Agreement No. W-1/18 with Forschunginstitut GmbH pursuant to which it was granted a license to use the 'TOR-technology' and the utility model "Tornado" documentation for certain purposes, for which TORtec paid an initial royalty of 30,000 Euros, and agreed to pay an annual royalty equal to 10% of any after tax profit received by TORtec (and any subsidiaries) by the year's result. This License Agreement expanded the licensed territory from North, Central and South America to the entire world. A copy of this License Agreement is attached to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2018 as Exhibit 10.1.

On September 9, 2017, TORtec entered into an agreement with MTM Center GmbH, then a shareholder of TORtec, for the construction of a mobile machine that utilizes the TORtec technology, referred to as the Tornado M. The total purchase price was 394,000 Euros (US $474,159 as of September 9, 2017 date of the agreement). On March 3,



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2018, the agreement was amended to the amount of 305,535 Euros or US $367,696 representing the original amount of 394,000 Euros or US $474,159 less the amount of 88,465 Euros or US $106,463 originally allocated to the Kaeser screw-compressor, plus the additional amount of 48,040 Euros or US $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.

The Company has paid the total amount of two payments totaling 354,600 euros or US $425,510 plus an additional payment of 30,000 Euros or $35,947 for the one-time License fee. The Company received the Tornado M machine in second fiscal quarter of 2019. The Tornado M is currently being prepared to be used in the Company's operations.

On February 19, 2019, TORtec entered into an agreement with TORtec Forschungsinstitut GmbH, the successor-in-interest to Scientific Research Institute of Technological Progress ("SRITP"), a Cyprus entity, controlled by the same shareholder. A copy is attached to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2019 as Exhibit 10.3. 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:

·

methods, techniques and technologies of disintegration of materials, minerals and rocks, mining;



·

industrial waste with subsequent enrichment and/or with the recipience of the product;



·

methods and technologies of mechanical activation, mechanochemical activation;

·

mechanosynthesis of mineral raw materials, obtaining materials with new properties and new;



·

materials, composites, mixtures, solutions;

·

methods and technologies of deep processing and decontamination of contaminated materials, waste, and water reclamation;

·

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; and

·

all or some know-how's, trademarks, design development and technical knowledge.

On April 12, 2019, TORtec entered into a general, exclusive, unlimited, irrevocable and perpetual license with TORtec Forschungsinstitut GmbH. A copy is attached to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2019 as Exhibit 10.4. The license grants to the Company the right to use the technology, know-how, development and technical knowledge 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:

·

Field of disintegration (micronization) of various non-mineral material;

·

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;"

·

The technologies for grinding non-mineral materials, including multi-component and various-phase materials, their functionalization and modification, their mechanical, mechanochemical activation and mechanosynthesis;

·

The production of dispersed new non-mineral materials and non-mineral materials with new properties; and



·

All know-how's, trademarks, design development and technical knowledge relating to the applications above

The TORtec Technology Business

As described above, the Company s wholly-owned subsidiary, TORtec Group, entered into an Exclusive License Agreement 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 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.



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); and


·

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 intervortex 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 material's structure and clusters occurs. Such mechanism can be compared to the mechanism of material's 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.




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The TOR technology can be used for: (1) micropulverization; (2) blending of materials; and (3) concentrating of materials.

Initial Problems with the Tornado M Machine

As explained in the Company's Annual Report for the fiscal year ended March 31, 2020, the Company incurred significant problems when attempting to use the Tornado M machine that was delivered to the Company. The air compressor purchased for the unit and the required air volume as prescribed by the manufacturer for the unit were inadequate and the initial air compressor had to be replaced with two compressors. We also learned through independent material handling and filter industry technicians and personnel that the unit was not ready for production for other reasons. These reasons included the following: (a) the material feed did not work properly; (b) two sets of bearings for the unit's rotary feeder were worn out within hours of operation; and (c) significant material "blow-back" occurred from the inlet to the unit. The cyclone system for the unit did not properly capture or separate the material as represented by MTM/Smidt or the manufacturer. The Donaldson filter provided with the unit did not work due to the pulse jet controller being inoperable and milled material could not be captured properly.

From May, 2019, it took about a year to get the unit working properly. The only original piece of the unit after this development was the vortex mill (the "mill"). All other components of the unit were replaced. Thus, as of April 30, 2020, due to the replacement parts and indicators that other potential parts were non-operational for the intended purposes the Company recorded an impairment of $389,000. In May 2020, several tons of material consisting of minerals from both Hungary and Nevada together with zeolite from Preston, Idaho were successfully processed through the unit. Unfortunately, it was determined that the resonant frequency rings in the mill and the mill housing itself was not made of Boron Carbide as contracted with MTM - but mild steel, and the mill wore out after about seven tons being processed. We replaced the mild steel rings with hardened steel to resolve the problem with the mill which is now in working condition.

North American Territory to go to Nano. An agreement has been executed by the Company and Nano. The Company then raised additional funds for ongoing operations for legal, accounting and auditing in addition to funds needed to get the unit working for the Nano joint venture.

For a detailed description of the formation of TORtec Nanosynthesis Corp. and the sale of a 49.9% interest in that company, see the Company's Current Report on Form 8-K for March 31, 2020 which was filed on April 8, 2020, and is incorporated herein by this reference.

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 three to five 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.




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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)."



Results of Operations


Three Months Ended September 30, 2020 compared to the Three Months Ended September 30, 2019

We reported no sales for the three months ended September 30, 2020 and 2019 due to the lack of revenue generating activities.

Research and development expenses during the three months ended September 30, 2020 were $17,823, compared to $7,890 during the three months ended September 30, 2019, an increase of $9,933. The increase was related to the continued development of the Tornado M unit to which we have recently incurred expenditures to modify and improve our process. We expect to incur additional costs until the Tornado M unit is ready for production.

General and administrative expenses during the three months ended September 30, 2020 were $62,548, compared to $32,679, during the three months ended September 30, 2019, an increase of $29,869. The increase in general and administrative expenses during the three months ended September 30, 2020 as compared to the prior period, was directly related to additional professional costs and rent related to a facility in which we commenced rental of in October 2019.

We incurred a net loss of $80,371, or $0.00 per share, in the three months ended September 30, 2020, compared to a net loss of $40,569, or $0.00 per share, incurred in the three months ended September 30, 2019. The increase in net loss in the later period is primarily attributed to an increase in research and development expenses incurred in the later period. We incurred a non-controlling loss of $16,848 in the three months ended September 30, 2020, and we incurred no similar non-controlling loss in the three months ended September 30, 2019. Our net loss attributable to TORtec Group Corporation in the three months ended September 30, 2020 was $63,523 or $0.00 per share, as compared to $40,569, or $0.00 per share, in the three months ended September 30, 2019.

Six Months Ended September 30, 2020 compared to the Six Months Ended September 30, 2019

We reported no sales for the six months ended September 30, 2020 and 2019 due to the lack of revenue generating activities.

Research and development expenses during the six months ended September 30, 2020 were $44,182, compared to $12,132 during the six months ended September 30, 2019, an increase of $32,050. The increase was related to the continued development of the Tornado M unit to which we have recently incurred expenditures to modify and improve our process. We expect to incur additional costs until the Tornado M unit is ready for production.

General and administrative expenses during the six months ended September 30, 2020 were $99,321, compared to $61,708, during the six months ended September 30, 2019, an increase of $37,613. The increase in general and administrative expenses during the six months ended September 30, 2020 as compared to the prior period, was directly related to additional professional costs and rent related to a facility in which we commenced rental of in October 2019.

We incurred a net loss of $143,503, or $0.00 per share, in the six months ended September 30, 2020, compared to a net loss of $73,840, or $0.00 per share, incurred in the six months ended September 30, 2019. The increase in net



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loss in the later period is primarily attributed to an increase in research and development expenses incurred in the later period. We incurred a non-controlling loss of $37,675 in the six months ended September 30, 2020, and we incurred no similar non-controlling loss in the six months ended September 30, 2019. Our net loss attributable to TORtec Group Corporation in the six months ended September 30, 2020 was $105,828, or $0.00 per share, as compared to $73,840, or $0.00 per share, in the six months ended September 30, 2019.

Liquidity

Current assets at September 30, 2020, included cash of $5,639. At March 31, 2020 current assets consisted of cash of $1,043 and subscriptions receivable of $165,000. At September 30, 2020, we had a negative working capital of $378,143, as compared a negative working capital of $127,340 at March 31, 2020. The decrease in working capital is mostly due an investment in common stock currently reflected as a current liability until the shares of common stock are issued.



Capital Resources


During the six months ended September 30, 2020, operating activities used cash of $138,144 compared to $104,787 net cash used in the six months ended September 30, 2019, an increase of $33,357. The increase was primary related to an increase in net loss due primarily to research and development activities and rent for which commenced in October 2019.

During the six months ended September 30, 2019, investing activities consisted of $35,051 expended in connection with the Company obtaining a license for which the term is perpetual. In the subsequent comparable period, there were no such expenditures. In addition, during the current period the Company purchased $107,300 of equipment in connection with the Tornado M, specifically, the Company made significant improvements to the electrical infrastructure of their leased facilities. In the six months ended September 30, 2019, the Company made purchase of $33,800 in equipment related to the Tornado M.

During the six months ended September 30, 2020, we received cash from financing activities of $250,040, which related to the collection of a subscription receivable and short term advances from related parties. In the prior comparable period, the Company received proceeds from short-term advances of $63,700 and $150,000 from the sale of common stock to a third party. The proceeds have been used to fund operations.

As reflected in the condensed consolidated financial statements, the Company has incurred significant current period losses, negative cash flows from operating activities, has negative working capital, and an accumulated deficit. These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern. We intend to fund future operations for the next 12 months through cash on hand, through additional advances from related parties and if needed from the sale of debt or equity securities. 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 issuance date of this Quarterly Report. However, those plans are dependent upon obtaining additional capital until cash flows from operations generated are sufficient to fund operations.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements during the quarter ended September 30, 2020.

Item 3.

© Edgar Online, source Glimpses

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