UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2010
Commission File Number 000-53182
GEO POINT TECHNOLOGIES, INC. | |
(Exact name of registrant as specified in its charter) | |
Utah | 11-3797590 |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) | |
257 East 200 South, Suite 490 | |
Salt Lake City, UT 84111 | |
(Address of principal executive offices) | |
801-810-4662 | |
(Registrant’s telephone number) | |
n/a | |
(Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes | x | No | o |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes | o | No | o |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer ¨ |
Non-accelerated filer o | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes | o | No | x |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 23, 2010, issuer had 3,257,000 outstanding shares of common stock, par value $0.001.
TABLE OF CONTENTS
Page | ||
PART I – FINANCIAL INFORMATION | ||
Item 1. Financial Statements. | ||
Condensed Balance Sheets (Unaudited) | 3 | |
Condensed Statements of Operations (Unaudited) | 4 | |
Condensed Statements of Cash Flows (Unaudited) | 5 | |
Notes to Condensed Financial Statements (Unaudited) | 6 | |
Item 2. Management’s Discussion and Analysis of Financial Condition and | ||
Results of Operations. | 9 | |
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 11 | |
Item 4T. Controls and Procedures | 11 | |
PART II – OTHER INFORMATION | ||
Item 6. Exhibits | 11 | |
Signature | 12 |
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GEO POINT TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
June 30, | March 31, | |||||
2010 | 2010 | |||||
ASSETS | ||||||
Current Assets | ||||||
Cash | $ | 59,281 | $ | 121,848 | ||
Accounts receivable, net of allowance for bad debt | ||||||
of $5,423 and $3,618, respectively | - | 60,850 | ||||
Note receivable | 11,800 | - | ||||
Prepaid expenses and other current assets | 18,418 | - | ||||
Total Current Assets | 89,499 | 182,698 | ||||
Furniture and equipment, net of accumulated depreciation | ||||||
of $42,315 and $39,815, respectively | 5,862 | 8,362 | ||||
Other assets | 1,000 | 1,000 | ||||
Total Assets | $ | 96,361 | $ | 192,060 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Current Liabilities | ||||||
Accounts payable and accrued liabilities | $ | 76,487 | $ | 66,473 | ||
Total Current Liabilities | 76,487 | 66,473 | ||||
Shareholders' Equity | ||||||
Preferred Stock - $0.001 par value; 5,000,000 shares authorized; | ||||||
none outstanding | - | - | ||||
Common stock - $0.001 par value; 100,000,000 shares authorized; | ||||||
3,257,000 and 3,257,000 shares issued and outstanding, respectively | 3,257 | 3,257 | ||||
Additional paid-in capital | 739,886 | 246,693 | ||||
Accumulated deficit | (723,269) | (124,363) | ||||
Total Shareholders' Equity | 19,874 | 125,587 | ||||
Total Liabilities and Shareholders' Equity | $ | 96,361 | $ | 192,060 |
The accompanying notes are an integral part of the condensed unaudited financial statements.
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GEO POINT TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended | ||||||
June 30, | ||||||
2010 | 2009 | |||||
Sales | $ | 9,875 | $ | 57,624 | ||
Cost of Sales | 3,950 | 26,675 | ||||
Gross Profit | 5,925 | 30,949 | ||||
Operating Expenses | ||||||
General and administrative including stock based | ||||||
compensation of $493,193 in 2010 | 604,792 | 37,700 | ||||
Total Operating Expenses | 604,792 | 37,700 | ||||
Operating Loss | (598,867) | (6,751) | ||||
Other income (expense) | (39) | 26 | ||||
Net Loss | $ | (598,906) | $ | (6,725) | ||
Basic and Diluted Loss per Share | $ | (0.18) | $ | (0.00) | ||
Basic and Diluted Weighted-Average | ||||||
Common Shares Outstanding | 3,257,000 | 3,257,000 |
The accompanying notes are an integral part of the condensed unaudited financial statements.
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GEO POINT TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended | ||||||
June 30, | ||||||
2010 | 2009 | |||||
Cash Flows from Operating Activities: | ||||||
Net loss | $ | (598,906) | $ | (6,725) | ||
Adjustments to reconcile net loss to net cash | ||||||
from operating activities: | ||||||
Depreciation | 2,500 | 3,000 | ||||
Fair value of warrants issued for services | 493,193 | - | ||||
Changes in assets and liabilities: | ||||||
Accounts receivable | 60,850 | (44,894) | ||||
Prepaid expenses and other current assets | (18,418) | 300 | ||||
Accounts payable and accrued liabilities | 10,014 | 15,180 | ||||
Income taxes payable | - | (1,621) | ||||
Net Cash Used in Operating Activities | (50,767) | (34,760) | ||||
Cash Flows from Investing Activities: | ||||||
Issuance of note receivable | (11,800) | - | ||||
Net Cash Used in Investing Activities | (11,800) | - | ||||
Net Change in Cash | (62,567) | (34,760) | ||||
Cash at Beginning of Period | 121,848 | 156,807 | ||||
Cash at End of Period | $ | 59,281 | $ | 122,047 | ||
Supplement Disclosure of Cash Flow Information: | ||||||
Cash paid for interest | $ | - | $ | - | ||
Cash paid for income taxes | $ | - | $ | 1,621 | ||
The accompanying notes are an integral part of the condensed unaudited financial statements.
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GEO POINT TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2010
(Unaudited)
NOTE 1 – ORGANIZATION AND BUSINESS
Geo Point Technologies, Inc. (the “Company”), was incorporated in the state of California on November 26, 2002. The Company’s operations are located in Santa Ana, California. In 2006, the Company formed Geo Point Merger Co., a Utah corporation, for the purpose of moving the domicile of the Company from California to Utah. The move was accomplished with an Agreement and Articles of Merger entered into by the two companies. Under the terms of the merger, upon execution, the two companies merged, and the Utah company was designated as the surviving corporation. The sole shareholder of the California company surrendered his stock and received one share of stock in the Utah company for every share of the California company. The articles of incorporation and bylaws of the Utah company became the articles and bylaws of the surviving corporation. The Utah company furthermore acquired all the assets and obligations of any kind of the California company. Finally, upon execution of the Agreement and Articles of Merger, the name of Geo Point Merger Co., was changed to Geo Point Technologies, Inc.
In connection with this recapitalization, the Company issued 3,000,000 shares of common stock to the sole shareholder for all the outstanding common stock of the California entity. Both entities were under common control and thus, the 3,000,000 shares have been reflected as being outstanding since inception.
The Company provides geological and earth study services related to: land surveying for new construction; soil testing and environmental risk and impact assessments; natural resource assessments with an emphasis on oil; and gas deposit discovery.
In May 2010, the Company entered into a share exchange agreement with GSM Oil Holdings Limited (“GSM Oil Holdings”), a limited liability company organized in Cyprus, and Summit Trustees PLLC, a Utah professional limited liability company, to acquire all of the issued and outstanding stock of GSM Oil Holdings. GSM Oil Holdings is in the process of acquiring Sinur Oil LLP through its wholly owned Dutch subsidiary, GSM Oil B.V. Sinur Oil LLP is a development-stage oil refining company with operations in the southern area of Kazakhstan and has recently completed construction of its initial “micro” oil refinery. At closing, the Company will issue 26,808,000 shares of its common stock to Summit Trustees PLLC and will receive all of the outstanding shares of GSM Oil Holdings. The Company is currently determining the impact of the transaction and expects to account for it as a reverse merger.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission, or SEC. Certain information and disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. These interim financial statements should be read in conjunction with the March 31, 2010, audited annual financial statements contained in the Form 10-K filed July 14, 2010, with the SEC.
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The results of operations for the three months ended June 30, 2010 and 2009, are not necessarily indicative of the results that may be expected for the full year.
Use of Estimates
The preparation of financial statements in conformity with GAAP 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 fair value of warrants issued for services, the allowance for doubtful accounts, and the useful life of property and equipment.
Fair Value of Financial Instruments
On April 1, 2008, the Company adopted 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:
• | Level 1 – quoted market prices in active markets for identical assets or liabilities. |
• | 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. |
• | Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
As of June 30, 2010 and March 31, 2010, the Company did not have Level 1, 2, or 3 financial assets, nor did it have any financial liabilities. Financial instruments consist of cash, accounts receivable, and payables. The fair value of financial instruments approximated their carrying values as of June 30, 2010 and March 31, 2010.
Share Based Compensation – Non-Employees
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees and non-employee directors in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services. The fair value of the equity instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital.
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Basic loss per share is calculated by dividing net loss by the weighted average common shares outstanding during the period. Diluted loss per 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 June 30, 2010, the Company excluded 68,465 shares from the computation of diluted net loss per common share as the effect would have been anti-dilutive. As of June 30, 2009, the Company did not have any dilutive securities.
NOTE 3 – NOTE RECEIVABLE
In May 2010, the Company loaned a business associate $11,800 to purchase a vehicle under a verbal agreement. The note did not incur interest and was due on demand. The note was repaid in August 2010.
NOTE 4 – STOCKHOLDERS’ EQUITY
In May 2010, the Company entered into an agreement with a third party to provide assistance in capital raising and business advisory services. Under the terms of the agreement, the Company is required to pay a total of $20,000 over the course of three months. In addition, the Company granted warrants to purchase 250,000 shares of common stock, exercisable at a $1.75 per share, which are exercisable immediately. Warrants to purchase an additional 250,000 shares may be issued upon the acceptance of a term sheet by the Company. The warrants expire five years from the date of issuance. In addition to the warrants, the Company is required to pay the third party 6% of equity capital raised, 3% of debt raised, and warrants to purchase 6% of the number of common shares purchased in the offering. In addition, if the Company is successful in an acquisition or sale transaction, it is required to pay fees ranging from 2-3% of the transaction value and $100,000.
In regards to the initial warrants to purchase 250,000 shares of common stock, the Company valued the warrants on the date of the agreement as the performed criteria had been met. The warrants were valued at $407,634 based on the Black-Scholes option pricing model using the following assumptions: volatility of 49%, expected life of five years, risk free interest rate of 1.95%, and no dividends. The value was recorded in general and administrative expense on the accompanying statement of operations during the three months ended June 30, 2010.
In regards to the 250,000 warrants, which have a performance commitment in order to be exercised, the Company estimated that the performance period will be approximately six months. Thus, at each reporting period, the Company will determine the fair value of the warrants and amortize that value over the estimated performance period. In addition, at each reporting period, the performance period will be reassessed and modified if necessary. As of June 30, 2010, the Company valued the warrants at $477,056 and recorded compensation expense of $85,559 within general and administrative expenses on the accompanying statement of operations during the three months ended June 30, 2010. The warrants were valued based on the Black-Scholes option pricing method using the following assumptions: volatility of 57%, expected life of five years, risk free interest rate of 1.95%, and no dividends.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements in Management’s Discussion and Analysis, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially from the forward-looking statements.
Overview
We are a provider of geological and earth study services related to land surveying for new construction, soil testing and environmental risk and impact assessments, and natural resource assessments with an emphasis on oil and gas deposit discovery. Our services generally are provided in connection with construction projects.
In the future, we intend to shift our focus to oil refining. Upon completion of the acquisition of Sinur Oil, we will own and operate a micro-refinery in Karatau, Kazakhstan.
Sources of Revenues
We derive our revenues through geological and earth study services related to land surveying for new construction, soil and groundwater environmental impact assessments, environmental clean-up, and natural resource assessments with an emphasis on oil and gas deposit discovery. Thus far, all of our revenues are derived in the state of California.
Cost of Revenues and Operating Expenses
Cost of Revenues. Cost of revenues consists of direct supplies and direct labor related to the fulfillment of each job.
General and Administrative. General and administrative expenses consist of compensation and related expenses for executive, finance, accounting, administrative, legal, professional fees, other corporate expenses, and marketing.
Critical Accounting Policies
Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
We believe that of our significant accounting policies, which are described in Note 2 to the financial statements, the following accounting policy involves a greater degree of judgment and complexity. Accordingly, this is the policy we believe is the most critical to aid in fully understanding and evaluating our financial condition and results of operations.
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Revenue Recognition. We recognize revenue when it is realized and earned. We consider revenue realized or realizable and earned when: (1) we have persuasive evidence of an arrangement; (2) services have been rendered and invoiced; (3) the price is fixed or determinable; and (4) collectibility is reasonably assured. We generate revenues from two environmental services: land surveying and engineering for new construction and environmental impact studies and clean-up services. Operations associated with the oil and gas segment have not yet generated revenues. If and when oil production begins, revenue will be recorded as indicated above, and more particularly when the product is delivered to the purchaser.
Results of Operations
Comparison of Three Months Ended June 30, 2010 and 2009
Revenues. Revenues for the three months ended June 30, 2010, were $9,875, as compared to $57,624 for the same quarter in fiscal year 2009, a decrease of $47,749. The decrease in revenues was due primarily to lack of construction projects due to the current state of the economy and increased competition from competitive proposals.
Cost of Revenues. Cost of revenues for the three months ended June 30, 2010, was $3,950, as compared to $26,675 for the same quarter in fiscal year 2009, a decrease of $22,725. The decrease in cost of revenues from 2010 to 2009 was directly related to the decrease in revenues.
General and Administrative Expenses. General and administrative expenses for the three months ended June 30, 2010, were $604,792, as compared to general and administrative expenses of $37,700 for the same quarter in fiscal year 2009, an increase of $567,092. This increase was primarily due to the value of warrants issued to consultants for services of $493,193 and significant corporate and travel costs incurred in connection with the pending transaction of GSM Oil Holdings Limited.
Cash Flows from Operating Activities. Net cash used in operating activities during the three months ended June 30, 2010, was $50,767, compared to net cash used in operating activities for the three months ended June 30, 2009, of $34,760. The increase in usage was primarily due to the increase in our net loss due to significant corporate and travel expenditures incurred in connection with the pending transaction of GSM Oil Holdings Limited. These expenditures were primarily offset through collections of accounts receivable and increases to our accounts payable and accrued liabilities.
Cash Flows from Investing Activities. Net cash used in investing activities during the three months ended June 30, 2010, was $11,800 and resulted from a short-term loan we provided to a business associate.
Liquidity and Capital Resources
As of June 30, 2010, our principal source of liquidity was cash totaling $59,281. The primary source of our liquidity during the three months ended June 30, 2010, was the cash on hand and receivables we collected, which funded our operations. A significant portion of our net loss during the three months ended June 30, 2010, was the result of non-cash and one-time charges.
We believe that our current cash together with our expected cash flows from operations will be sufficient to meet our anticipated cash requirements for working capital and capital expenditures, including our marketing efforts, for at least the next 12 months.
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Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to stockholders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4T. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that information is accumulated and communicated to our management, including our principal executive and principal financial officer (whom we refer to in this periodic report as our Certifying Officer), as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Certifying Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act) as of June 30, 2010, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Based upon that evaluation, our Certifying Officer concluded that, as of June 30, 2010, our disclosure controls and procedures were effective.
There were no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 6. EXHIBITS
The following exhibits are filed as a part of this report:
Exhibit Number* | Title of Document | Location | ||
Item 31 | Rule 13a-14(a)/15d-14(a) Certifications | |||
31.01 | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14 | Attached | ||
Item 32 | Section 1350 Certifications | |||
32.01 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer and Chief Financial Officer) | Attached |
_______________
* | All exhibits are numbered with the number preceding the decimal indicating the applicable SEC reference number in Item 601 and the number following the decimal indicating the sequence of the particular document. |
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SIGNATURE
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 TECHNOLOGIES, INC. | ||
Date: August 23, 2010 | By: | /s/ Jeffrey Jensen |
Jeffrey Jensen | ||
President, Principal Executive Officer | ||
Date: August 23, 2010 | By: | /s/ Jeffrey Brimhall |
Jeffrey Brimhall | ||
Principal Financial Officer |
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