Ridgestone Resources, Inc. was incorporated in the State of Nevada on September 12, 2006, and changed its name to GreenChek Technology Inc. (the "Company") on August 5, 2008. From inception to May 31, 2008, the Company's principal business was the acquisition and exploration of mineral resources. On July 14, 2008, the Company entered into a licensing agreement to acquire patent and intellectual rights relating to the manufacturing, marketing, and distributing of products designed to reduce gas emissions by motor vehicles through the use of hydrogen technology.
On July 14, 2008, the Company entered into an Agreement with China Bright Technology Development Limited (the Licensor) and Lincole Parke (the Principal), and acquired a Comprehensive License to use certain patent and intellectual rights for the purpose of manufacturing, marketing, and distributing products designed to reduce gas emissions by motor vehicles. The territory covered by the license is the European Union and the United States of America. The price for the license is $3,500,000, payable as follows: $300,000 on August 13, 2008 (deemed paid); $1,000,000 by December 31, 2008; $1,000,000 by March 31, 2009; and, $1,200,000 by August 31, 2009. In addition, provided that the $1,000,000 payment due December 31, 2008 is made, the Company is to issue the Principal a total of 43,470,000 shares or approximately 60% of the Company's total outstanding common shares after the issuance. The Company must also use its best efforts to provide funding for business development of $3,500,000 payable on the same schedule as the license fee payments noted above. The Company must also use its best efforts to fund a $2,000,000 product and investor awareness marketing campaign through the issuance of shares.
The term of the Comprehensive License is 20 years. In the event of failure by the Company to fulfill any of its obligations under the Agreement, the Agreement and Comprehensive License may be terminated by the Licensor with 120 days notice. On July 15, 2008, the Principal was appointed Chief Executive Officer, Chief Financial Officer, and director of the Company.
The Agreement did not state any interest on the $3,500,000 total amounts due the Licensor between August 13, 2008 and August 31, 2009. Accordingly, the Company recorded the license price at the $3,101,578 present value (discounted at an 18% annual interest rate) of the $3,500,000 total payments due and recorded amortization expense of $20,394 for the period July 14, 2008 to August 31, 2008 (using the straight line method over the 20 years term of the Agreement).
As of August 31, 2008, the Company reviewed the remaining $3,081,184 carrying value of the license agreement costs for potential impairment. Considering all facts and circumstances, the Company concluded that it was not more likely than not that any of the $3,081,184 carrying costs were recoverable. Accordingly, the Company expensed a $3,081,184 provision for impairment of license agreement costs at August 31, 2008 and reduced the license agreement costs, net to $0.
