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 endedSeptemberJune 30, 20192020
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number:000-31549
PCT LTD
(Exact name of registrant as specified in its charter)
Nevada | 90-0578516 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
4235 Commerce Street Little River, South Carolina |
29566 |
(Address of principal executive offices) | (Zip Code) |
(843) 390-7900
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | N/A | N/A |
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 thethe 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☑ No☐
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☑ No☐ The registrant does not have a Web site.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer☐ Non-accelerated filer☑ | Accelerated filer☐ Smaller reporting company☑ Emerging growth company☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes☐ No☑
Securities registered pursuant to Section 12(b) of the Act:
The number of shares outstanding of the registrant’s common stock as of April 10,August 27, 2020 was 527,813,393598,982,574 which does not include 427,186,607400,267,426 shares of common stock reserved against default/conversion default on convertible debt and 750,000 shares for vesting of convertible debt.executive shares.
TABLE OF CONTENTS
Part I – Financial Information | Page | |
Item 1. | Condensed Consolidated Financial Statements (Unaudited) | 3 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4. | Controls and Procedures | |
Part II – Other Information | ||
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 3. | Defaults Upon Senior Securities | |
Item 4. | Mine Safety Disclosures | |
Item 5. | Other Information | |
Item 6. | Exhibits | |
Signatures |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial information set forth below with respect to our statements of operations, stockholders’ equity (deficit), and cash flows for the nine monththree and six-month periods ended SeptemberJune 30, 20192020 and 20182019 is unaudited. This financial information, in the opinion of management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the nine monththree and six-month periods ended SeptemberJune 30, 20192020 and 20182019 are not necessarily indicative of results to be expected for any subsequent period.
3 |
PCT LTD
Condensed Consolidated Balance Sheets
June 30, 2020 | December 31, 2019 | |||||||||||||||
September 30, 2019 | December 31, 2018 | (Unaudited) | ||||||||||||||
ASSETS | (Unaudited) | |||||||||||||||
CURRENT ASSETS | ||||||||||||||||
Cash | $ | 6,669 | $ | 4,893 | ||||||||||||
Accounts receivable | 103,872 | 49,140 | ||||||||||||||
Inventory | 4,803 | 7,105 | ||||||||||||||
Cash and cash equivalents | $ | 29,260 | $ | 67,613 | ||||||||||||
Accounts receivable, net | 319,128 | 111,915 | ||||||||||||||
Prepaid expenses | 44,980 | 218,494 | 51,395 | 43,100 | ||||||||||||
Other current assets | 2,110 | 2,110 | 17,110 | 2,110 | ||||||||||||
Total current assets | 162,434 | 281,742 | 416,893 | 224,738 | ||||||||||||
PROPERTY AND EQUIPMENT | ||||||||||||||||
Property and equipment, net | 446,346 | 499,972 | 401,233 | 440,109 | ||||||||||||
OTHER ASSETS | ||||||||||||||||
Intangible assets, net | 3,782,652 | 4,059,775 | 3,552,267 | 3,704,429 | ||||||||||||
Operating lease right-of-use asset | 7,878 | — | ||||||||||||||
Deposits | 5,499 | 5,499 | 2,526 | 5,499 | ||||||||||||
Total other assets | 3,796,029 | 4,065,274 | 3,554,793 | 3,709,928 | ||||||||||||
TOTAL ASSETS | $ | 4,404,809 | $ | 4,846,988 | $ | 4,372,919 | $ | 4,374,775 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||||||||
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT | ||||||||||||||||
CURRENT LIABILITIES | ||||||||||||||||
Accounts payable | $ | 359,817 | $ | 350,593 | $ | 447,805 | $ | 315,228 | ||||||||
Accrued expenses – related parties | 72,137 | 54,033 | 98,311 | 84,538 | ||||||||||||
Accrued expenses | 670,872 | 362,436 | 912,393 | 890,104 | ||||||||||||
Operating lease liability | 9,125 | — | ||||||||||||||
Current portion of notes payable – related parties, net | 834,886 | 93,000 | ||||||||||||||
Current portion of notes payable, net | 278,100 | 399,664 | ||||||||||||||
Current portion of convertible notes payable, net | 1,334,040 | 161,280 | ||||||||||||||
Notes payable – related parties, net | 826,214 | 826,957 | ||||||||||||||
Notes payable, net | 408,617 | 468,153 | ||||||||||||||
Convertible notes payable, net | 980,254 | 1,187,633 | ||||||||||||||
Derivative liability | 5,538,198 | 322,976 | 18,419,365 | 10,517,873 | ||||||||||||
Preferred series A stock liability | — | 144,352 | ||||||||||||||
Total current liabilities | 9,097,175 | 1,888,334 | 22,092,959 | 14,290,486 | ||||||||||||
LONG-TERM LIABILITIES | ||||||||||||||||
Notes payable – related parties, net of current portion and discounts | — | 733,826 | ||||||||||||||
Notes payable, net of current portion and discounts | — | 126,707 | ||||||||||||||
Convertible notes payable, net of current portion and discounts | — | 392,534 | ||||||||||||||
TOTAL LIABILITIES | 9,097,175 | 3,141,401 | 22,092,959 | 14,290,486 | ||||||||||||
MEZZANINE EQUITY | ||||||||||||||||
Preferred stock series A, $0.001 par value; 1,000,000 authorized; 500,000 and nil issued and outstanding at September 30, 2019 and December 31, 2018, respectively | 60,398 | — | ||||||||||||||
Preferred stock series B, $0.001 par value; 1,000,000 authorized; 1,000,000 and nil issued and outstanding at September 30, 2019 and December 31, 2018, respectively | 155,000 | — | ||||||||||||||
Preferred series A stock, $0.001 par value; 1,000,000 authorized; 500,000 and 500,000 issued and outstanding at June 30, 2020 and December 31, 2019, respectively | 60,398 | 60,398 | ||||||||||||||
Preferred series B stock, $0.001 par value; 1,000,000 authorized; 1,000,000 and 1,000,000 issued and outstanding at June 30, 2020 and December 31, 2019, respectively | 158,247 | 158,247 | ||||||||||||||
Preferred series C stock, $0.001 par value; 5,500,000 authorized; 440,000 and nil issued and outstanding at June 30, 2020 and December 31, 2019, respectively | 484,000 | — | ||||||||||||||
TOTAL MEZZANINE EQUITY | 215,398 | — | 702,645 | 218,645 | ||||||||||||
STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Preferred stock series C, $0.001 par value; 5,500,000 authorized; nil issued and outstanding at September 30, 2019 and December 31, 2018 | — | — | ||||||||||||||
Common stock, $0.001 par value; 1,000,000,000 authorized; 262,360,042 and 44,559,238 issued and outstanding at September 30, 2019 and December 31, 2018, respectively | 262,361 | 44,560 | ||||||||||||||
STOCKHOLDERS’ DEFICIT | ||||||||||||||||
Common stock, $0.001 par value; 1,000,000,000 authorized; 584,201,486 and 498,880,300 issued and outstanding at June 30, 2020 and December 31, 2019, respectively | 584,202 | 498,881 | ||||||||||||||
Additional paid-in-capital | 14,971,340 | 11,588,030 | 18,056,637 | 15,872,330 | ||||||||||||
Accumulated deficit | (20,141,465 | ) | (9,927,003 | ) | (37,063,524 | ) | (26,505,567 | ) | ||||||||
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | (4,907,764 | ) | 1,705,587 | |||||||||||||
TOTAL STOCKHOLDERS’ DEFICIT | (18,422,685 | ) | (10,134,356 | ) | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 4,404,809 | $ | 4,846,988 | ||||||||||||
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT | $ | 4,372,919 | $ | 4,374,775 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4 |
PCT LTD
Condensed Consolidated Statements of Operations
(Unaudited)
For the three months ended September 30, | For the nine months ended September 30, | For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||
Product | $ | 110,739 | $ | 13,624 | $ | 209,578 | $ | 86,837 | $ | 582,389 | $ | 11,745 | $ | 745,037 | $ | 98,839 | ||||||||||||||||
Licensing | 29,500 | 8,000 | 108,000 | 8,000 | 77,000 | 34,000 | 84,000 | 78,500 | ||||||||||||||||||||||||
Equipment leases | 79,794 | 19,500 | 217,274 | 58,500 | 221,783 | 73,117 | 324,317 | 137,480 | ||||||||||||||||||||||||
Total Revenue | 220,033 | 41,124 | 534,852 | 153,337 | ||||||||||||||||||||||||||||
Total Revenues | 881,172 | 118,862 | 1,153,354 | 314,819 | ||||||||||||||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||||||||||||
General and administrative | 468,897 | 827,168 | 1,554,992 | 1,885,962 | 592,042 | 415,339 | 1,140,828 | 1,082,303 | ||||||||||||||||||||||||
Research and development | 5,000 | 3,792 | 5,000 | 3,792 | ||||||||||||||||||||||||||||
Cost of product, licensing and equipment leases | 51,483 | 39,216 | 148,214 | 59,690 | 415,855 | 24,077 | 564,705 | 96,731 | ||||||||||||||||||||||||
Depreciation and amortization | 84,467 | 84,070 | 253,568 | 250,928 | 81,348 | 84,189 | 164,369 | 169,101 | ||||||||||||||||||||||||
Total operating expenses | 604,847 | 950,454 | 1,956,774 | 2,196,580 | 1,094,245 | 527,397 | 1,874,902 | 1,351,927 | ||||||||||||||||||||||||
Net loss before other expenses | (384,814 | ) | (909,330 | ) | (1,421,922 | ) | (2,043,243 | ) | ||||||||||||||||||||||||
Loss from operations | (213,073 | ) | (408,535 | ) | (721,548 | ) | (1,037,108 | ) | ||||||||||||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||||||||||||||||||
Loss on change in fair value of derivative liability | (4,169,978 | ) | — | (7,121,619 | ) | — | (1,092,845 | ) | (2,789,342 | ) | (10,387,607 | ) | (2,951,641 | ) | ||||||||||||||||||
Gain (loss) on change in fair value of preferred series A stock liability | — | — | 72,473 | — | — | (3,004 | ) | — | 72,473 | |||||||||||||||||||||||
Gain on sale of intangible assets | — | — | 52,498 | — | — | 52,498 | — | 52,498 | ||||||||||||||||||||||||
Gain on sale of equipment | — | 16,185 | — | 16,185 | ||||||||||||||||||||||||||||
Gain (Loss) on settlement of debt | 16,706 | (67,703 | ) | — | ||||||||||||||||||||||||||||
Gain (loss) on settlement of debt | 1,759,539 | — | 1,715,539 | (84,409 | ) | |||||||||||||||||||||||||||
Interest expense | (1,225,906 | ) | (46,950 | ) | (1,728,189 | ) | (112,398 | ) | (459,930 | ) | (381,764 | ) | (894,341 | ) | (502,283 | ) | ||||||||||||||||
Total other income (expenses) | (5,379,178 | ) | (30,765 | ) | (8,792,540 | ) | (96,213 | ) | ||||||||||||||||||||||||
Total other income (expense) | 206,764 | (3,121,612 | ) | (9,566,409 | ) | (3,413,362 | ) | |||||||||||||||||||||||||
Loss from operations before Income taxes | (5,763,992 | ) | (940,095 | ) | (10,214,462 | ) | (2,139,456 | ) | ||||||||||||||||||||||||
Loss before Income taxes | (6,309 | ) | (3,530,147 | ) | (10,287,957 | ) | (4,450,470 | ) | ||||||||||||||||||||||||
Income taxes | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
NET LOSS | $ | (5,763,992 | ) | $ | (940,095 | ) | $ | (10,214,462 | ) | $ | (2,139,456 | ) | $ | (6,309 | ) | $ | (3,530,147 | ) | $ | (10,287,957 | ) | $ | (4,450,470 | ) | ||||||||
Preferred series C stock deemed dividends | — | — | (270,000 | ) | — | |||||||||||||||||||||||||||
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS’ | $ | (6,309 | ) | $ | (3,530,147 | ) | $ | (10,557,957 | ) | $ | (4,450,470 | ) | ||||||||||||||||||||
Basic and diluted net loss per share | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.10 | ) | $ | (0.05 | ) | $ | (0.00 | ) | $ | (0.07 | ) | $ | (0.02 | ) | $ | (0.09 | ) | ||||||||
Basic and diluted weighted average shares outstanding | 206,524,228 | 44,448,368 | 102,223,061 | 43,184,183 | 569,964,666 | 52,755,139 | 557,809,456 | 49,208,103 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5 |
PCT LTD
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the nine months ended September 30, | ||||||||
2019 | 2018 | |||||||
Cash Flows from Operating Activities | ||||||||
Net loss | $ | (10,214,462 | ) | $ | (2,139,456 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 253,568 | 250,928 | ||||||
Amortization of debt discount | 735,582 | 30,518 | ||||||
Amortization of operating lease right-of-use asset | 35,452 | — | ||||||
Common stock issued and issuable for services | 151,391 | 903,946 | ||||||
Loss on change in fair value of derivative liability | 7,121,619 | — | ||||||
Gain on change in fair value of preferred series A stock liability | (72,473 | ) | — | |||||
Series B preferred stock issued for services | 155,000 | — | ||||||
Loss on settlement of debt | 67,703 | — | ||||||
Gain on sale of intangible assets | (52,498 | ) | — | |||||
Gain on sale of equipment | — | (16,185 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (137,092 | ) | (14,748 | ) | ||||
Inventory | 21,707 | (24,009 | ) | |||||
Prepaid expenses | 173,514 | (1,487 | ) | |||||
Other assets | — | (55,000 | ) | |||||
Operating lease liability | (34,205 | ) | — | |||||
Accounts payable | 66,737 | 178,815 | ||||||
Accrued expenses – related party | 18,104 | 26,302 | ||||||
Accrued expenses | 1,113,652 | — | ||||||
Deferred revenue | — | 25,000 | ||||||
Net cash used in operating activities | (596,701 | ) | (835,376 | ) | ||||
Cash Flows from Investing Activities | ||||||||
Proceeds from sale of intangible assets | 111,323 | — | ||||||
Proceeds from the sales of equipment | — | 22,500 | ||||||
Purchase of property and equipment | (2,516 | ) | (3,900 | ) | ||||
Purchase of intangible assets | (5,000 | ) | (9,500 | ) | ||||
Net cash provided by investing activities | 103,807 | 9,100 | ||||||
Cash Flows from Financing Activities | ||||||||
Proceeds from notes payable – related parties | 17,544 | 109,000 | ||||||
Proceeds from notes payable | 138,600 | 287,500 | ||||||
Proceeds from convertible notes payable | 480,750 | 350,000 | ||||||
Proceeds from common stock issued | — | 115,000 | ||||||
Repayment of notes payable – related parties | (20,044 | ) | (15,000 | ) | ||||
Repayment of notes payable | (31,180 | ) | (20,000 | ) | ||||
Repayment of convertible notes payable | (91,000 | ) | — | |||||
Net cash provided by financing activities | 494,670 | 826,500 | ||||||
Net change in cash | 1,776 | 224 | ) | |||||
Cash and cash equivalents at beginning of period | 4,893 | 7,838 | ||||||
Cash and cash equivalents at end of period | $ | 6,669 | $ | 8,062 | ||||
Supplemental Cash Flow Information | ||||||||
Cash paid for interest | $ | 40,914 | $ | 20,060 | ||||
Cash paid for income taxes | $ | — | $ | — | ||||
Non-Cash Investing and Financing Activities: | ||||||||
Debt discounts on notes payable – related parties | $ | — | $ | 20,000 | ||||
Debt discounts on notes payable | $ | 10,204 | $ | 13,464 | ||||
Debt discounts on convertible notes payable | $ | 610,125 | $ | 84,087 | ||||
Modification of notes payable | $ | 20,590 | $ | — | ||||
Common stock issued in conversion of convertible notes payable | $ | 2,644,325 | $ | — | ||||
Accounts receivable netted against notes payable | $ | 28,090 | $ | — | ||||
Initial operating lease right-of-use asset and liability | $ | 43,330 | $ | — | ||||
Default penalty on convertible notes payable | $ | 665,731 | $ | — | ||||
Preferred series A stock reclassification from liability to mezzanine equity | $ | 60,398 | $ | — | ||||
Extinguishment of notes payable | $ | 175,814 | $ | 250,000 | ||||
Common stock issued for prepaid expenses | $ | — | $ | 1,383,000 | ||||
Property plant & equipment transferred to inventory | $ | 19,405 | $ | — |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
PCT LTD
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)(deficit)
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Additional | Total Stockholders’ | |||||||||||||||||||
Common Stock | Paid-in | Accumulated | Equity’ | |||||||||||||||||
Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
Balance – December 31, 2018 | 44,559,238 | $ | 44,560 | $ | 11,588,030 | (9,927,003 | ) | $ | 1,705,587 | |||||||||||
Common stock issued for services | 575,000 | 575 | 98,352 | — | 98,927 | |||||||||||||||
Common stock issued in settlement of debt | 5,383,810 | 5,383 | 800,012 | — | 805,395 | |||||||||||||||
Net loss | — | — | — | (920,323 | ) | (920,323 | ) | |||||||||||||
Balance – March 31, 2019 | 50,518,048 | $ | 50,518 | $ | 12,486,394 | (10,847,326 | ) | $ | 1,689,586 | |||||||||||
Common stock issued for services | — | — | 23,125 | — | 23,125 | |||||||||||||||
Common stock issued in conversion of convertible notes payable | 26,341,913 | 26,342 | 261,034 | — | 287,376 | |||||||||||||||
Net loss | — | — | — | (3,530,147 | ) | (3,530,147 | ) | |||||||||||||
Balance – June 30, 2019 | 76,859,961 | $ | 76,860 | $ | 12,770,553 | (14,377,473 | ) | $ | (1,530,060 | ) | ||||||||||
Common stock issued and issuable for services | 1,000,000 | 1,000 | 28,339 | — | 29,339 | |||||||||||||||
Common stock issued from exercise of warrants | 12,030,881 | 12,031 | 220,803 | — | 232,834 | |||||||||||||||
Common stock issued in conversion of convertible notes payable | 172,469,200 | 172,470 | 1,951,645 | — | 2,124,115 | |||||||||||||||
Net loss | — | — | — | (5,763,992 | ) | (5,763,992 | ) | |||||||||||||
Balance – September 30, 2019 | 262,360,042 | $ | 262,361 | $ | 14,971,340 | (20,141,465 | ) | $ | (4,907,764 | ) |
Additional | Total | |||||||||||||||||||
Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
Balance – December 31, 2017 | 41,179,238 | $ | 41,180 | $ | 10,001,323 | $ | (6,744,520 | ) | $ | 3,297,983 | ||||||||||
Common stock issued for cash | 110,000 | 110 | 54,890 | — | 55,000 | |||||||||||||||
Common stock payable for services | — | — | 43,836 | — | 43,836 | |||||||||||||||
Beneficial conversion feature | — | — | 58,401 | — | 58,401 | |||||||||||||||
Net loss | — | — | — | (531,302 | ) | (531,302 | ) | |||||||||||||
Balance – March 31, 2018 | 41,289,238 | $ | 41,290 | $ | 10,158,450 | $ | (7,275,822 | ) | $ | 2,923,918 | ||||||||||
Common stock issued for cash | 120,000 | 120 | 59,880 | — | 60,000 | |||||||||||||||
Common stock issued for services | 2,050,000 | 2,050 | 982,114 | — | 984,164 | |||||||||||||||
Beneficial conversion feature | — | — | 16,686 | — | 16,686 | |||||||||||||||
Net loss | — | — | — | (668,059 | ) | (668,059 | ) | |||||||||||||
Balance – June 30, 2018 | 43,459,238 | $ | 43,460 | $ | 11,217,130 | $ | (7,943,881 | ) | $ | 3,316,709 | ||||||||||
Common stock issued for services | 1,000,000 | 1,000 | 354,000 | — | 355,000 | |||||||||||||||
Net loss | — | — | — | (940,095 | ) | (940,095 | ) | |||||||||||||
Balance – September 30, 2018 | 44,459,238 | $ | 44,460 | $ | 11,571,130 | $ | (8,883,976 | ) | $ | 2,731,614 |
Additional | Total Stockholders’ | |||||||||||||||||||
Common Stock | Paid-in | Accumulated | Equity | |||||||||||||||||
Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
Balance – December 31, 2018 | 44,559,238 | $ | 44,560 | $ | 11,588,030 | $ | (9,927,003 | ) | $ | 1,705,587 | ||||||||||
Common stock issued for services | 575,000 | 575 | 98,352 | — | 98,927 | |||||||||||||||
Common stock issued in settlement of debt | 5,383,810 | 5,383 | 800,012 | — | 805,395 | |||||||||||||||
Net loss for the three-months ended March 31, 2019 | — | — | — | (920,323 | ) | (920,323 | ) | |||||||||||||
Balance – March 31, 2019 | 50,518,048 | $ | 50,518 | $ | 12,486,394 | $ | (10,847,326 | ) | $ | 1,689,586 | ||||||||||
Stock-based compensation | — | — | 23,125 | — | 23,125 | |||||||||||||||
Common stock issued in conversion of convertible notes payable | 26,341,913 | 26,342 | 261,034 | — | 287,376 | |||||||||||||||
Net loss for the three-months ended June 30, 2020 | — | — | — | (3,530,147 | ) | (3,530,147 | ) | |||||||||||||
Balance – June 30, 2019 | 76,859,961 | $ | 76,860 | $ | 12,770,553 | $ | (14,377,473 | ) | $ | (1,530,060 | ) |
Additional | Total Stockholders’ | |||||||||||||||||||
Common Stock | Paid-in | Accumulated | Equity | |||||||||||||||||
Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
Balance – December 31, 2019 | 498,880,300 | $ | 498,881 | $ | 15,872,330 | $ | (26,505,567 | ) | $ | (10,134,356 | ) | |||||||||
Common stock issued for services | 15,525,000 | 15,525 | 103,538 | — | 119,063 | |||||||||||||||
Common stock issued in settlement of debt | 250,000 | 250 | 7,975 | — | 8,225 | |||||||||||||||
Common stock issued in conversion of convertible notes payable | 36,050,000 | 36,050 | 360,660 | — | 396,710 | |||||||||||||||
Beneficial conversion feature on preferred series C stock | — | — | 270,000 | (270,000 | ) | — | ||||||||||||||
Net loss for the three-months ended March 31, 2020 | — | — | — | (10,281,648 | ) | (10,281,648 | ) | |||||||||||||
Balance – March 31, 2020 | 550,705,300 | $ | 550,706 | $ | 16,614,503 | $ | (37,057,215 | ) | $ | (19,892,006 | ) | |||||||||
Common stock issued for cash | 4,250,000 | 4,250 | 135,750 | — | 140,000 | |||||||||||||||
Stock-based compensation | — | — | 14,182 | — | 14,182 | |||||||||||||||
Common stock issued in settlement of debt | 15,000,000 | 15,000 | 826,500 | — | 841,500 | |||||||||||||||
Common stock issued in cashless exercise of warrants | 9,246,186 | 9,246 | 420,702 | — | 429,948 | |||||||||||||||
Common stock issued in conversion of preferred series C stock | 5,000,000 | 5,000 | 45,000 | — | 50,000 | |||||||||||||||
Net loss for the three-months ended June 30, 2020 | — | — | — | (6,309 | ) | (6,309 | ) | |||||||||||||
Balance – June 30, 2020 | 584,201,486 | $ | 584,202 | $ | 18,056,637 | $ | (37,063,524 | ) | $ | (18,422,685 | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6 |
PCT LTD
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Cash Flows from Operating Activities | ||||||||
Net loss | $ | (10,287,957 | ) | $ | (4,450,470 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 164,369 | 169,101 | ||||||
Amortization of debt discounts | 280,188 | 300,703 | ||||||
Amortization of operating lease right-of-use asset | — | 23,635 | ||||||
Common stock issued for services | 133,245 | 122,052 | ||||||
Loss on change in fair value of derivative liability | 10,387,607 | 2,951,641 | ||||||
Gain on change in fair value of preferred series A stock liability | — | (72,473 | ) | |||||
(Gain) loss on settlement of debt | (1,715,539 | ) | 84,409 | |||||
Gain on sale of intangible assets | — | (52,498 | ) | |||||
Default penalties on convertible notes payable | 13,762 | 87,500 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (207,213 | ) | (81,166 | ) | ||||
Inventory | 26,669 | 644 | ||||||
Prepaid expenses | (8,295 | ) | 177,475 | |||||
Other assets | (12,027 | ) | — | |||||
Operating lease liability | — | (21,626 | ) | |||||
Accounts payable | 132,577 | 59,265 | ||||||
Accrued expenses – related party | 13,773 | 8,245 | ||||||
Accrued expenses | 620,188 | 215,811 | ||||||
Contract liabilities | — | 24,532 | ||||||
Net cash used in operating activities | (458,653 | ) | (453,220 | ) | ||||
Cash Flows from Investing Activities | ||||||||
Proceeds from sale of intangible assets | — | 57,500 | ||||||
Purchases of property and equipment | — | (2,516 | ) | |||||
Purchase of intangible assets | — | (5,000 | ) | |||||
Net cash provided by investing activities | — | 49,984 | ||||||
Cash Flows from Financing Activities | ||||||||
Proceeds from notes payable – related parties | 3,500 | 2,544 | ||||||
Proceeds from notes payable | 155,525 | 88,600 | ||||||
Proceeds from convertible notes payable | 413,000 | 460,750 | ||||||
Proceeds from common stock subscriptions | 140,000 | — | ||||||
Proceeds from preferred series C stock subscriptions | 270,000 | — | ||||||
Repayments of notes payable – related parties | (4,286 | ) | (16,044 | ) | ||||
Repayments of notes payable | (245,551 | ) | (9,209 | ) | ||||
Repayments of convertible notes payable | (311,888 | ) | (91,000 | ) | ||||
Net cash provided by financing activities | 420,300 | 435,641 | ||||||
Net change in cash | (38,353 | ) | 32,405 | |||||
Cash and cash equivalents at beginning of period | 67,613 | 4,893 | ||||||
Cash and cash equivalents at end of period | $ | 29,260 | $ | 37,298 | ||||
Supplemental Cash Flow Information | ||||||||
Cash paid for interest | $ | 53,645 | $ | 51,639 | ||||
Cash paid for income taxes | $ | — | $ | — | ||||
Non-Cash Investing and Financing Activities: | ||||||||
Preferred series C stock deemed dividend | $ | 270,000 | $ | — | ||||
Original debt discounts against notes payable | $ | 23,917 | $ | 10,204 | ||||
Original debt discounts against convertible notes payable | $ | 197,888 | $ | 395,125 | ||||
Modification of notes payable | $ | — | $ | 20,590 | ||||
Common stock issued in conversion of convertible notes payable | $ | 396,710 | $ | 287,376 | ||||
Common stock issued in cashless exercise of warrants | $ | 429,948 | $ | — | ||||
Common stock issued in conversion of preferred series C stock | $ | 50,000 | $ | — | ||||
Accounts receivable netted against notes payable | $ | — | $ | 18,000 | ||||
Initial operating lease right-of-use asset and liability | $ | — | $ | 43,330 | ||||
Preferred series A stock reclassification from liability to mezzanine equity | $ | — | $ | 60,398 | ||||
Property plant and equipment transferred to inventory | $ | 26,669 | $ | — |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7 |
PCT LTD
Notes to the Unaudited
Condensed Consolidated Financial Statements
SeptemberJune 30, 20192020
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim condensed consolidated financial statements of PCT LTD (the “Company”) have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of our balance sheet,sheets, statements of operations, stockholders’ equity (deficit), and cash flows for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative of the results to be expected for a full year.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 20182019 audited financial statements as reported in its Form 10-K, filed on August 3, 2020.
COVID-19
In December 2019 COVID-19 emerged in Wuhan, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to almost all other countries, including the United States, and infections have been reported globally. Because COVID-19 infections have been reported throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future.
The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak. Any resulting financial impact cannot be reasonably estimated at this time but may have a material impact on our business, financial condition and results of operations. The significance of the impact of the COVID-19 outbreak on the Company’s businesses and the duration for which it may have an impact cannot be determined at this time. At a minimum, the COVID-19 pandemic caused the Company to restrict travel of its personnel and to initiate distributor installations of certain of the Company’s equipment, as possible. The Company adapted to the immediate need for its US EPA registered disinfectant at the end of March and beginning of April, 15, 2019.
2020, by installing greater storage reserves and by assembling more of it higher-volume equipment to produce the hospital grade disinfectant known as Hydrolyte®. There were hard costs associated with these adaptations to the Little River, SC facility, but the Company continues to benefit from its fluid production capacities over the longer term. As the Federal, state and other restrictions associated with the pandemic have lessened, the Company is able to act more effectively in obtaining new contracts for its healthcare equipment, the Annihilyzer® and other equipment.
Nature of Operations
PCT LTD (formerly Bingham Canyon Corporation, (the “Company,” “PCT Ltd,” or “Bingham”), a Delaware corporation, was formed on AugustFebruary 27, 1986. The Company changed its domicile to Nevada on August 26, 1999.1998. The Company acquires, develops and provides sustainable, environmentally safe disinfecting, cleaning and tracking technologies. The Company specializes in providing cleaning, sanitizing, and disinfectant fluid solutions and fluid-generating equipment that creates environmentally safe solutions for global sustainability.
On August 31, 2016, the Company entered into a Securities Exchange Agreement with Paradigm Convergence Technologies Corporation (“Paradigm”) to affect the acquisition of Paradigm as a wholly-owned subsidiary. Under the terms of the agreement, Bingham issued 16,790,625 restricted common shares of Bingham stock to the shareholders of Paradigm in exchange for all 22,387,500 outstanding common shares of Paradigm stock. In addition, Bingham issued options exercisable into 2,040,000 shares of the Bingham’s common stock (with exercise prices ranging between $0.133 and $0.333) in exchange for 2,720,000 outstanding Paradigm stock options (with exercise prices ranging between $0.10 and $0.25). These 2,040,000 options have been adjusted at the same exchange rate of 75% that the outstanding common shares were exchanged. As a result of this share exchange agreement, Paradigm, the operating company, is considered the accounting acquirer.
Paradigm is located in Little River, SC and was formed June 6, 2012 under the name of EUR-ECA, Ltd. On September 11, 2015, its Board of Directors authorized EUR-ECA Ltd to file with the Nevada Secretary of State to change its name to Paradigm Convergence Technologies Corp. Paradigm is a technology licensing company specializing in environmentally safe solutions for global sustainability. The company holds a patent, intellectual property and/or distribution rights to innovative products and technologies. Paradigm provides innovative products and technologies for eliminating biocidal contamination from water supplies, industrial fluids, hard surfaces, food processing equipment, and medical devices. Paradigm’s overall strategy is to market new products and technologies through the use of equipment leasing, joint ventures, licensing, distributor agreements and partnerships.
Effective on February 29, 2018, the Company changed its name from Bingham Canyon Corporation to PCT LTD to more accurately identify the Company’s direction and to develop the complimentary relationship and association with its wholly-owned operating company, Paradigm Convergence Technologies Corporation (“Paradigm” or “PCT Corp.”).
8 |
Principles of ConsolidationsSignificant Accounting Policies
The accompanying consolidated financial statements include the accounts of PCT LTD (“Parent”) and its wholly owned subsidiary, Paradigm Convergence Technologies Corporation (“Paradigm” or “Subsidiary”). All intercompany accounts
There have been eliminated upon consolidation.
Use of Estimates
The preparationno changes to the significant accounting policies of the condensed consolidated financial statements requires management to make estimates and assumptions that affectCompany from the reported amounts of assets and liabilities and the disclosure of contingencies at the dateinformation provided in Note 1 of the financial statements as well asNotes to the reported amounts of revenues and expenses duringConsolidated Financial Statements in the reporting periods. Estimates are based on historical experience and on various other market-specific and other relevant assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates.Company's most recent Form 10-K.
Cash and Cash EquivalentsReclassification
Cash
Certain balances on the previously issued statements of operations and cash equivalents are consideredflows have been reclassified to be cash and highly liquid securitiesconsistent with original maturities of three monthsthe current period presentation. The reclassification had no impact on total financial position, net loss, or less. The cash of $6,669 and $4,893 as of September 30, 2019 and December 31, 2018, respectively, represents cash on deposit in various bank accounts. There were no cash equivalents as of September 30, 2019 and December 31, 2018.stockholders’ equity (deficit).
Fair Value Measurements
The Company follows ASC 820, “Fair“Fair Value Measurements and Disclosures”, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, is used to measure fair value:
The carrying values of our financial instruments, including, cash and cash equivalents, accounts receivable, inventory, prepaid expenses, accounts payable and accrued expenses approximate their fair value due to the short maturities of these financial instruments.
Derivative liabilities and preferred series A stock liabilities are determined based on “Level 3” inputs, which are significant and unobservable and have the lowest priority. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.
Our financial assets and liabilities carried at fair value measured on a recurring basis as of SeptemberJune 30, 2019,2020, consisted of the following:
Total fair value at June 30, 2020 $ | Quoted prices in active markets (Level 1) $ | Significant other observable inputs (Level 2) $ | Significant unobservable inputs (Level 3) $ | |||||||||||||||||||||||||||||
Total fair value at September 30, 2019 $ | Quoted prices in active markets (Level 1) $ | Significant other observable inputs (Level 2) $ | Significant unobservable inputs (Level 3) $ | |||||||||||||||||||||||||||||
Description: | ||||||||||||||||||||||||||||||||
Derivative liability (1) | 5,538,198 | — | — | 5,538,198 | 18,419,365 | — | — | 18,419,365 | ||||||||||||||||||||||||
Total | 5,538,198 | — | — | 5,538,198 | 18,419,365 | — | — | 18,419,365 |
Our financial assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2018,2019, consisted of the following:
Total fair value at December 31, 2018 $ | Quoted prices in active markets (Level 1) $ | Significant other observable inputs (Level 2) $ | Significant unobservable inputs (Level 3) $ | |||||||||||||
Description: | ||||||||||||||||
Preferred series A stock liability (1) | 144,352 | — | — | 144,352 | ||||||||||||
Derivative liability (1) | 322,976 | — | — | 322,976 | ||||||||||||
Total | 467,328 | — | — | 467,328 |
Total fair value at December 31, 2019 $ | Quoted prices in active markets (Level 1) $ | Significant other observable inputs (Level 2) $ | Significant unobservable inputs (Level 3) $ | |||||||||||||
Description: | ||||||||||||||||
Derivative liability (1) | 10,517,873 | — | — | 10,517,873 | ||||||||||||
Total | 10,517,873 | — | — | 10,517,873 |
(1) The Company has estimated the fair value of these liabilities using the Binomial Model.
Derivative and Preferred Series A Stock Liabilities
The Company accounts for derivative instruments in accordance with ASC Topic 815, “Derivatives and Hedging” and all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet. The Company uses estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company’s policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads, relying first on observable data from active markets. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments at fair value as discussed above. As of September 30, 2019, and December 31, 2018, the Company had a $5,538,198 and $322,976 derivative liability, respectively and preferred series A stock liabilities of $0 and $144,352, respectively.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. See Note 7 for additional information.
Accounts Receivable
Trade accounts receivable are recorded at the time product is shipped or services are provided including any shipping and handling fees. The Company provided allowances for uncollectible accounts receivable equal to the estimated collection losses that will be incurred in collection of all receivables. Accounts receivable is periodically evaluated for collectability bases on past credit history with customers and their current financial condition. The Company’s management determines which accounts are past due and if deemed uncollectible, the Company charges off the receivable in the period the determination is made. Based on management’s evaluation, the Company provided an allowance for doubtful accounts of $0 at September 30, 2019 and December 31, 2018, respectively.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by using the first in, first out (FIFO) method. We record the value of our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand, future pricing and market conditions. As of September 30, 2019 and December 31, 2018, the inventory consisted of parts for equipment sold as replacement parts to existing customers or sold to new customers. The Company has recorded a reserve allowance of $0 and $0 as of September 30, 2019 and December 31, 2018, respectively. The Company has determined that some of the supplies inventory is necessary to be placed into service, after assembly into equipment to be used in product manufacturing and classified as Machinery and Equipment. The balance at September 30, 2019 and December 31, 2018 of such supplies and equipment not yet placed in service amounted to $276,428 and $319,735, respectively.
Property and Equipment
Property and equipment are stated at purchased cost and depreciated utilizing a straight-line method over estimated useful lives ranging from 3 to 7 years after the asset has been placed in service. Upon selling equipment that had been under a lease agreement, the company discontinues the depreciation on that piece of equipment, as it transfers ownership to another entity. Additions and major improvements that extend the useful lives of property and equipment are capitalized. Maintenance and repairs are charged to operations as incurred. Upon trade-in, sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any related gains or losses are recorded in the results of operations.
Impairment of Long-lived Assets
The carrying values of the Company’s long-lived assets are reviewed for impairment annually and whenever events or changes in circumstances indicate that they may not be recoverable. When projections indicate that the carrying value of the long-lived asset is not recoverable, the carrying value is reduced by the estimated excess of the carrying value over the fair value. Under similar analysis no impairment was recorded during the nine months ended September 30, 2019.
Intangible Assets
Costs to obtain or develop patents are capitalized and amortized over the remaining life of the patents, and technology rights are amortized over their estimated useful lives. The Company currently has the right to several patents and proprietary technology. Patents and technology are amortized from the date the Company acquires or is awarded the patent or technology right, over their estimated useful lives, which range from 1 to 15 years. An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected discounted net future cash flows. The recorded impairment expense was nil for the nine months ended September 30, 2019.
Research and Development
Research and development costs are recognized as an expense during the period incurred, which is until the conceptual formulation, design, and testing of a process is completed and the process has been determined to be commercially viable.
Leases
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) ("ASC 842"), which requires lessees to recognize right-of-use ("ROU") assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. We adopted ASC 842 on January 1, 2019 using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach did not require any transition accounting for leases that expired before the earliest comparative period presented. The adoption of this standard resulted in the recording of ROU assets and lease liabilities for our lease agreements with original terms of greater than one year. Upon implementation, the Company recognized an initial operating lease right-of-use asset of $43,330 and operating lease liability of $43,330. Due to the simplistic nature of the Company's leases, no retained earnings adjustment was required. See Note 5 for further details.
Revenue Recognition
On May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customer (Topic 606). The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principal is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Company has the following three revenue streams:
1)product sales (equipment and/or fluid solutions);
2)licensing (contract-based use of the Company’s US EPA Product Registration, returning revenue in licensing fees and/or royalties from minimum or actual fluid sales); and
3)equipment leases (under systems service agreements, usually 3-year contracts for the provision of the Company’s equipment and service of such, under contract to customers, with renewable terms).
The Company recognizes revenue from the sale of products when the performance obligation is satisfied by transferring control of the product to a customer.
The Company recognizes revenue from the leasing of equipment as the entity provides the equipment and the customer simultaneously receives and consumes the benefits through the use of the equipment. This revenue generating activity would meet the criteria for a performance obligation satisfied over time. As a result, the Company recognizes revenue over time by using the output method, as the Company can measure progress of the performance obligation using the time elapsed under each obligation.
The Company’s licenses provide a right to use and create performance obligations satisfied at a point in time. The Company recognizes revenue from licenses when the performance obligation is satisfied through the transfer of the license. For licenses that include royalties the Company will recognize royalty revenue as the underlying sales or usages occur, as long as this approach does not result in the acceleration of revenue ahead of the entity’s performance.
The Company has disclosed disaggregated revenue via revenue stream on the face of the statement of operations. The Company did not have any contract assets or liabilities at September 30, 2019.
Basic and Diluted Loss Per Share
Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. As of SeptemberJune 30, 2019,2020, there were outstanding common share equivalents (options, warrants, convertible debtnotes payable, preferred series A stock and preferred series AC stock) which amounted to 960,689,801573,019,281 shares of common stock. These common share equivalents were not included in the computation of diluted loss per share as their effect would have been anti-dilutive.
Recent Accounting Pronouncements
In August 2018, the FASB issued Accounting Standards Update No. 2018-13 (“ASU 2018-13”), Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements relating to fair value measurements as outlined in Topic 820, Fair Value Measurement. ASU 2018-13 is applicable to all entities that are required, under GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments outlined in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for any removed or modified disclosures upon issuance of ASU 2018-13. The Company has reviewed all other FASB issuedadopted ASU accounting pronouncements2018-13 on January 1, 2020 and interpretations thereof that have effective dates during the period reported and in future periods. The Company has carefully considered the new pronouncements that alter the previous GAAP and doadoption of ASU 2018-13 did not believe that any new or modified principles will have a material impacteffect on the Company’s reportedconsolidated financial position or operations in the near term.statements.
NOTE 2. GOING CONCERN
The accompanying unauditedconsolidated condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has limited assets, has incurred losses since inceptionan accumulated deficit of $20,141,465$37,063,524 and has negative cash flows from operations. As of SeptemberJune 30, 2019,2020, the Company had a working capital deficit of $8,934,741.$21,676,066. The Company has relied on raising debt and equity capital in order to fund its ongoing day-to-day operations and its corporate overhead. The Company will require additional working capital from either cash flow from operations, from debt or equity financing, or from a combination of these sources. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3. PROPERTY AND EQUIPMENT
Depreciation expense was $18,947 and $18,644 for the nine months ended September 30, 2019 and 2018, respectively. Property and equipment at SeptemberJune 30, 20192020 and December 31, 20182019 consisted of the following:
September 30, 2019 | December 31, 2018 | June 30, 2020 | December 31, 2019 | |||||||||||||
Machinery and leased equipment | $ | 151,719 | $ | 138,209 | $ | 151,719 | $ | 151,719 | ||||||||
Machinery and equipment not yet in service | 321,565 | 369,754 | 294,896 | 321,565 | ||||||||||||
Office equipment and furniture | 20,064 | 20,064 | 20,064 | 20,064 | ||||||||||||
Website | 2,760 | 2,760 | 2,760 | 2,760 | ||||||||||||
Total property and equipment | $ | 496,108 | $ | 530,787 | $ | 469,439 | $ | 496,108 | ||||||||
Less: Accumulated Depreciation | (49,762 | ) | (30,815 | ) | (68,206 | ) | (55,999 | ) | ||||||||
Property and equipment, net | 446,346 | 499,972 | 401,233 | 440,109 |
On JulyDepreciation expense was $12,207 and $12,701 for the six-months ended June 30, 2020 and 2019, the Company transferred $17,790 of equipment not yet in service and offset accounts receivable of $23,209 in exchange for $13,939 and the settlement of accounts payable and accrued liabilities of $43,766. As result the Company recorded a gain on the settlement of debt of $16,706.respectively.
NOTE 4. INTANGIBLE ASSETS
Amortization is computed using the straight-line method and is recognized over the estimated useful lives of the intangible assets, which range from 1 to 15 years. Amortization expense was $234,621 and $232,284 for the nine months ended September 30, 2019 and 2018, respectively. Intangible assets at SeptemberJune 30, 20192020 and December 31, 20182019 consisted of the following:
September 30, 2019 | December 31, 2018 | June 30, 2020 | December 31, 2019 | |||||||||||||
Patents | $ | 4,505,489 | $ | 4,514,989 | $ | 4,505,489 | $ | 4,505,489 | ||||||||
Technology rights | 200,000 | 235,500 | 200,000 | 200,000 | ||||||||||||
Intangible, at cost | 4,705,489 | 4,750,489 | ||||||||||||||
Intangibles, at cost | 4,705,489 | 4,705,489 | ||||||||||||||
Less: Accumulated amortization | (922,837 | ) | (690,714 | ) | (1,153,222 | ) | (1,001,060 | ) | ||||||||
Net Carrying Amount | $ | 3,782,652 | $ | 4,059,775 | $ | 3,552,267 | $ | 3,704,429 |
Amortization expense was $152,162 and $156,400 for the six-months ended June 30, 2020 and 2019, respectively.
Estimated Future Amortization Expense:
$ | ||||
For year ending December 31, | ||||
For year ending December 31, 2021 | 302,003 | |||
For year ending December 31, 2022 | 302,003 | |||
For year ending December 31, 2023 | ||||
For year ending December 31, 2024 | 302,003 | |||
Thereafter | 2,193,253 | |||
Total |
On May 10, 2019, the Company sold intangible assets with a carrying value of $92,502 for $111,323 of cash and the settlement of $33,677 of liabilities owed to the buyer. The Company recorded a gain on sales of intangible assets of $52,498.
NOTE 5 – LEASES
In February 2016, the FASB issued ASU No. 2016-02,Leases, which introduced a lessee model that requires the majority of leases to be recognized on the balance sheet. On January 1, 2019, the Company adopted the ASU using the modified retrospective transition approach and elected the transition option to recognize the adjustment in the period of adoption rather than in the earliest period presented. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $43,330 and $43,330 respectively, as of January 1, 2019. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
The depreciable lives of operating lease assets and leasehold improvements are limited by the expected lease term. The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The Company used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date.
The following table sets forth the ROU assets and liabilities as of September 30, 2019:
September 30, 2019 | ||||
Operating lease right-of-use asset | $ | 7,878 | ||
Operating lease liability: | ||||
Current operating lease liability | $ | 9,125 | ||
Noncurrent operating lease liability | — | |||
Total operating lease liability | $ | 9,125 |
Expense related to leases is recorded on a straight-line basis over the lease term, including rent holidays. During the nine months ended September 30, 2019, the Company recognized operating lease expense of $44,447. Operating lease costs are included within selling, administrative and other expenses on the condensed consolidated statements of income.
Cash paid for amounts included in the measurement of operating lease liabilities were $43,200 for the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company reduced its ROU liabilities by $34,205 from cash paid.
Our weighted average discount rate is 41% and the weighted average remaining lease term is 2 months. Lease payments over the next five years and thereafter are as follows:
September 30, 2019 | ||||
2019 - remaining | $ | 9,600 | ||
2020 and thereafter | — | |||
Total lease payments | 9,600 | |||
Less: imputed interest | (475 | ) | ||
Total ROU liabilities | $ | 9,125 |
As previously disclosed in our 2018 Form 10-K under the prior guidance of ASC 840, minimum payments under operating lease agreements as of December 31, 2018 were as follows:
December 31, 2018 | ||||||
2019 | $ | 52,950 | ||||
2020 | — | |||||
Total | $ | 52,950 |
NOTE 6.5. Notes Payable
The following tables summarize notes payable as of SeptemberJune 30, 20192020 and December 31, 2018:2019:
Type | Amount | Origination Date | Maturity Date | Annual Interest Rate | Balance at September 30, 2019 | Balance at December 31, 2018 | ||||||||||||||
Note Payable(v) *** | $ | 150,000 | 5/18/2016 | 6/1/2019 | 19.00 | % | $ | 150,000 | $ | 150,000 | ||||||||||
Note Payable *** | $ | 25,000 | 5/8/2017 | 6/30/2018 | 0.00 | % | $ | 27,500 | $ | 27,500 | ||||||||||
Note Payable | $ | 130,000 | 6/20/2018 | 1/2/2020 | 8.00 | % | $ | 130,000 | $ | 130,000 | ||||||||||
Note Payable (a) | $ | 126,964 | 6/20/2018 | 8/31/2018 | 6.00 | % | $ | — | $ | 126,964 | ||||||||||
Note Payable (b) | $ | 26,500 | 6/26/2018 | 10/1/2019 | 10.00 | % | $ | 10,090 | $ | 26,500 | ||||||||||
Note Payable | $ | 60,000 | 10/30/2018 | 12/30/2018 | 8.00 | % | $ | — | $ | 60,000 | ||||||||||
Note Payable *** | $ | 8,700 | 11/15/2018 | 6/30/2019 | 10.00 | % | $ | 8,700 | $ | 8,700 | ||||||||||
Note Payable (c) | $ | 52,063 | 4/8/2020 | 4/8/2020 | 41.38 | % | $ | 42,854 | $ | — | ||||||||||
Note Payable (d) | $ | 40,000 | 6/20/2019 | 12/31/2019 | 8.00 | % | $ | 40,000 | $ | — | ||||||||||
Note Payable (e) | $ | 6,741 | 6/21/2019 | 4/8/2020 | 41.38 | % | $ | 6,741 | $ | — | ||||||||||
Note Payable (d) | $ | 90,596 | 9/15/2019 | 3/16/2020 | 8.00 | % | $ | 90,596 | $ | — | ||||||||||
Subtotal | $ | 284,420 | $ | 529,664 | ||||||||||||||||
Debt Discount | $ | (6,320 | ) | $ | (3,293 | ) | ||||||||||||||
Balance, net | $ | 278,100 | $ | 526,371 | ||||||||||||||||
Less current portion | $ | (278,100 | ) | $ | (399,664 | ) | ||||||||||||||
Total long-term | $ | — | $ | 126,707 | ||||||||||||||||
*** Currently in default |
Type | Original Amount | Origination Date | Maturity Date | Annual Interest Rate | Balance at June 30, 2020 | Balance at December 31, 2019 | ||||||||||||||
Note Payable ** | $ | 25,000 | 05/08/2017 | 06/30/2018 | 0 | % | $ | 27,500 | $ | 27,500 | ||||||||||
Note Payable ** | $ | 130,000 | 06/20/2018 | 01/02/2020 | 8 | % | $ | 112,500 | $ | 130,000 | ||||||||||
Note Payable ** | $ | 8,700 | 11/15/2018 | 06/30/2019 | 10 | % | $ | 8,700 | $ | 8,700 | ||||||||||
Note Payable (e) | $ | 90,596 | 09/15/2019 | 05/28/2020 | 8 | % | $ | — | $ | 90,596 | ||||||||||
Note Payable (k) | $ | 50,000 | 10/03/2019 | 04/03/2020 | 12 | % | $ | — | $ | 37,500 | ||||||||||
Note Payable (e) | $ | 17,500 | 11/12/2019 | 11/12/2020 | 8 | % | $ | — | $ | 17,500 | ||||||||||
Note Payable ** | $ | 83,400 | 12/20/2019 | 06/19/2020 | 150 | % | $ | 38,491 | $ | 80,192 | ||||||||||
Note Payable | $ | 148,362 | 12/20/2019 | 11/27/2020 | 80 | % | $ | 68,496 | $ | 145,404 | ||||||||||
Note Payable (a) | $ | 25,782 | 01/08/2020 | 05/13/2020 | 313 | % | $ | — | $ | — | ||||||||||
Note Payable (b) | $ | 33,660 | 02/19/2020 | 04/30/2020 | 585 | % | $ | — | $ | — | ||||||||||
Note Payable (c)(e) | $ | 20,000 | 02/28/2020 | 05/28/2020 | 8 | % | $ | — | $ | — | ||||||||||
Note Payable (d) | $ | 100,000 | 03/31/2020 | 08/01/2020 | 30 | % | $ | 50,000 | $ | — | ||||||||||
Note Payable (e) | $ | 118,644 | 05/05/2020 | 05/05/2021 | 8 | % | $ | 118,644 | $ | — | ||||||||||
Subtotal | $ | 424,331 | $ | 537,392 | ||||||||||||||||
Debt discount | $ | (15,714 | ) | $ | (69,239 | ) | ||||||||||||||
Balance, net | $ | 408,617 | $ | 468,153 | ||||||||||||||||
Less current portion | $ | (408,617 | ) | $ | (468,153 | ) | ||||||||||||||
Total long-term | $ | — | $ | — | ||||||||||||||||
** Currently in default |
a) | On January |
On |
c) | On February 28, 2020, the Company entered into a promissory note with a non-related party for |
d) | On March 31, 2020, the |
e) | On |
The following table summarizes notes payable, related parties as of SeptemberJune 30, 20192020 and December 31, 2018:2019:
Type | Amount | Origination Date | Maturity Date | Annual Interest Rate | Balance at September 30, 2019 | Balance at December 31, 2018 | Original Amount | Origination Date | Maturity Date | Annual Interest Rate | Balance at June 30, 2020 | Balance at December 31, 2019 | ||||||||||||||||||||||||||||
Note Payable, RP *** | $ | 30,000 | 4/10/2018 | 1/15/2019 | 3.00 | % | $ | 30,000 | $ | 30,000 | ||||||||||||||||||||||||||||||
Note Payable, RP | $ | 380,000 | 6/20/2018 | 1/2/2020 | 8.00 | % | $ | 380,000 | $ | 380,000 | ||||||||||||||||||||||||||||||
Note Payable, RP | $ | 350,000 | 6/20/2018 | 1/2/2020 | 5.00 | % | $ | 339,000 | $ | 350,000 | ||||||||||||||||||||||||||||||
Note Payable, RP | $ | 17,000 | 6/20/2018 | 1/2/2020 | 5.00 | % | $ | 17,000 | $ | 17,000 | ||||||||||||||||||||||||||||||
Note Payable, RP *** | $ | 50,000 | 7/27/2018 | 11/30/2018 | 8.00 | % | $ | 50,000 | $ | 50,000 | ||||||||||||||||||||||||||||||
Note Payable, RP ** | $ | 30,000 | 04/10/2018 | 01/15/2019 | 3 | % | $ | 30,000 | $ | 30,000 | ||||||||||||||||||||||||||||||
Note Payable, RP ** | $ | 380,000 | 06/20/2018 | 01/02/2020 | 8 | % | $ | 380,000 | $ | 380,000 | ||||||||||||||||||||||||||||||
Note Payable, RP ** | $ | 350,000 | 06/20/2018 | 01/02/2020 | 5 | % | $ | 322,214 | $ | 325,000 | ||||||||||||||||||||||||||||||
Note Payable, RP ** | $ | 17,000 | 06/20/2018 | 01/02/2020 | 5 | % | $ | 17,000 | $ | 17,000 | ||||||||||||||||||||||||||||||
Note Payable, RP ** | $ | 50,000 | 07/27/2018 | 11/30/2018 | 8 | % | $ | 50,000 | $ | 50,000 | ||||||||||||||||||||||||||||||
Note Payable, RP | $ | 5,000 | 10/9/2018 | Demand | 0.00 | % | $ | 5,000 | $ | 5,000 | $ | 5,000 | 10/09/2018 | Demand | 0 | % | $ | 5,000 | $ | 5,000 | ||||||||||||||||||||
Note Payable, RP | $ | 5,000 | 10/19/2018 | Demand | 0.00 | % | $ | 5,000 | $ | 5,000 | $ | 5,000 | 10/19/2018 | Demand | 0 | % | $ | 5,000 | $ | 5,000 | ||||||||||||||||||||
Note Payable, RP ** | $ | 3,000 | 10/24/2018 | Demand | 0.00 | % | $ | — | $ | 3,000 | $ | 15,000 | 08/16/2019 | 02/16/2020 | 8 | % | $ | 15,000 | $ | 15,000 | ||||||||||||||||||||
Note Payable, RP (f)** | $ | 2,544 | 1/3/2019 | 6/30/2019 | 3.00 | % | $ | — | $ | — | ||||||||||||||||||||||||||||||
Note Payable, RP (f) | $ | 1,500 | 02/11/2020 | Demand | 0 | % | $ | — | $ | — | ||||||||||||||||||||||||||||||
Note Payable, RP (g) | $ | 15,000 | 8/16/2019 | 2/16/2020 | 8.00 | % | $ | 15,000 | — | $ | 2,000 | 02/11/2020 | Demand | 0 | % | $ | 2,000 | $ | — | |||||||||||||||||||||
Subtotal | $ | 837,500 | $ | 840,000 | $ | 826,214 | $ | 827,000 | ||||||||||||||||||||||||||||||||
Debt Discount | $ | (2,614 | ) | $ | (13,174 | ) | ||||||||||||||||||||||||||||||||||
Debt discount | $ | — | $ | (43 | ) | |||||||||||||||||||||||||||||||||||
Balance, net | $ | 8,34,886 | $ | 826,826 | $ | 826,214 | $ | 826,957 | ||||||||||||||||||||||||||||||||
Less current portion | $ | (834,886 | ) | $ | (93,000 | ) | $ | (826,214 | ) | $ | (826,957 | ) | ||||||||||||||||||||||||||||
Total long-term | $ | — | $ | 733,826 | $ | — | $ | — | ||||||||||||||||||||||||||||||||
** Paid off during the period ***Currently in default | ||||||||||||||||||||||||||||||||||||||||
** Currently in default |
f) | On |
g) | On |
The following table summarizes convertible notes payable as of SeptemberJune 30, 20192020 and December 31, 2018:2019:
Type | Amount | Origination Date | Maturity Date | Annual Interest Rate | Balance at September 30, 2019 | Balance at December 31, 2018 | ||||||||||||||
Convertible Note Payable (h) | $ | 450,000 | 3/28/2018 | 3/31/2021 | 8.00 | % | $ | — | $ | 450,000 | ||||||||||
Convertible Note Payable ** | $ | 38,000 | 7/30/2018 | 7/25/2019 | 12.00 | % | $ | — | $ | 38,000 | ||||||||||
Convertible Note Payable ** | $ | 53,000 | 8/29/2018 | 8/27/2019 | 12.00 | % | $ | — | $ | 53,000 | ||||||||||
Convertible Note Payable (i) * | $ | 50,000 | 12/6/2018 | 12/6/2019 | 5.00 | % | $ | 36,123 | $ | 50,000 | ||||||||||
Convertible Note Payable (j) * | $ | 65,000 | 12/6/2018 | 12/6/2019 | 5.00 | % | $ | 43,599 | $ | 65,000 | ||||||||||
Convertible Note Payable(k) *** | $ | 63,000 | 12/12/2018 | 12/5/2019 | 22.00 | % | $ | 42,800 | $ | 63,000 | ||||||||||
Convertible Note Payable (h) | $ | 539,936 | 1/15/2019 | 1/15/2020 | 8.00 | % | — | — | ||||||||||||
Convertible Note Payable (l) *** | $ | 33,000 | 1/16/2019 | 1/15/2020 | 22.00 | % | $ | 49,500 | $ | — | ||||||||||
Convertible Note Payable (m) *** | $ | 100,000 | 1/18/2019 | 1/16/2020 | 8.00 | % | $ | 100,000 | $ | — | ||||||||||
Convertible Note Payable (n) * | $ | 60,000 | 1/29/2019 | 1/22/2020 | 8.00 | % | $ | 60,000 | $ | — | ||||||||||
Convertible Note Payable (o) * | $ | 50,000 | 2/1/2019 | 10/22/2019 | 12.00 | % | $ | 50,000 | $ | — | ||||||||||
Convertible Note Payable (p) * | $ | 60,000 | 2/21/2019 | 2/14/2022 | 0.00 | % | $ | 60,000 | $ | — | ||||||||||
Convertible Note Payable (q) | $ | 55,125 | 2/21/2019 | 2/20/2020 | 8.00 | % | $ | 55,125 | $ | — | ||||||||||
Convertible Note Payable (r) *** | $ | 53,000 | 2/26/2019 | 2/20/2020 | 22.00 | % | $ | 79,500 | $ | — | ||||||||||
Convertible Note Payable (s)*** | $ | 75,000 | 3/18/2019 | 12/13/2019 | 12.00 | % | $ | 75,000 | $ | — | ||||||||||
Convertible Note Payable (t) *** | $ | 38,000 | 5/2/2019 | 4/29/2020 | 22.00 | % | $ | 57,000 | $ | — | ||||||||||
Convertible Note Payable (u) *** | $ | 26,000 | 9/16/2019 | 9/11/2022 | 0.00 | % | $ | 26,000 | $ | — | ||||||||||
Convertible Note Payable (v) | $ | 175,814 | 9/27/2019 | 9/25/2020 | 8.00 | % | $ | 175,814 | $ | — | ||||||||||
Subtotal | $ | 1,334,040 | $ | 719,000 | ||||||||||||||||
Debt Discount | $ | — | $ | (165,186 | ) | |||||||||||||||
Balance, net | $ | 1,334,040 | $ | 553,814 | ||||||||||||||||
Less current portion | $ | (1,334,040 | ) | $ | (161,280 | ) | ||||||||||||||
Total long-term | $ | — | $ | 392,534 | ||||||||||||||||
* Embedded conversion feature accounted for as a derivative liability ** Paid off during the period |
Type | Original Amount | Origination Date | Maturity Date | Annual Interest Rate | Balance at June 30, 2020 | Balance at December 31, 2019 | ||||||||||||||
Convertible Note Payable (h) * ** | $ | 50,000 | 12/06/2018 | 12/06/2019 | 12 | % | $ | 5,685 | $ | 22,777 | ||||||||||
Convertible Note Payable * ** | $ | 65,000 | 12/06/2018 | 12/06/2019 | 12 | % | $ | 46 | $ | 46 | ||||||||||
Convertible Note Payable (i) * ** | $ | 100,000 | 01/18/2019 | 01/16/2020 | 24 | % | $ | 105,041 | $ | 95,492 | ||||||||||
Convertible Note Payable (r) | $ | 60,000 | 01/29/2019 | 01/22/2020 | 18 | % | $ | — | $ | 266,050 | ||||||||||
Convertible Note Payable * ** | $ | 50,000 | 02/01/2019 | 10/22/2019 | 24 | % | $ | 154,330 | $ | 154,330 | ||||||||||
Convertible Note Payable (o) | $ | 60,000 | 02/21/2019 | 02/14/2022 | 0 | % | $ | — | $ | 74,000 | ||||||||||
Convertible Note Payable (j) * ** | $ | 55,125 | 02/21/2019 | 02/20/2020 | 24 | % | $ | 46,338 | $ | 42,125 | ||||||||||
Convertible Note Payable * ** | $ | 75,000 | 03/18/2019 | 12/13/2019 | 24 | % | $ | 232,814 | $ | 232,814 | ||||||||||
Convertible Note Payable (o) | $ | 26,000 | 09/16/2019 | 09/11/2022 | 0 | % | $ | — | $ | 26,000 | ||||||||||
Convertible Note Payable (k) | $ | 175,814 | 09/27/2019 | 09/25/2020 | 8 | % | $ | — | $ | 175,814 | ||||||||||
Convertible Note Payable | $ | 53,000 | 10/08/2019 | 10/07/2020 | 12 | % | $ | — | $ | 53,000 | ||||||||||
Convertible Note Payable | $ | 50,000 | 10/31/2019 | 10/29/2020 | 12 | % | $ | — | $ | 50,000 | ||||||||||
Convertible Note Payable (l) | $ | 8,888 | 02/19/2020 | 02/18/2021 | 12 | % | $ | — | $ | — | ||||||||||
Convertible Note Payable (m) * ** | $ | 30,000 | 03/06/2020 | 03/05/2021 | 12 | % | $ | 30,000 | $ | — | ||||||||||
Convertible Note Payable (n) | $ | 45,000 | 03/09/2020 | 03/02/2021 | 12 | % | $ | 45,000 | $ | — | ||||||||||
Convertible Note Payable (p) * ** | $ | 150,000 | 04/10/2020 | 04/09/2021 | 12 | % | $ | 150,000 | $ | — | ||||||||||
Convertible Note Payable (q) | $ | 128,000 | 04/16/2020 | 04/09/2021 | 12 | % | $ | 128,000 | $ | — | ||||||||||
Convertible Note Payable (s) | $ | 83,000 | 05/12/2020 | 11/08/2021 | 12 | % | $ | 83,000 | $ | — | ||||||||||
Subtotal | $ | 980,254 | $ | 1,192,448 | ||||||||||||||||
Debt discount | $ | — | $ | (4,815 | ) | |||||||||||||||
Balance, net | $ | 980,254 | $ | 1,187,633 | ||||||||||||||||
Less current portion | $ | (980,254 | ) | $ | (1,187,633 | ) | ||||||||||||||
Total long-term | $ | — | $ | — | ||||||||||||||||
* Embedded conversion feature accounted for as a derivative liability at period end ** Currently in default |
h) |
|
i) | During the period ended June 30, 2020, the Company was further assessed default penalties and interest on this convertible note as the note reached maturity. Additional default and penalties were assessed in the amount of $118,295 of which $9,549 was recorded as a principal addition and $108,746 was recorded in accrued interest. to the note. |
j) | During the period ended June 30, 2020, the Company was further assessed default penalties and interest on this convertible note as the note reached maturity. Additional default and penalties were assessed in the amount of $4,213 was recorded as a principal addition. |
k) | On February 7, 2020, the Company extinguished both promissory note (totaling $39,000) and convertible note (totaling $181,000), including accrued interest with a non-related party through the issuance of 220,000 shares of preferred series C stock. The Company recorded the difference between the fair value of the preferred series C stock |
l) | On February 19, 2020, the Company received another tranche on a convertible note originally dated December 6, 2018. The new tranche had a principal amount of $8,888, with an original issue discount of $888. The convertible note The embedded conversion option qualified for derivative accounting and bifurcation under ASC During the |
14 |
m) | On March The embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature |
|
|
On |
p) | On April 10, 2020, the Company entered into a convertible promissory note with a non-related party for
|
|
triggered. |
|
q) |
|
On |
On June 19, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $187,924 and resulted in a discount to the note payable of $50,000 and an initial derivative expense of $137,924. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense.
r) | On May 11, 2020, the Company entered into a settlement agreement to settle the $60,000 convertible note. The Company agreed to pay $100,000 to settle the principal and accrued interest and penalties relating the convertible note. The Company recorded a gain on settlement of debt of $2,273,770. |
s) | On |
The embedded conversion option and warrant qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature of $139,196 and the warrant of $25,401 resulted in a discount to the note payable of $75,000 and an initial derivative expense of $99,847. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the nine months ended September 30, 2019, $27,804 of the convertible note payable and $5,287 of accrued interest was converted into 11,490,000 shares of the Company’s common stock
On June 19, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $135,455 and resulted in a discount to the note payable of $35,000 and an initial derivative expense of $100,455. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense.
The embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $58,453 and warrants $2,768 resulted in a discount to the note payable of $20,000 and an initial derivative expense of $41,221. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense.
NOTE 7 –6. DERIVATIVE AND PREFERRED SERIES A STOCK LIABILITIES
The embedded conversion option of (1) the convertible debenturesnotes payable described in Note 6;5; (2) preferred series A stock liability; (3) warrants; contain conversion features that qualify for embedded derivative classification. The fair value of the liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.
Upon the issuance of the convertible notes payable described in Note 6,5, the Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible notes, warrants and options. The Company elected to reclassify contracts from equity with the earliest inception date first. As a result, none of the Company’s previously outstanding convertible instruments qualified for derivative reclassification, however, any convertible securities issued after the election, including the warrants described in Note 10,9, qualified for derivative classification. The Company reassesses the classification of the instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.
The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities.
September 30, 2019 | December 31, 2018 | |||||||
Balance at the beginning of period | $ | 322,976 | $ | — | ||||
Original discount limited to proceeds of notes | 540,750 | 100,000 | ||||||
Fair value of derivative liabilities in excess of notes proceeds received | 1,653,887 | 247,033 | ||||||
Settlement of derivative instruments | (2,447,147 | ) | — | |||||
Change in fair value of embedded conversion option | 5,467,732 | (24,057 | ) | |||||
Balance at the end of the period | $ | 5,538,198 | $ | 322,976 |
June 30, 2020 | December 31, 2019 | |||||||
Balance at the beginning of period | $ | 10,517,873 | $ | 322,976 | ||||
Original discount limited to proceeds of notes | 166,000 | 540,750 | ||||||
Fair value of derivative liabilities in excess of notes proceeds received | 804,403 | 1,653,887 | ||||||
Settlement of derivative instruments | (2,652,115 | ) | (3,258,054 | ) | ||||
Change in fair value of embedded conversion option | 9,583,204 | 11,258,314 | ||||||
Balance at the end of the period | $ | 18,419,365 | $ | 10,517,873 |
The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option and warrant liabilities as their fair values were determined by using the Binomial Model based on various assumptions.
Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:
On December 1, 2018, the Company’s Board of Director authorized an offering for 1,000,000 Preferred Series “A” stock at $0.10 per share and with 100%, regular or cashless exercise at $0.10 per share of common stock warrant coverage. At December 31, 2018, the Company received $60,000 of subscriptions for the issuance of 600,000 shares of Preferred Series “A” stock to three accredited investors who are related parties. On December 1, 2018, the Company issued 600,000 warrants subject to cashless exercise at $0.10 per share for 5 years.
The Company was unable to issue the subscriber the preferred shares until the Company filed a Certificate of Designation and the Preferred Series “A” stock had been duly validly authorized. As the Company had not filed the Certificate of Designation, and as the Company could not issue the preferred shares to settle the proceeds received, it was determined the subscriptions were settleable in cash. As a result, the Company classified the subscriptions received as a liability in accordance with ASC 480 Distinguishing Liabilities from Equity. The fair value of the liability of the preferred series A stock at December 31, 2018 was $144,352.
On March 29, 2019, the Company executed a settlement agreement that included the settlement of 100,000 of the Series A Preferred Shares and 100,000 of the warrants subscribed for as part of the December 1, 2018 offering. The Company agreed to issue 164,000 shares of its common stock as payment in full $25,000 owed to the subscriber for services rendered; the Company agreed to accept conversion and exercise of the purchased 100,000 Preferred Series A shares into 100,000 shares of the Company’s common stock and the Company shall accept the cashless conversion of 100,000 warrant into 34,400 shares of the Company’s restricted common stock; and, as inducement for and consideration for the settlement of the Company’s debt, the Company agrees to grant 500,000 additional shares of the Company’s restricted stock. The Company recorded the fair value of the shares issued of $103,792 and recorded a loss on the settlement of the subscriptions and the amounts payable of $55,830.
On April 12, 2019, the Company filed the Certificate of Designation for the Series A Convertible Preferred Stock. The fair value of the liability of the preferred series A stock on April 12, 2019 was $60,398. On April 12, 2019, the Company adjusted the fair value of the preferred series A stock to $60,398 and reclassified the fair value of the preferred series A stock to mezzanine equity.
Expected Volatility | Risk-free Interest Rate | Expected Dividend Yield | Expected Life (in years) | |||||||||
At issuance during the period | 336-358% | 0.25-1.47% | 0 | % | 1.00 | |||||||
At June 30, 2020 | 236-320% | 0.16-0.18% | 0 | % | 0.68-3.70 |
The Company uses Level 3 inputs for its valuation methodology for the preferred series A stock liability as their fair values were determined by using the Binomial Model based on various assumptions.
Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:
16 |
Expected Volatility | Risk-free Interest Rate | Expected Dividend Yield | Expected Life (in years) | |||||||
At April 12, 2019 | 170% | 2.36% | 0 | % | 3.00 |
NOTE 8 -7. STOCKHOLDERS’ DEFICIT
Preferred Stock
Series A Preferred Shares
Effective March 23, 2018,On February 7, 2020, the Company amendedextinguished a promissory note and convertible note, including accrued interest through the articlesissuance of incorporation and authorized 10,000,000220,000 shares of preferred stock with a par value of $0.001 per share; of which 1,000,000 shares were designated as Series A Convertible Preferred Stock as of September 30, 2019. The preferred stock may be issued from time to time by the board of directors as shares of one or more classes or series.
On December 1, 2018, the Company’s Board of Director authorized an offering for 1,000,000 Preferred Series “A” stock at $0.10 per share and with 100%, regular or cashless exercise at $0.10 per share of common stock warrant coverage. At December 31, 2018, the Company received $60,000 of subscriptions for the issuance of 600,000 shares of Preferred Series “A” stock to three accredited investors who are related parties.series C stock. The Company was unable to issuerecorded the subscriberdifference between the preferred shares until the Company filed a Certificate of Designation and the Preferred Series “A” stock has been duly validly authorized. See Note 7 for liabilities related to the Company’s commitment to issue shares of Series A stock upon the designation.
On April 12, 2019, the Company filed a Certificate of Designation with the Nevada Secretary of State designating 1,000,000 shares of its authorized preferred stock as Series A Convertible Preferred Stock. The principal terms of the Series A Preferred Shares are as follows:
Issue Price
The stated price for the Series A Preferred shall be $0.10 per share.
Redemption
This Company may at any time following the first anniversary date of issuance (the “Redemption Date”), at the option of the Board of Directors, redeem in whole or in part the Shares by paying in cash in exchange for the Shares to be redeemed a price equal to the Original Series A Issue Price ($0.10) (the “Redemption Price”). Any redemption affected pursuant to this provision shall be made on a pro rata basis among the holders of the Shares in proportion to the number of Shares then held by them.
Dividends
None.
Preference of Liquidation
In the event of any liquidation, dissolution or winding up of the Company, the holders of Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets of this Company to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of (i) $0.10 for each outstanding Share (the “Original Series A Issue Price”) and (ii) an amount equal to 6% of the Original Series A Issue Price for each 12 months that has passed since the date of issuance of any Shares (such amount being referred to herein as the “Premium”).
For purposes of this provision, a liquidation, dissolution or winding up of this Company shall be deemed to be occasioned by, or to include, (A) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (B) a sale of all or substantially all of the assets of the Company; unless the Company’s stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity.
If upon the occurrence of such liquidation, dissolution or winding up event, the assets and funds thus distributed among the holders of the Shares shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of series of preferred stock that may from time to time come into existence, the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the Shares in proportion to the preferential amount each such holder is otherwise entitled to receive.
In any of such liquidation, dissolution or winding up event, if the consideration received by the Company is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:
Voting
The holder of each Share shall not have any voting rights, except in the case of voting on a change in the preferences of Shares.
Conversion
Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.10 (1 Share converts into 1 share of Common Stock), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth day prior to the Redemption Date, if any, as may have been fixed in any Redemption Notice with respect to the Shares, at the office of this Company or any transfer agent for such stock. Each Share shall automatically be converted into shares of Common Stock on the first day of the thirty-sixth (36th) month following the original issue date of the Shares, at the Conversion Price per share.
The Company was unable to issue the subscribers the preferred shares until the Company filed a Certificate of Designation and the Preferred Series “A” stock had been duly validly authorized. As the Company had not filed the Certificate of Designation, and as the Company could not issue the preferred shares to settle the proceeds received, it was determined the subscriptions were settleable in cash. As a result, the Company classified the subscriptions received as a liability in accordance with ASC 480 Distinguishing Liabilities from Equity. The filing of the Certificate of Designation and issuance of the preferred shares resulted in the reclassification of the Series A Preferred Shares from a liability to temporary equity or “mezzanine” because the preferred shares include the liquidation preferences described above. The fair value of the preferred series AC stock of $264,000 and the debt outstanding of $220,000 as a loss on April 12, 2019 was $60,398 and was valued by using the Binomial Model based on various assumptions.
Asextinguishment of September 30, 2019, there were 500,000 sharesdebt of Series A Convertible Preferred Stock issued or outstanding.$44,000.
Series B Preferred Shares
Effective August 13, 2019,During the period ended June 30, 2020, the Company filed a Certificate of Designation with the Nevada Secretary of State thereby designating 1,000,000 shares of its authorized preferred stock as Series B –Preferred Stock. The principal terms of the Series B Preferred Shares are as follows:
Voting Rights
Holders of the Series B Preferred Stock shall be entitled to cast five hundred (500) votes for each share held of the Series B Preferred Stock on all matters presented to the stockholders of the Corporation for stockholder vote which shall vote along with holders of the Corporation’s Common Stock on such matters.
Redemption Rights
The Series B Preferred Stock shall be redeemed by the Corporation upon the successful receipt by the Corporation of at least $1,000,000 in equity capital following the issuance of the Series B Preferred Stock.
Conversion Rights
The Series B Preferred Stock is not convertible into shares of Common Stock of the Corporation.
Protective Provisions
So long as any shares of Series B Preferred Stock are outstanding, this Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the Holders of the Series B Preferred Stock which is entitled, other than solely by law, to vote with respect to the matter, and which Preferred Stock represents at least a majority of the voting power of the then outstanding shares of such Series B Preferred Stock:
a)sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Corporation is disposed of;
b)alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock so as to affect adversely the shares;
c)increase or decrease (other than by redemption or conversion) the total number of authorizedsold 270,000 shares of preferred stock;
d)authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisableseries C stock for any equity security (i) having a preference over, or being on a parity with, the Series B Preferred Stock with respect to dividends or upon liquidation, or (ii) having rights similar to anyproceeds of the rights of the Series B Preferred Stock; or
e)amend the Corporation’s Articles of Incorporation or bylaws
Dividends
None.
Preference of Liquidation
None.
Upon designation, the Company issued 500,000 shares of the Series B preferred stock to each of its CEO and President (1,000,000 shares in total) pursuant to their employment agreements. As the Series B Preferred Shares represent share-based payments that are not classified as liabilities but that could require the employer to redeem the equity instruments for cash or other assets the Company classified the initial redemption amount of the shares of $155,000 as temporary equity or “mezzanine”.
As of September 30, 2019, there were 1,000,000 shares of Series B Preferred Stock issued or outstanding.
Series C Preferred Shares
Pursuant to the September 18, 2019 majority consent of stockholders in lieu of an annual meeting (including the consent of the Series A Convertible Preferred Stockholders), the Registrant filed a Certificate of Designation with the Nevada Secretary of State designating 5,500,000 shares of its authorized preferred stock as Series C Convertible Preferred Stock. The Registrant is awaiting the file stamped Certificate of Designation from the Nevada Secretary of State. The rights and preferences of such preferred stock are as follows:$270,000.
The number of shares constitutingpreferred series C stock sold during the Series C Convertible Preferred Stock shall be 5,500,000. Such number of shares may be increased or decreased by resolution ofperiod contained a beneficial conversion feature as the Board; provided, that no decrease shall reduce the number of shares of Series C Convertible Preferred Stock to a numberconversion price was less than the numberfair value of the common stock which the instrument is convertible at the commitment date. During the six-months ended June 30, 2020, the intrinsic value of the 270,000 shares then outstanding plussold was $270,000. As the number of shares reserved forpreferred series C stock are have no stated maturity date and are convertible at any time, the discount created in the preferred series C stock is fully amortized at issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series C Convertible Preferred Stock.as a deemed dividend.
Conversion Rights
Each Share shall be convertible intoOn June 24, 2020, 50,000 shares of the Company’s Common Stock at a price perpreferred series C stock was converted into common stock (1 share of $0.01 (1 Share converts into 100 shares of Common Stock) (the “Conversion Price”)common stock), atresulting in the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth (5th) day prior to a redemption Date, if any, as may have been fixed in any redemption notice with respect to the Shares, at the office5,000,000 shares of this Company or any transfer agent for suchcommon stock.
Voting Rights
The holder of each Share shall not have any voting rights, except in the case of voting on a change in the preferences of Shares.
Protective Provisions
So long as any Shares are outstanding, this Company shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of Shares which is entitled, other than solely by law, to vote with respect to the matter, and which Shares represents at least a majority of the voting power of the then outstanding Shares:
Other Rights
There are no other rights, privileges, or preferences attendant or relating to in any way the Shares, including by way of illustration but not limitation, those concerning dividend, ranking, other conversion, other redemption, participation, or anti-dilution rights or preferences.
At September 30, 2019, there were no Series C Preferred Shares outstanding.
Common Stock
Effective March 23, 2018, the Company amended the articles of incorporation and increased the authorized shares of common stock with a par value of $0.001 per share from 100,000,000 to 300,000,000 shares. Effective October 4, 2019, the Company amended the articles of incorporation and increased the authorized shares of common stock with a par value of $0.001 per share from 300,000,000 to 1,000,000,000 shares. The number of shares outstanding of the registrant’s common stock as of September 30, 2019 was 262,360,042.
On January 1, 2019, the Company entered into a four-year employment agreement with F. Jody Read in his role as Chief Executive Officer. The terms of the contract call for an annual salary of $90,000 for the first year, effective March 1, 2019 and increasing to $120,000 once the Company’s revenue exceeds monthly expenses, then incrementally over time and with certain operational results, up to $200,000/year. The salary may be paid, at the employee’s discretion, either in cash or in common stock. A $1,000 per month allowance will be granted to the executive for housing near the Company’s South Carolina facility. The employment agreement awards the CEO 1,500,000 restricted shares of the Company’s restricted stock valued at $240,000, which shall vest in the following manner: 375,000 shares on March 1, 2019, 375,000 shares on March 1, 2020;2020, 375,000 shares on March 1, 2021 and the final 375,000 shares on March 1, 2022. On January 1,October 4, 2019, F. Jody Read resigned from the fair valueposition of CEO and moved back into the restricted stock award totaled $240,000 which will be expensed over vesting period.role of COO. The terms of his employment agreement remained unchanged. As of SeptemberJune 30, 2019, 375,0002020, 750,000 shares were issued and the Company had recognized $102,391$145,093 of expense.stock-based compensation.
On January 28, 2019,During the Company agreed to convert $131,327period ended June 30, 2020, $17,092 of principal and $3,507 of interest of the notesa convertible note payable described in Note 6(a)was converted into 987,42136,050,000 shares of the Company’s common stock.stock as further described in Note 5(h).
On March 25, 2019,During the period ended June 30, 2020, the Company issued 200,0009,246,186 shares of common stock to two employeesupon the cashless exercise of 9,280,742 warrants.
On January 1, 2020, the Company as compensation in lieu of commission on salesissued 15,000,000 fully vested shares of the Company’s products.common stock to Gary J. Grieco, its President and CEO, pursuant to an employment agreement. The Company recorded the fair value of the common shares of $34,000 in consulting expense.
On March 29, 2019, the Company executed a settlement agreement with a contractual consultant, UCAP Partners, LLC for the settlement of $25,000 owed to the contractor for the provision of services$99,000 as related to the March 15, 2018 agreement between UCAP and us. The settlement terms include acknowledgement that the Company owes UCAP $25,000 as payment for said services; that UCAP purchased and fully paid for Series A Preferred Stock and Warrants from the Company on December 3, 2018 (100,000 Preferred Series A Shares and 100,000 warrants to purchase common shares at $0.10/share); the settlement is outlined as follows: the Company shall issue 164,000 shares of its common stock as payment in full for the services rendered on the consulting contract; the Company shall accept UCAP’s conversion and exercise of the purchased 100,000 Preferred Series A shares into 100,000 shares of the Company’s common stock and the Company shall accept the cashless conversion of UCAP’s 100,000 warrant into 34,400 shares of the Company’s restricted common stock; and, as inducement for and consideration for the settlement of the Company’s debt to UCAP, the Company agrees to grant 500,000 additional shares of the Company’s restricted stock. As a result of this transaction, 3,597,989 shares of Company’s common stock were issued and a $55,830 loss on settlement of debt was recognized.
During the nine months ended September 30, 2019, the Company issued a total of 76,154,631 shares of the Company’s common stock upon the conversion of $44,723 of principal ($42,223) and interest ($2,500) pursuant to the convertible note payable described in Note 6(i).
During the nine months ended September 30, 2019, the Company issued a total of 66,290,000 shares of the Company’s common stock upon the conversion of $64,558 of principal ($58,058) and interest ($6,500) pursuant to the convertible note payable described in Note 6(j).
During the nine months ended September 30, 2019, the Company issued a total of 18,559,816 shares of the Company’s common stock upon the conversion of $74,200 of the convertible note payable pursuant to the convertible note payable described in Note 6(k).
During the nine months ended September 30, 2019, the Company issued a total of 5,207,600 shares of the Company’s common stock upon the conversion of $4,508 of the convertible note payable and $179 of accrued interest pursuant to the convertible note payable described in Note 6(m).
During the nine months ended September 30, 2019, the Company issued a total of 7,500,000 shares of the Company’s common stock upon the conversion of $8,640 of principal pursuant to the convertible note payable described in Note 6(n).
During the nine months ended September 30, 2019, the Company issued a total of 4,999,000 shares of the Company’s common stock upon the conversion of $2,196 of principal and $953 of interest pursuant to the convertible note payable described in Note 6(o).
During the nine months ended September 30, 2019, the Company issued a total of 5,555,555 shares of the Company’s common stock upon the conversion of $5,000 of principal pursuant to the convertible note payable described in Note 6(p).
During the nine months ended September 30, 2019, the Company issued a total of 3,054,511 shares of the Company’s common stock upon the conversion of $13,000 of principal pursuant to the convertible note payable described in Note 6(q).
During the nine months ended September 30, 2019, the Company issued a total of 11,490,000 shares of the Company’s common stock upon the conversion of $27,804 of the convertible note payable and $5,287 of accrued interest pursuant to the convertible note payable described in Note 6(s).stock-based compensation.
On August 16, 2019,March 20, 2020, the Company issued 5,989,500 shares of common stock upon the cashless exercise of 6,000,000 warrants.
On September 24, 2019, the Company issued 6,041,381 shares of common stock upon the cashless exercise of 6,057,143 warrants.
On August 1, 2019, the Company entered into a consulting agreement for investor relations services through September 30, 2019. The agreement called for 1,000,000 restricted150,000 shares of common stock to be issued toa consultant. The Company recorded the consultant. Asfair value of September 30, 2019,the common shares of $5,880 in consulting expense.
On March 31, 2020, the Company issued 250,000 shares of common stock pursuant to a loan agreement. The Company recorded $15,000 in additional paid-in capital for the consulting expense related tofair value of the consulting services provided, due to the fact that the 1,000,000 common shares wereof $8,225 in interest expense.
On April 27, 2020, the Company issued subsequently on March 11, 2020.1,000,000 shares of common stock to an employee of the Company for cash proceeds of $10,000.
On April 27, 2020, the Company issued 2,750,000 shares of common stock for cash proceeds of $110,000.
On May 5, 2020, the Company issued 15,000,000 shares of common stock as part of the note extinguishment and consolidation agreement described in Note 5(e).
On May 19, 2020, the Company issued 500,000 shares of common stock for cash proceeds of $20,000.
On June 24, 2020, 50,000 shares of preferred series C stock was converted into common stock (1 share converts into 100 shares of common stock), resulting in the issuance of 5,000,000 shares of common stock.
NOTE 9 –8. STOCK OPTIONS
The Company did not grant any stock options during the year ended December 31, 2018 or the nine months ended September 30, 2019.
Below is a table summarizing the options issued and outstanding as of SeptemberJune 30, 2019:2020:
Number of warrants | Weighted average exercise price $ | |||||||||
Balance, December 31, 2018 | 2,287,500 | 0.34 | ||||||||
Granted | — | — | ||||||||
Expired | (1,905,000 | ) | 0.16 | |||||||
Settled | — | — | ||||||||
Balance, September 30, 2019 | 382,500 | 1.24 |
Number of options | Weighted average exercise price $ | |||||||||
Balance, December 31, 2019 | 200,000 | 2.00 | ||||||||
Granted | — | — | ||||||||
Expired | — | — | ||||||||
Settled | — | — | ||||||||
Balance, June 30, 2020 | 200,000 | 2.00 |
As at SeptemberJune 30, 2019,2020, the following share stock options were outstanding:
Date | Date | Number | Number | Exercise | Weighted Average Remaining Contractual | Expiration | Proceeds to Company if | Date | Number | Number | Exercise | Weighted Average Remaining Contractual | Expiration | Proceeds to Company if | ||||||||||||||||||||||||||||||||||||||
Issued | Issued | Outstanding | Exercisable | Price $ | Life (Years) | Date | Exercised | Issued | Outstanding | Exercisable | Price $ | Life (Years) | Date | Exercised | ||||||||||||||||||||||||||||||||||||||
01/01/2016 | 75,000 | 75,000 | 0.33 | 0.25 | 12/31/2019 | 25,000 | 01/26/2017 | 200,000 | 200,000 | 2.00 | 1.58 | 01/26/2022 | 400,000 | |||||||||||||||||||||||||||||||||||||||
01/01/2016 | 90,000 | 90,000 | 0.33 | 0.25 | 12/31/2019 | 30,000 | 200,000 | 200,000 | $ | 400,000 | ||||||||||||||||||||||||||||||||||||||||||
09/15/2016 | 10,000 | 10,000 | 1.00 | 0.25 | 12/31/2019 | 10,000 | ||||||||||||||||||||||||||||||||||||||||||||||
10/01/2016 | 7,500 | 7,500 | 1.00 | 0.25 | 12/31/2019 | 7,500 | ||||||||||||||||||||||||||||||||||||||||||||||
01/26/2017 | 200,000 | 200,000 | 2.00 | 2.33 | 01/26/2022 | 400,000 | ||||||||||||||||||||||||||||||||||||||||||||||
382,500 | 382,500 | $ | 472,500 |
The weighted average exercise prices are $1.24$2.00 for the options outstanding and exercisable, respectively. The intrinsic value of stock options outstanding at SeptemberJune 30, 20192020 was $Nil.$nil.
NOTE 10 –9. WARRANTS
As described in Note 6, from February 14 through September 11, 2019, the Company issued 487,500 warrants subject to an exercise price of $0.20 per share for 5 years and 300,000 warrants subject to an exercise price of $0.10 per share for 5 years. If the Company issues any common stock or common stock equivalents at an effective price per share less than the warrant’s exercise price the exercise price of the warrants will be reduced to the lower price. In addition, the number of common shares issuable upon conversion of the warrants is increased so that the number of shares issuable multiplied by the exercise price equals the aggregate exercise price of the warrants immediately prior to the exercise reduction. During period, convertible notes were exercised at a price less than the original exercise price of these warrants, resulting in an adjustment to the number of warrants and exercise price.
The Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible instruments. The initial fair value of the warrants issued during the period was calculated using the Binomial Model as described in Note 7.6.
The following table summarizes the continuity of share purchase warrants:
Number of warrants | Weighted average exercise price $ | |||||||
Balance, December 31, 2018 | 650,000 | 0.09233 | ||||||
Adjustment to warrants outstanding | 431,007,738 | 0.00041 | ||||||
Granted | 787,500 | 0.00131 | ||||||
Settled | (12,130,881 | ) | 0.00117 | |||||
Balance, September 30, 2019 | 420,314,357 | 0.00053 |
Number of warrants | Weighted average exercise price $ | |||||||
Balance, December 31, 2019 | 413,816,252 | 0.00053 | ||||||
Adjustment to warrants outstanding | 43,154,762 | 0.00056 | ||||||
Granted | — | — | ||||||
Exercised | (9,280,742 | ) | 0.00035 | |||||
Balance, June 30, 2020 | 447,690,272 | 0.00049 |
As at SeptemberJune 30, 2019,2020, the following share purchase warrants were outstanding:
Date | Date | Number | Number | Exercise | Weighted Average Remaining Contractual | Expiration | Proceeds to Company if | Date | Number | Number | Exercise | Weighted Average Remaining Contractual | Expiration | Proceeds to Company if | ||||||||||||||||||||||||||||||||||||||
Issued | Issued | Outstanding | Exercisable | Price $ | Life (Years) | Date | Exercised | Issued | Outstanding | Exercisable | Price $ | Life (Years) | Date | Exercised | ||||||||||||||||||||||||||||||||||||||
11/28/2018 | 142,857,143 | * | 142,857,143 | * | 0.00035 | * | 2.16 | 11/28/2021 | $ | 50,000 | 11/28/2018 | 142,857,143 | * | 142,857,143 | * | 0.00035 | * | 1.41 | 11/28/2021 | $ | 50,000 | |||||||||||||||||||||||||||||||
12/3/2018 | 500,000 | 500,000 | 0.10 | 4.18 | 12/3/2023 | 50,000 | 12/3/2018 | 500,000 | 500,000 | 0.10 | 3.43 | 12/3/2023 | 50,000 | |||||||||||||||||||||||||||||||||||||||
2/14/2019 | 159,397,690 | * | 159,397,690 | * | 0.00035 | * | 4.38 | 2/14/2024 | 55,789 | 2/14/2019 | 143,618,843 | * | 143,618,843 | * | 0.00035 | * | 3.63 | 2/14/2024 | 50,267 | |||||||||||||||||||||||||||||||||
3/13/2019 | 107,142,857 | * | 107,142,857 | * | 0.00035 | * | 4.45 | 3/13/2024 | 37,500 | 3/13/2019 | 107,142,857 | * | 107,142,857 | * | 0.00035 | * | 3.70 | 3/13/2024 | 37,500 | |||||||||||||||||||||||||||||||||
9/11/2019 | 10,416,667 | * | 10,416,667 | * | 0.00288 | * | 4.95 | 9/11/2024 | 30,000 | 9/11/2019 | 53,571,429 | * | 53,571,429 | * | 0.00056 | * | 4.20 | 9/11/2024 | 30,000 | |||||||||||||||||||||||||||||||||
420,314,357 | 420,314,357 | $ | 223,289 | 447,690,272 | 447,690,272 | $ | 217,767 |
*The number of warrants outstanding and exercisable is variable based on adjustments to the exercise price of the warrant due to dilutive issuances.
The intrinsic value of warrants outstanding at SeptemberJune 30, 20192020 was $2,513,523.$15,796,926.
18 |
NOTE 11 –10. RELATED PARTY TRANSACTIONS
The Company has agreements with related parties for consulting services, accrued rent, accrued interest, notes payable and stock options. See Notes to Financial Statements numbers 6, 9,5, 7, 8 and 1211 for more details.
NOTE 12 –11. COMMITMENTS AND CONTINGENCIES
Consulting Agreements –
On January 1, 2018, the Company entered into a contract for consulting services with a Florida-based agricultural advocacy group. The agreement included a $5,000 initial engagement fee and $1,250 per month through January 1, 2019.
On March 15, 2018, the Company entered into a 12-month service agreement, expiring on March 15, 2019, for strategic planning, financing, capital formation, up listing and expansion of the Company’s shareholder base. The consulting company received a $5,000 non-refundable initial fee and the agreement included $2,500 per month through March 14, 2019 and received 2,000,000 shares of the Company’s restricted common stock.
On July 2, 2018, the Company entered into a 6-month service contract for investor relations services through January 2, 2019. The agreement called for 1,000,000 restricted shares of common stock to be issued to Life Sciences Journeys, Inc. The shares were issued on October 9, 2018. The Company placed a stop transfer order on the shares, discussed the benefits of services provided by Life Sciences Journeys and rescinded its stop transfer, allowing the contract to continue through its end.
On November 28, 2018, the Company re-engaged the services of a prior contractor for finance assistance related to obtaining a line of credit based on the Company’s equipment and/or contracts, through November 27, 2019. If the Company obtains a line of credit based on the Company’s equipment and/or contracts the Company will incur a fee of 4% of financings from $1,000,000 to $5,000,000, 3% of financings from $5,000,001 to $10,000,000, and 0.25% of financings over $10,000,000.
On December 3, 2018, the Company engaged a consultant for services related to business development in the healthcare market. The contract is in place through June 3, 2019 and the consultant received 100,000 restricted shares of the Company’s common stock for the services.
On August 1, 2019, the Company entered into a consulting agreement for investor relations services through September 30, 2019. Pursuant to the agreement the Company issued 1,000,000 restricted shares of common stock with a fair value of $15,000. As described in Note 13, on October 1, 2019 the Company entered into a second agreement with the consultant for the provision of investor relations services through March 31, 2020. The agreement called for a cash payment of $25,000 and 12,000,000 0restrictedrestricted shares of common stock to be issued to the consultant. TheAs of December 31, 2019, the Company issuedrecorded the 12,000,000 commonfair value of the shares of $61,200 for the consulting expense related to the consultantconsulting services provided. The expense was recognized over the service period, ending on March 16,31, 2020.
In addition to contracts for service, the Company also regularly uses the professional services of securities attorneys, a US EPA specialist, professional accountants and other public-company specialists.
Employment Agreements –
On September 1, 2017, the Company entered into a five-year employment agreement with Marion E. Paris, Jr. to be the Vice President for Business Development and Director of Intellectual Properties for Paradigm. Under the terms of the employment agreement, Mr. Paris is to be paid an annual base salary of $90,000 and other benefits, including four weeks paid vacation.
On January 1, 2019, the Company entered into a four-year employment agreement with F. Jody Read in his role as Chief Executive Officer. The terms of the contract call for an annual salary of $90,000 for the first year, effective March 1, 2019 and increasing to $120,000 once the Company’s revenue exceeds monthly expenses, then incrementally over time and with certain operation results, up to $200,000/year. The salary may be paid, at the employee’s discretion, either in cash or in common stock. A $1,000 per month allowance will be granted to the executive for housing near the Company’s South Carolina facility. The employment agreement awards the CEO 1,500,000 restricted shares of the Company’s restricted stock, which shall vest in the following manner: 375,000 shares on March 1, 2019, 375,000 shares on March 1, 2020, 375,000 shares on March 1, 2021 and the final 375,000 shares on March 1, 2022. On August 12, 2019, the Company amended the Employment Contract with F. Jody Read, CEO, whereby 500,000 Preferred Seriespreferred series B sharesstock were issued to Read. All other terms of the January 1, 2019 employment agreement remain in effect. On October 4, 2019, F. Jody Read resigned from the position of CEO and moved back into the role of COO.
On August 12, 2019, the Company entered into a four-year employment agreement with Gary J. Grieco, its President, whereby Mr. Grieco will continue to receive $24,000 per year for services to Company as its President and whereby 500,000 Preferred Seriespreferred series B sharesstock were issued to Grieco. The employment agreement begins on August 12, 2019, is automatically renewable for two years unless terminated earlier as per the terms of the agreement. Gary Grieco entered the role of CEO of the Company upon F. Jody Read’s resignation on October 4, 2019 and entered into a four-year employment agreement with the Company on January 1, 2020. Pursuant to the agreement Mr. Grieco will receive $48,000 per year commencing April 1, 2020 and receive 15,000,000 shares of the Company’s common stock for services to the Company as its President and CEO. In addition, once monthly revenue exceeds monthly expenses the salary will be increased and Mr. Grieco will be issued an additional 10,000,000 shares of the Company’s common stock. The employment agreement begins on January 1, 2020 and is automatically renewable for two years unless terminated earlier as per the terms of the agreement.
Other Obligations and Commitments–
On April 12, 2018,March 20, 2020, the Company entered into a Purchase agreement with a third party to purchase its exclusive rights to US EPA Product Registration No. 83241-1 for a fixed fee. The Company paid $5,000 on execution of the agreement and has continued to make periodic installment payments for the purchase of this Registration.
On March 27, 2019, the Company entered into a letter of intent (the “LOI”) with Magnolia Columbia Limited (“Magnolia”), a Canadian company traded on the TSXV under the symbol “MCO”.consulting agreement. Pursuant to the terms ofagreement the LOI, the parties agreed to negotiate and enter into a definitive agreement on or before April 27, 2019. As of April 28, 2019, we had not entered into a definitive agreement with Magnolia or agreed to any extensions of the LOI, therefore the LOI terminated.
On July 12, 2019, the Company entered into a binding Letter of Intent (“LOI”) to negotiate in good faith a transaction with 2705908 Ontario Inc.consultant will provide investor relations services for a definitive loan and option agreement to includeperiod of six months. The Company had issued the acquisitionconsultant 150,000 shares of at least 51% controlcommon stock with a fair value of the Company, in addition to the other terms and commitments. On July 30, 2019, the LOI due diligence and negotiations were slated to terminate, but both parties agreed to extend the term of the LOI through August 19, 2019. On August 19, 2019 the Company and 2705908 Ontario Inc. allowed the LOI to expire.$5,880 for services received.
NOTE 13.12. SUBSEQUENT EVENTS
On October 1, 2019,July 6, 2020, the Company entered into a consulting agreement. Pursuant to the agreement forthe consultant will provide investor relations services through March 31, 2020. The agreement called for a cash paymentperiod of $25,000one year in consideration for $3,000 per month and 12,000,000 restricted shares of common stock to be issued to the consultant. The Company issued the 12,000,000 common shares to the consultant on March 16, 2020.
On October 3, 2019, the Company entered into a promissory note with a non-related party for $50,000. The note is due on April 3, 2020 and bears interest at a rate of 12%. On October 9, 2020, the Company had repaid $12,599 of the loan. On March 8, 2020, the Company agreed to settle the remaining $39,054 of principal and accrued interest outstanding on the note through the issuance of 39,000 Shares of Series A Preferred Stock and the payment of $54.
On October 4, 2019, F. Jody Read stepped down from his position as Chief Executive Officer1,000,000 common shares of the Registrant due to increased workload in the Registrant’s wholly-owned operating subsidiary. Mr. Read remains as a director and Chief Operating Officer of the Registrant. Concurrent with Mr. Read stepping down from the position of Chief Executive Officer, the Registrant appointed Mr. Gary J. Grieco to act as President and Chief Executive Officer of the Registrant.
On October 7, 2019, the Company entered into a convertible promissory with a non-related party for $53,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $50,000. The note is due on October 7, 2020 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date.Company.
On October 8, 2019, the Company issued 6,399,302 shares of common stock upon the cashless exercise of 6,424,286 warrants.
On October 22, 2019, the Company issued 6,498,105 shares of common stock upon the cashless exercise of 6,528,571 warrants.
On October 29, 2019, the Company entered into a convertible promissory with a non-related party for $50,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $47,000. The note is due on October 29, 2020 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date.
On November 12, 2019, the Company entered into a promissory note with a non-related party for $17,500. The note is due November 12, 2020, is unsecured and bears an interest rate of 8% per annum.
On December 12, 2019, the Company entered into a loan with a non-related party for $12,250 of which $2,250 was the loan fee or original issue discount resulting in cash proceeds to the Company of $10,000. The note is to be repaid through 12 monthly payments ending on May 12, 2020.
On December 19, 2019, the Company sold future receivables of $83,400 in consideration for $58,200. The advance is to be repaid through $3,208 weekly payments. In connection with the advance, the Company granted the lender a security interest in all accounts, equipment, intangibles and inventory.
On December 20, 2019, the Company sold future receivables of $148,362 in consideration for $100,000. The advance is to be repaid through $2,958 weekly payments.
On December 31, 2019, the Company sold future receivables of $87,540 in consideration for $60,000. The advance is to be repaid through $3,651 weekly payments. The Company paid $3,625 of finance fees and includes default fees of up to $2,500 and a default rate of interest of 9%. In connection with the advance, the Company granted the lender a security interest in all accounts, equipment, intangibles and inventory. As of the date of filing the Company had only received advances of $15,575.
On January 1, 2020, the Company entered into a four-year employment agreement with Gary, J. Grieco, its President and CEO, whereby Mr. Grieco will receive $48,000 per year commencing April 1, 2020, and receive 15,000,000 shares of the Company’s common stock for services to the Company as its President and CEO. In addition, once monthly revenue exceeds monthly expenses the salary will be increased and Mr. Grieco will be issued an additional 10,000,000 shares of the Company’s common stock. The employment agreement begins on January 1, 2020, and is automatically renewable for two years unless terminated earlier as per the terms of the agreement.
On February 11, 2020, the Company received a $1,500 advance from the President of the Company and a $2,000 advance from a Director of the Company. The advances are unsecured, non-interest bearing and due on demand.
On February 18, 2020, the Company sold future receivables of $32,978 in consideration for $22,000. The advance is to be repaid through daily payments of $660. The Company paid $794 of finance fees and the agreement includes default fees of up to $15,000. In connection with the advance, the Company granted the lender a security interest in all accounts, equipment, intangibles and inventory.
On February 18, 2020, the Company received an additional tranche of $8,888 pursuant to the convertible note described in Note 6(i). The additional tranche consisted of a $888 original issue discount resulting in cash proceeds to the Company of $8,000.
On February 28,July 7, 2020, the Company entered into a promissory note with a non-related party for $20,000.$150,000. The note is due May 28,October 5, 2020, is unsecured and bears an interest rate of 8%10% per annum.
On March 2,July 8, 2020, the Company entered into a convertible promissory with a non-related party for $45,000 of which $3,000 was an original issue discount resulting in cash proceedsconsulting agreement. Pursuant to the Companyagreement the consultant will provide operational business development and introductory services for a period of $42,000. The note is due on March 2, 2021 and bears interest onfive years in consideration for the unpaid principal balance at a rateissuance of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note’s term) and any part1,000,000 common shares of the note which is notCompany and a 5% commission, paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender atin shares, for any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date.investments brokered.
On March 5, 2020, the Company received an additional tranche of $30,000 pursuant to the convertible note described in Note 6(i). The additional tranche consisted of a $3,000 original issue discount resulting in cash proceeds to the Company of $27,000.
On March 9, 2020, the Company entered into an agreement to settle the $175,814 convertible note payable described in Note 6(v) and $5,279 of interest accrued on the note through the issuance of 181,000 Shares of Series A Preferred Stock and the payment of $93.
As of April 6, 2020, the Company sold 270,000 Series C Convertible Preferred Shares for $270,000.
From October 1, 2019 through March 25, 2020, the Company issued a total of 265,453,351 shares of common stock upon the conversion of $286,043 of principal, $20,306 of interest and of fees pursuant to the convertible notes payable described in Note 6.
On April 1,July 15, 2020, the Company entered into a settlement agreement to settle the $60,000 and $26,000 convertible notes describedpromissory note with a non-related party for $119,200. The note is repayable in Notes 6(p) and (u). The Company agreed to pay $100,000 to settle the principal and accrued interest and penalties relating to the two convertible notes.$7,450 weekly payments.
On April 1,August 11, 2020, 75,000 shares of preferred series C stock was converted into common stock (1 share converts into 100 shares of common stock), resulting in the issuance of 7,500,000 shares of common stock.
On August 18, 2020, the Company issued 4,623,093settled the $100,000 note described in Note 5(i). Pursuant to the settlement agreement, the Company will issue the lender 5,281,088 shares of common stock uponand pay the cashless exerciselender $140,000 in four monthly installments of 4,640,371 warrants.$35,000 commencing August 19, 2020 and ending November 19, 2020.
On August 21, 2020, the Company sold future receivables with a non-related party for $50,000. The advance is repayable through daily payments of $1,071 totaling $74,950.
FORWARD-LOOKING STATEMENTS
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures we make in this Quarterly Report on Form 10-Q, future Quarterly Reports on Form 10-Q, our Annual Report on Form 10-K and Current Reports on Form 8-K.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:
• | our ability to efficiently manage and repay our debt obligations; |
• | our inability to raise additional financing for working capital; |
• | our ability to generate sufficient revenue in our targeted markets to support operations; |
• | significant dilution resulting from our financing activities; |
• | actions and initiatives taken by both current and potential competitors; |
• | supply chain disruptions for components used in our products; |
• | manufacturers inability to deliver components or products on time; |
• | our ability to diversify our operations; |
• | the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain; |
• | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; |
• | changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate; |
• | deterioration in general or global economic, market and political conditions; |
• | inability to efficiently manage our operations; |
• | inability to achieve future operating results; |
• | the unavailability of funds for capital expenditures; |
• | our ability to recruit, hire and retain key employees; |
• | the global impact of COVID-19 on the United States economy and out operations; |
• | the inability of management to effectively implement our strategies and business plans; and |
• | the other risks and uncertainties detailed in this report. |
In this form 10-Q references to “PCT LTD”, “the Company”, “we,” “us,” “our” and similar terms refer to PCT LTD (formerly Bingham Canyon Corporation) and its wholly owned operating subsidiary, Paradigm Convergence Technologies Corporation (“PCT Corp.” or “Paradigm”Paradigm”).
COVID-19
The current and potential effects of coronavirus may impact our business, results of operations and financial condition.
Actual or threatened epidemics, pandemics, outbreaks, or other public health crises could materially and adversely impact or disrupt our operations, adversely affect the local economies where we operate and negatively impact our customers’ spending in the impacted regions or depending upon the severity, globally, which could materially and adversely impact our business, results of operations and financial condition. For example, since December 2019, a strain of novel coronavirus (causing “COVD-19”) surfaced in China and has spread into the United States, Europe and most other countries of the world, resulting in certain supply chain disruptions, volatilities in the stock market, lower oil and other commodity prices due to diminished demand, massive unemployment, and lockdown on international travels, all of which has had an adverse impact on the global economy. There is significant uncertainty around the breadth and duration of the business disruptions related to COVID-19, as well as its impact on the U.S. economy. Moreover, an epidemic, pandemic, outbreak or other public health crisis, such as COVID-19, could adversely affect our ability to adequately staff and manage our business. The extent to which COVID-19 impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain, rapidly changing and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions take to contain it or treat its impact.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Overview
On August 31, 2016, PCT LTD entered into a Securities Exchange Agreement (the “Exchange Agreement”) with Paradigm Convergence Technologies Corporation, a Nevada corporation (“Paradigm”). Pursuant to the terms of the Exchange Agreement, Paradigm became the wholly-owned subsidiary of PCT LTD after the exchange transaction. PCT LTD is a holding company, which through Paradigm is engaged in the business of marketing new products and technologies through licensing and joint ventures.
PCT LTD had not recorded revenues for the two fiscal years prior to its acquisition of Paradigm and was dependent upon financing to continue basic operations. Paradigm has recorded revenue since it initiated operations in 2012; however, those revenues have not been sufficient to finance operations. The Company recorded a net loss of $10,214,462$10,287,957 for the nine monthssix-months ended SeptemberJune 30, 20192020 and accumulated losses of $20,141,465$37,063,524 from inception through SeptemberJune 30, 2019.2020.
PCT LTD remains dependent upon additional financing to continue operations. The Company intends to raise additional financing through private placements of its common stock and note payable issuances. We expect that we would issue such stock pursuant to exemptions to the registration requirements provided by federal and state securities laws. The purchasers and manner of issuance will be determined according to our financial needs, as discussed below, and the available exemptions to the registration requirements of the Securities Act of 1933. We also note that if we issue more shares of our common stock, then our stockholders may experience dilution in the value per share of their common stock.
The expected costs for the next twelve months include:
Management projects these costs to total approximately $2,500,000.$2,700,000. To minimize these costs, the Company intends to maintain its practice of controlling operating overheads with efficient facilities commitments, generally below market salaries and consulting fees, and rigorous prioritization of expenditure requirements. Based on its understanding of the commercial readiness of its products and technologies, the capabilities of its personnel (current and being hired), established business relationships and the general market conditions, management believes that the Company expects to be close to profitability covering its fixed operating expenses (“burn rate”)by the end of the fourththird quarter of 2020.
Liquidity and Capital Resources
A critical component of our operating plan impacting our continued existence is the ability to obtain additional capital through additional equity and/or debt financing. We do not anticipate generating sufficient positive internal operating cash flow until such time as we can deliver our products to market and generate substantial revenues, which may take the next full year to fully realize, if ever. In the event we cannot obtain the necessary capital to pursue our strategic plan, we may have to significantly curtail our operations. This would materially impact our ability to continue operations.
SUMMARY OF BALANCE SHEET | September 30, 2019 | December 31, 2018 | ||||||
Cash and cash equivalents | $ | 6,669 | $ | 4,893 | ||||
Total current assets | 162,434 | 281,742 | ||||||
Total assets | 4,404,809 | 4,846,988 | ||||||
Total liabilities | 9,097,175 | 3,141,401 | ||||||
Accumulated deficit | (20,141,465 | ) | (9,927,003 | ) | ||||
Total stockholders’ equity (deficit) | $ | (4,907,764 | ) | $ | 1,705,587 |
SUMMARY OF BALANCE SHEET | June 30, 2020 | December 31, 2019 | ||||||
Cash and cash equivalents | $ | 29,260 | $ | 67,613 | ||||
Total current assets | 416,893 | 224,738 | ||||||
Total assets | 4,372,919 | 4,374,775 | ||||||
Total liabilities | 22,092,959 | 14,290,486 | ||||||
Accumulated deficit | (37,063,524 | ) | (26,505,567 | ) | ||||
Total stockholders’ deficit | $ | (18,422,685 | ) | $ | (10,134,356 | ) |
At SeptemberJune 30, 2019,2020, the Company recorded a net loss for the nine month period of $10,214,462$10,287,957 and had a working capital deficit of $8,934,741. We$21,676,066. While we have recently recorded an increase in the amount of revenues from operations, but these have been insufficientsince inception and we had not established an ongoing source of revenue sufficient to cover our operating costs. During the nine monthssix-months ended June 30, 2020 and 2019 and 2018 we have primarily relied upon advances and loans from stockholders and third parties to fund our operations. The Company has relied on raising debt and equity capital in order to fund its ongoing day-to-day operations and its corporate overhead. We had $6,669$29,260 in cash at SeptemberJune 30, 2019,2020, compared to $4,893$67,613 in cash at December 31, 2018.2019. We had total liabilities of $9,097,175$22,092,959 at SeptemberJune 30, 20192020 compared to $3,141,401$14,290,486 at December 31, 2018.2019.
Our current cash flow is not sufficient to meet our monthly expenses of approximately $210,000$250,000 and to fund future research and development.development adequately. We intend to rely on additional debt financing, loans from existing stockholders and private placements of our securitiescommon stock for additional funding in addition to the increasing our recognized revenue from the leasing and/or sale of products; however, there is no assurance that additional funding will be available. We do not have material commitments for future capital expenditures. However, we cannot assure you that we will be able to obtain short-term financing, or that sources of such financing, if any, will continue to be available, and if available, that they will be on favorable terms.
During the next 12 months we anticipate incurring additional costs related to the filing of Exchange Act reports. We believe we will be able to meet these costs through funds provided by management, significant stockholders and/or third parties. We may also rely on the issuance of our securitiescommon stock in lieu of cash to convert debt or pay for expenses.
Commitments and Obligations
At SeptemberJune 30, 2019,2020 the Company recorded notes payable totaling approximately $2,447,026 (net$2,215,085 (related, non-related and convertible, net of debt discount) compared to notes payable totaling $1,907,011 (net$2,482,743 (related, non-related and convertible, net of debt discount) at December 31, 2018.2019. These notes payable represent cash advances received and expenses paid from third parties and related parties. All of the notes payable carry effective interest from 0% to 25%585% and are due ranging from on demand to February 14, 2022.November 8, 2021.
The Company headquarters and operations areis located in Little River, South Carolina. The South Carolina lease amountspayment was to $4,800 per month expires onthrough November 30, 20192019. The building was sold and includes an option to renew for two additional three-year periods.the Company is on a month-to-month lease with the new Landlord, while negotiating a new annual lease, which will likely include monthly lease payments of $7,500/month.
Results of Operations
Three Months Ended SeptemberJune 30, 20192020
SUMMARY OF OPERATIONS | Three months period ended September 30, | Three-month period ended June 30, | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
2019 | 2018 | Increase/(Decrease) | 2020 | 2019 | ||||||||||||||||
Revenues | $ | 220,033 | $ | 41,124 | $ | 178,909 | $ | 881,172 | $ | 118,862 | ||||||||||
Total operating expenses | $ | 604,847 | $ | 950,454 | $ | (345,607 | ) | 1,094,245 | 527,397 | |||||||||||
Total other expenses | $ | 5,379,178 | $ | 30,765 | $ | 5,348,413 | ||||||||||||||
Total other income (expense) | 206,764 | (3,121,612 | ) | |||||||||||||||||
Net loss | $ | 5,763,992 | $ | 940,095 | $ | 4,823,897 | (6,309 | ) | (3,530,147 | ) | ||||||||||
Preferred series C stock deemed dividends | — | — | ||||||||||||||||||
Net loss attributable to common stockholders’ | (6,309 | ) | (3,530,147 | ) | ||||||||||||||||
Basic and diluted loss per share | $ | (0.03 | ) | $ | (0.02 | ) | $ | 0.01 | $ | (0.00 | ) | $ | (0.07 | ) |
Revenues increased to $220,033$881,172, for the three monthsthree-months ended SeptemberJune 30, 2020 (the “2020 second quarter”) compared to $118,862 for the three-months ended June 30, 2019 (the “2019 third quarter”) compared to $41,124 for the three months ended September 30, 2018 (the “2018 thirdsecond quarter”). The revenue increase for the period was due to the increased volume of fluids sold, as a result of the sale of aCompany adapting to the COVID-19 pandemic and heightened need for an effective US EPA registration (duplicate), licensing revenue from EPA sub registrations, equipment sales andEPA-registered disinfectant, as well as the additional revenue from recurring leased-equipment income.
Total operating expenses decreasedincreased to $604,847$1,094,245 during the 2020 second quarter compared to $527,397 during the 2019 third quarter compared to $950,454second quarter. The increase during the 2018 third quarter. The decrease during the thirdsecond quarter of 20192020 was primarily due to a decreasean increase in stock-based compensation.general and administrative expenses and an increase in cost of product, licensing, and equipment leases associated with increased revenue.
General and administrative expenses decreasedincreased to $468,897$592,042 for the 2019 third2020 second quarter compared to $827,168$415,339 during the 2018 third2019 second quarter. The decreaseincrease during the thirdsecond quarter of 20192020 was primarily due to a decrease in stock-based compensation expense during the third quarter of 2019 as comparedhiring new employees and expenses related to the third quarter of 2018.legal and accounting work.
Depreciation and amortization expenses increaseddecreased slightly to $84,467$81,348 during the 2020 second quarter compared to $84,189 during the 2019 third quarter compared to $84,070 during the 2018 thirdsecond quarter. Depreciation and amortization werewas comparable between the two periods.
Total other income was $206,764 for the 2020 second quarter compared to other expense of $3,121,612 during the 2019 second quarter. The overall change was a result of a gain on settlement of debt and a decrease in the loss on change in fair value of derivatives during the second quarter of 2020.
As a result of the changes described above, net loss decreased to $6,309 during the 2020 second quarter compared to $3,530,147 during the 2019 second quarter.
Six Months Ended June 30, 2020
SUMMARY OF OPERATIONS | Six months period ended June 30, | |||||||
(Unaudited) | ||||||||
2020 | 2019 | |||||||
Revenues | $ | 1,153,354 | $ | 314,819 | ||||
Total operating expense | $ | 1,874,902 | $ | 1,351,927 | ||||
Total other expense | $ | 9,566,409 | $ | 3,413,362 | ||||
Net loss | $ | (10,287,957 | ) | $ | (4,450,470 | ) | ||
Preferred series C stock deemed dividends | (270,000 | ) | — | |||||
Net loss attributable to common stockholders’ | (10,557,957 | ) | (4,450,470 | ) | ||||
Basic and diluted loss per share | $ | (0.02 | ) | $ | (0.09 | ) |
Revenues increased to $1,153,354 for the six months ended June 30, 2020 compared to $314,819 for the six months ended June 30, 2019. The revenue increase for the period was due to the increased volume of fluids sold as a result of the Company adapting to the COVID-19 pandemic and heightened need for an effective US EPA-registered disinfectant, as well as the additional revenue from recurring leased-equipment income.
Total operating expenses increased to $1,874,902 during the six months ended June 30, 2020 compared to $1,351,927 during the six months ended June 30, 2019. The increase during the period was primarily due to an increase in cost of product, licensing, and equipment leases associated with increased revenue.
General and administrative expenses increased slightly to $1,140,828 for the six months ended June 30, 2020 compared to $1,082,303 during the six months ended June 30, 2019. General and administrative was comparable between the two periods.
Depreciation and amortization expenses decreased slightly to $164,369 during the six months ended June 30, 20120compared to $169,101 during the six months ended June 30, 2019. Depreciation and amortization was comparable between the two periods.
Total other expenses increased to $5,379,178$9,566,409 for the 2019 third quartersix months ended June 30, 2020 compared to $30,765$3,413,362 during the 2018 third quarter.six months ended June 30, 2019. The overall increase was a result of an increase in interest expense, and loss on change in fair value of derivatives. This was offset by a gain on the settlement of debt during the six months ended June 30, 2020.
As a result of the changes described above, net loss from operations after income taxes increased to $5,763,992$10,287,957 during the 2019 third quartersix months ended June 30, 2020 compared to $940,095$4,450,470 during the 2018 third quarter.six months ended June 30, 2019.
Nine Months Ended September 30, 2019
SUMMARY OF OPERATIONS | Nine months period ended September 30, | |||||||||||
(Unaudited) | ||||||||||||
2019 | 2018 | Increase/(Decrease) | ||||||||||
Revenues | $ | 534,852 | $ | 153,337 | $ | 381,515 | ||||||
Total operating expenses | $ | 1,956,774 | $ | 2,196,580 | $ | (239,806 | ) | |||||
Total other expenses | $ | 8,792,540 | $ | 96,213 | $ | 8,696,327 | ||||||
Net loss | $ | 10,214,462 | $ | 2,139,456 | $ | 8,075,006 | ||||||
Basic and diluted loss per share | $ | (0.10 | ) | $ | (0.05 | ) | $ | 0.05 |
Revenues increased to $534,852 for the nine months ended September 30, 2019 compared to $153,337 for the nine months ended September 30, 2018. The revenue increase for the period was due to the increased volume of fluids sold, the sale of a duplicate US EPA Registration, licensing revenue from EPA sub registrations, equipment sales and the additional revenue from recurring leased-equipment income.
Total operating expenses decreased to $1,956,774 during the nine months ended September 30, 2019 compared to $2,196,580 during the nine months ended September 30, 2018. The decrease during the period was primarily due to a decrease in stock-based compensation. This was offset by an increase in cost of sales as a result of an increase in revenues.
General and administrative expenses decreased to $1,554,992 for the nine months ended September 30, 2019 compared to $1,885,962 during the nine months ended September 30, 2018. The increase during the period was primarily due to a decrease in stock-based compensation expense.
Depreciation and amortization expenses increased slightly to $253,568 during the nine months ended September 30, 2019 compared to $250,928 during the nine months ended September 30, 2018. Depreciation and amortization was comparable between the two periods.
Total other expenses increased to $8,792,540 for nine months ended September 30, 2019 compared to $96,213 during the nine months ended September 30, 2018. The overall increase was a result of an increase in interest expense, and loss on change in fair value of derivatives and settlement of debt. This was offset by a gain on the sale of assets and a gain on change in fair value of preferred series A stock liabilities.
As a result of the changes described above, net loss from operations after income taxes increased to $10,214,462 during the nine months ended September 30, 2019 compared to $2,139,456 during the nine months ended September 30, 2018.
Off-Balance Sheet Arrangements
We have not entered into any 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 and would be considered material to investors.
Critical Accounting Policies
DerivativeOur financial statements and Preferred Series A Stock Liabilities
The Company accounts for derivative instrumentsaccompanying notes have been prepared in accordance with ASC Topic 815, “DerivativesUnited States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and Hedging” and all derivative instruments are reflected as either assets or liabilities at fair value inassumptions that affect the balance sheet. The Company uses estimatesreported amounts of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company’s policy in estimating fair values is to first look at observable market prices for identical assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in active markets, where available. When thesethe notes to our financial statements. In general, management’s estimates are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads, relying first on observable data from active markets. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments at fair value as discussed above. As of September 30, 2019,historical experience, on information from third party professionals, and December 31, 2018, the Company had a $5,538,198 and $322,976 derivative liability, respectively and preferred series A stock liabilities of $0 and $144,352, respectively.
Fair value estimateson various other assumptions that are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. See Note 7 for additional information.
Accounts Receivable
Trade accounts receivable are recorded at the time product is shipped or services are provided including any shipping and handling fees. The Company provided allowances for uncollectible accounts receivable equal to the estimated collection losses that will be incurred in collection of all receivables. Accounts receivable is periodically evaluated for collectability bases on past credit history with customers and their current financial condition. The Company’s management determines which accounts are past due and if deemed uncollectible, the Company charges off the receivable in the period the determination is made. Based on management’s evaluation, the Company provided an allowance for doubtful accounts of $0 at September 30, 2019 and December 31, 2018, respectively.
Property and Equipment
Property and equipment are stated at purchased cost and depreciated utilizing a straight-line method over estimated useful lives ranging from 3 to 7 years after the asset has been placed in service. Upon selling equipment that had been under a lease agreement, the company discontinues the depreciation on that piece of equipment, as it transfers ownership to another entity. Additions and major improvements that extend the useful lives of property and equipment are capitalized. Maintenance and repairs are charged to operations as incurred. Upon trade-in, sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any related gains or losses are recorded in the results of operations.
Impairment of Long-lived Assets
The carrying values of the Company’s long-lived assets are reviewed for impairment annually and whenever events or changes in circumstances indicate that they may not be recoverable. When projections indicate that the carrying value of the long-lived asset is not recoverable, the carrying value is reduced by the estimated excess of the carrying value over the fair value. Under similar analysis no impairment was recorded during the nine months ended September 30, 2019.
Intangible Assets
Costs to obtain or develop patents are capitalized and amortized over the remaining life of the patents, and technology rights are amortized over their estimated useful lives. The Company currently has the right to several patents and proprietary technology. Patents and technology are amortized from the date the Company acquires or is awarded the patent or technology right, over their estimated useful lives, which range from 1 to 15 years. An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected discounted net future cash flows. The recorded impairment expense was nil for the nine months ended September 30, 2019.
Leases
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) ("ASC 842"), which requires lessees to recognize right-of-use ("ROU") assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. We adopted ASC 842 on January 1, 2019 using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach did not require any transition accounting for leases that expired before the earliest comparative period presented. The adoption of this standard resulted in the recording of ROU assets and lease liabilities for our lease agreements with original terms of greater than one year. Upon implementation, the Company recognized an initial operating lease right-of-use asset of $43,330 and operating lease liability of $43,330. Due to the simplistic nature of the Company's leases, no retained earnings adjustment was required. See Note 5 for further details.
Revenue Recognition
On May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customer (Topic 606). The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principal is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflect the consideration to which the entity expectsbelieved to be entitled in exchange forreasonable under the facts and circumstances. Actual results could differ from those goods or services.
The Company has the following three revenue streams:
1)product sales (equipment and/or fluid solutions);
2)licensing (contract-based use of the Company’s US EPA Product Registration, returning revenue in licensing fees and/or royalties from minimum or actual fluid sales); and
3)equipment leases (under systems service agreements, usually 3-year contracts for the provision of the Company’s equipment and service of such, under contract to customers, with renewable terms).
The Company recognizes revenue from the sale of products when the performance obligation is satisfiedestimates made by transferring control of the product to a customer.management.
The Company recognizes revenue from the leasing of equipment as the entity provides the equipment and the customer simultaneously receives and consumes the benefits through the use of the equipment. This revenue generating activity would meet the criteria for a performance obligation satisfied over time. As a result, the Company recognizes revenue over time by using the output method, as the Company can measure progress of the performance obligation using the time elapsed under each obligation.
The Company’s licenses provide a right to use and create performance obligations satisfied at a point in time. The Company recognizes revenue from licenses when the performance obligation is satisfied through the transfer of the license. For licenses that include royalties the Company will recognize royalty revenue as the underlying sales or usages occur, as long as this approach does not result in the acceleration of revenue ahead of the entity’s performance.
The Company has disclosed disaggregated revenue via revenue stream on the face of the statement of operations. The Company did not have any contract assets or liabilities at September 30, 2019.
Recent Accounting Developments
The Company has reviewed all other FASB issued ASU accounting pronouncements and interpretations thereof that have effective dates during the period reported and in future periods. The Company has carefully considered the new pronouncements that alter the previous GAAP and do not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated to allow our management to make timely decisions regarding required disclosure. Gary J. Grieco,F. Jody Read, our Chief Executive Officer, who serves as our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. The disclosure controls and procedures ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rule and forms; and (ii) accumulated and communicated to our principal executive officer as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive officer concluded that as of SeptemberJune 30, 2019,2020, our disclosure controls and procedures were not effective.
Notwithstanding this finding of ineffective disclosure controls and procedures, we concluded that the consolidated financial statements included in this Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.
Changes in Internal Control Over Financial Reporting
During the quarter ended SeptemberJune 30, 2019,2020, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We may become involved in various routine legal proceedings incidental to our business. To our knowledge as of the date of this Report,report, other than described below, there are no material pending legal proceedings to which we are a party or to which any of our property is subject. We were named as a defendant in a case for $6,010 to be paid to a HVAC contractor, which we maintain is our landlord’s responsibility. This legal dispute has been fully satisfied.
Annihilare Litigation
On August 8, 2019, we received notice from Annihilare Inc.Medical Systems, Inc (“Annihilare”) that certain intellectual properties developed jointly between us and Annihilare arewere to be discontinued from use by us and our customers. We dispute the claims from Annihilare that the intellectual properties are exclusively Annihilare’s, and are
In May of 2020, we filed a complaint in discussionsthe United States District Court for the Western District of North Carolina (Charlotte Divisions – Civil Action No. 3:20-cv-00287), against Annihilare, Marion E. Paris, Jr. and Clay Parker Sipes. Seeking damages for:
1. Two counts of Patent infringement;
2. Trademark infringement;
3. Federal unfair competition, false designation of origin, and false and misleading description of representation;
4. Trademark dilution;
5. Federal cybersquatting;
6. Violation of Defend Trade Secrets Act;
7. Violation of North Carolina’ Trade Secrets Protection Act;
8. Violation of North Carolina and common law unfair competition
9. Breach of fiduciary duty;
10. Breach of duty of loyalty and faithless service;
11. Breach of consulting agreements;
12. Breach of employment agreements;
13. Tortious interference with Annihilare on this point. We have engaged counsel to assistprospective business relationships;
14. Unjust enrichment;
15. Conversion;
16. Civil conspiracy; and
17. Injunctive relief.
These claims arise from several consulting agreements and an acquisition agreements between us with this dispute and are evaluating potential litigation on this matter. However, asthe Defendants surrounding the purchase of Annihilyzer® Intellectual property by us and subsequent infringement of the date of this filing no litigation has been initiated.intellectual properties. The case is currently ongoing.
26 |
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item. However, we detailed significant business risks in Item 1A to our Form 10-K for the year ended December 31, 2018.2019.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
TFK Investments LLC Note Conversions
During the quarter ended September 30, 2019,On April 27, 2020, the Company issued TFK Investments LLC shares of its common stock upon partial conversion of the promissory note dated November 28, 2018 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining |
7/2/2019 | $5,100 plus $500 in fees | $0.0014 | 4,000,000 | $38,499 |
7/10/2019 | $3,874 plus $500 in fees | $0.0009 | 4,628,000 | $34,625 |
7/15/2019 | $3,360 plus $500 in fees | $0.0007 | 5,252,000 | $31,265 |
7/17/2019 | $2,990 plus $500 in fees | $0.0006 | 5,540,000 | $28,275 |
7/19/2019 | $3,494 plus $500 in fees | $0.0006 | 6,340,000 | $24,781 |
7/22/2019 | $3,501 plus $500 in fees | $0.0006 | 6,350,000 | $21,280 |
7/23/2019 | $4,483 plus $500 in fees | $0.0006 | 7,910,000 | $16,797 |
7/24/2019 | $4,962 plus $500 in fees | $0.0006 | 8,670,000 | $11,835 |
7/29/2019 | $4,893 plus $500 in fees | $0.0006 | 8,560,000 | $6,942 |
Total | $41,157 | 57,250,000 |
Power Up Lending Group Ltd Note Conversions
During the quarter ended September 30, 2019, the Company issued Power Up Lending Group LTD shares of its common stock upon partial conversion of the promissory note dated December 5, 2018 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | ||||||||||||||
7/1/2019 | $ | 8,100 | $ | 0.0031 | 2,612,903 | $ | 34,700 | * | ||||||||||
7/5/2019 | $ | 10,400 | $ | 0.0026 | 4,000,000 | $ | 24,300 | * | ||||||||||
7/8/2019 | $ | 10,000 | $ | 0.0025 | 4,000,000 | $ | 14,300 | * | ||||||||||
Total | $ | 28,500 | 10,612,903 |
* Includes default amount
Crown Bridge Partners, LLC Note Conversions
During the quarter ended September 30, 2019, the Company issued Crown Bridge Partners, LLC shares of its common stock upon partial conversion of the promissory note dated November 28, 2018 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | |||||||||||||
7/8/2019 | $1,470 | $ | 0.0004 | 4,200,000 | $ | 34,653 | |||||||||||
7/9/2019 | $1,610 | $ | 0.0004 | 4,600,000 | $ | 33,043 | |||||||||||
7/16/2019 | $1,820 | $ | 0.0004 | 5,200,000 | $ | 31,223 | |||||||||||
7/17/2019 | $1,942 | $ | 0.0004 | 5,550,000 | $ | 29,281 | |||||||||||
7/19/2019 | $2,226 | $ | 0.0004 | 6,360,000 | $ | 27,055 | |||||||||||
7/22/2019 | $2,415 | $ | 0.0004 | 6,900,000 | $ | 24,640 | |||||||||||
7/23/2019 | $2,660 | $ | 0.0004 | 7,600,000 | $ | 21,980 | |||||||||||
7/24/2019 | $4,617 plus $500 in fees | $ | 0.0006 | 8,600,000 | $ | 17,363 | |||||||||||
7/29/2019 | $4,617 plus $500 in fees | $ | 0.0006 | 8,600,000 | $ | 12,746 | |||||||||||
8/1/2019 | $4,968 plus $500 in fees | $ | 0.0006 | 9,189,631 | $ | 7,778 | |||||||||||
Total | $29,845 | 66,799,631 |
GS Capital Partners, LLC Note Conversions
During the quarter ended September 30, 2019, the Company issued GS Capital Partners, LLC shares of its common stock upon partial conversion of the promissory note dated January 16, 2019 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | ||||||||||||
7/19/2019 | $4,508 plus $179 of interest | $ | 0.0009 | 5,207,600 | $ | 95,492 |
JSJ Investments Inc. Note Conversions
During the quarter ended September 30, 2019, the Company issued JSJ Investments Inc. shares of its common stock upon partial conversion of the promissory note dated January 22, 2019 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | ||||||||||||||
7/29/2019 | $ | 8,640 | $ | 0.0012 | 7,500,000 | $ | 51,360 |
EMA Financial LLC Note Conversions
During the quarter ended September 30, 2019, the Company issued EMA Financial LLC shares of its common stock upon partial conversion of the promissory note dated January 22, 2019 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | ||||||||||||
8/1/2019 | $2,196 plus $953 of interest | $ | 0.0006 | 4,999,000 | $ | 72,804 |
Peak One Opportunity Fund Note Conversion and Warrant Exercise
During the quarter ended September 30, 2019, the Company issued Peak One Opportunity Fund, LP shares of its common stock upon partial conversion of the promissory note dated February 14, 2019 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | ||||||||||||||
8/9/2019 | $ | 5,000 | $ | 0.0009 | 5,555,555 | $ | 55,000 |
On August 16, 2019, the Company issued Peak One Opportunity Fund, LP 5,989,5001,000,000 shares of common stock upon the cashless exerciseto an employee of 6,000,000 warrants.
Adar Alef LLC Note Conversion
During the quarter ended September 30, 2019, the Company issued Adar Alef LLC sharesfor cash proceeds of its common stock upon partial conversion of the promissory note dated February 20, 2019 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | ||||||||||||||
9/19/2019 | $ | 13,000 | $ | 0.004256 | 3,054,511 | $ | 42,125 |
Peak One Investments LLC Warrant Exercise
On September 24, 2019, the Company issued Peak One Investments LLC 6,041,381 shares of common stock upon the cashless exercise of 6,057,1431 warrants.
Auctus Fund LLC
During the quarter ended September 30, 2019, the Company issued Auctus Fund LLC shares of its common stock upon partial conversion of the promissory note dated March 13, 2019 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | ||||||||||||
9/27/2019 | $27,804.21 plus $4,536.99 in interest and $750 in fees | $ | 0.00288 | 11,490,000 | $ | 47,195.79 |
Subsequent Issuances after Quarter-End
Peak One Opportunity Fund Note Conversions
Subsequent to the quarter ended September 30, 2019, the Company issued Peak One Opportunity Fund, LP shares of its common stock upon partial conversion of the promissory note dated February 14, 2019 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | ||||||||||||||
10/4/2019 | $ | 7,000 | $ | 0.0011 | 6,363,636 | $ | 48,000 | |||||||||||
10/22/2019 | $ | 7,000 | $ | 0.001 | 7,000,000 | $ | 41,000 | |||||||||||
11/6/2019 | $ | 11,000 | $ | 0.00085 | 12,941,176 | $ | 30,000 | |||||||||||
Total | $ | 25,000 | 37,849,867 |
Power Up Lending Group Ltd Note Conversions
Subsequent to the quarter ended September 30, 2019, the Company issued Power Up Lending Group LTD shares of its common stock upon partial conversion of the promissory note dated December 5, 2018 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | ||||||||||||
10/8/2019 | $21,450 plus $3,780 in interest | $ | 0.002 | 12,615,000 | $ | 0.00 |
Subsequent to the quarter ended September 30, 2019, the Company issued Power Up Lending Group LTD shares of its common stock upon partial conversion of the promissory note dated January 15, 2019 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | |||||||||||||
10/15/2019 | $23,500 | $ | 0.0018 | 13,055,556 | $ | 26,000 | * | ||||||||||
10/16/2019 | $22,500 | $ | 0.0015 | 15,000,000 | $ | 3,500 | * | ||||||||||
10/21/2019 | $3,500 plus $1,980 in interest | $ | 0.0012 | 4,566,667 | $ | 0.00 | |||||||||||
Total | $49,500 | 32,622,223 |
* Includes default amount
Subsequent to the quarter ended September 30, 2019, the Company issued Power Up Lending Group LTD shares of its common stock upon partial conversion of the promissory note dated February 21, 2019 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | ||||||||||||||
10/22/2019 | $ | 13,000 | $ | 0.0012 | 11,083,333 | $ | 66,200 | * | ||||||||||
10/23/2019 | $ | 18,900 | $ | 0.0012 | 15,750,000 | $ | 47,300 | * | ||||||||||
10/25/2019 | $ | 14,100 | $ | 0.0012 | 11,750,000 | $ | 33,200 | * | ||||||||||
10/28/2019 | $ | 18,900 | $ | 0.0012 | 15,750,000 | $ | 14,300 | |||||||||||
10/29/2019 | $14,300 plus $3,180 in interest | $ | 0.0012 | 14,566,667 | $ | 0.00 | ||||||||||||
Total | $ | 79,200 | * | 68,900,000 | ||||||||||||||
* Includes default amount
Subsequent to the quarter ended September 30, 2019, the Company issued Power Up Lending Group LTD shares of its common stock upon partial conversion of the promissory note dated April 29, 2019 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | ||||||||||||||
11/4/2019 | $ | 15,700 | $ | 0.001 | 15,700,000 | $ | 41,300 | * | ||||||||||
11/5/2019 | $ | 15,600 | $ | 0.001 | 15,600,000 | $ | 25,700 | * | ||||||||||
11/6/2019 | $ | 20,100 | $ | 0.001 | 20,100,000 | $ | 5,600 | |||||||||||
11/11/2019 | $5,600 plus $2,280 in interest | $ | 0.00098 | 8,040,816 | $ | 0.00 | ||||||||||||
Total | $ | 57,000 | * | 59,440,816 | ||||||||||||||
* Includes default amount
Peak One Investments LLC Warrant Exercises
On October 8, 2019, the Company issued Peak One Investments LLC 6,399,302 shares of common stock upon the cashless exercise of 6,424,286 warrants.
On October 22, 2019, the Company issued Peak One Investments LLC 6,498,105 shares of common stock upon the cashless exercise of 6,528,571 warrants.$10,000.
On April 1,27, 2020, the Company issued Peak One Investments LLC 4,623,0932,750,000 shares of common stock upon the cashless exercisefor cash proceeds of 4,640,371 warrants.$110,000.
Crown Bridge Partners, LLC Note Conversions
Subsequent to the quarter ended September 30, 2019, the Company issued Crown Bridge Partners, LLC shares of its common stock upon partial conversion of the promissory note dated November 28, 2018 as follows:
Date of Conversion | Principal Amount Converted | Conversion Price | Number of Shares Issued | Principal Balance Remaining | ||||||||||||
1/9/2020 | $6,491.25 plus $500 in fees | $ | 0.000595 | 11,750,000 | $ | 1,286.87 | ||||||||||
1/13/2020 | $10,601.48 plus $2,506.52 of interest and $500 in fees | $ | 0.00056 | 24,300,000 | $ | 5,685.39 | ||||||||||
Total | 36,050,000 |
On March 16,May 5, 2020, the Company issued 12,000,00015,000,000 shares of restricted common stock to a consultant for public relations services performedas part of the note extinguishment and consolidation agreement described in October 2019.Note 5(e).
AsOn May 19, 2020, the Company issued 500,000 shares of Aprilcommon stock for cash proceeds of $20,000.
On June 24, 2020, 50,000 shares of preferred series C stock was converted into common stock (1 share converts into 100 shares of common stock), resulting in the issuance of 5,000,000 shares of common stock.
Subsequent Issuances After Quarter-End
On July 6, 2020, the Company has sold 270,000 Series C Convertible Preferred Sharesentered into a consulting agreement. Pursuant to the agreement the consultant will provide investor relations services for $270,000.a period of one year in consideration for $3,000 per month and the issuance of 1,000,000 common shares of the Company.
On July 8, 2020, the Company entered into a consulting agreement. Pursuant to the agreement the consultant will provide operational business development and introductory services for a period of five years in consideration for the issuance of 1,000,000 common shares of the Company and a 5% commission, paid in shares, for any investments brokered.
On August 11, 2020, 75,000 shares of preferred series C stock was converted into common stock (1 share converts into 100 shares of common stock), resulting in the issuance of 7,500,000 shares of common stock.
On August 18, 2020, the Company settled the $100,000 note described in Note 5(i). Pursuant to the settlement agreement, the Company will issue the lender 5,281,088 shares of common stock and pay the lender $140,000 in four monthly installments of $35,000 commencing August 19, 2020 and ending November 19, 2020.
All of the above-described issuances were exempt from registration pursuant to Section 4(a)(2) and/or Regulation D of the Securities Act as transactions not involving a public offering. With respect to each transaction listed above, no general solicitation was made by either the Company or any person acting on its behalf. All such securities issued pursuant to such exemptions are restricted securities as defined in Rule 144(a)(3) promulgated under the Securities Act, appropriate legends have been placed on the documents evidencing the securities and may not be offered or sold absent registration or pursuant to an exemption therefrom.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the quarter ended SeptemberJune 30, 2019.2020.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We have entered into a number of promissory notes, some of which are in default as of SeptemberJune 30, 2019,2020, or went into default before the filing of this Quarterly Report (See Note 65 to the financial statements).
In addition,A significant portion of our current debt is in default, which may subject us to litigation by the debt holders.
As of June 30, 2020, we only had cash and cash equivalents of $29,260 and had a significant amount of short-term debt in default. The short-term debt agreements provide legal remedies for satisfaction of defaults, including increased interest rates, default fees and other financial penalties. As of the date of this Annual Report none of the lenders have insufficientpursued their legal remedies, although several lenders have sent us demand letters. Management’s plan is to raise additional funds in the form of debt or equity in order to continue to fund losses until such time as revenues are able to sustain the Company. To date, the main source of funding has been through the issuance of convertible notes with provisions that allow the holder to convert the debt and accrued and unpaid interest at substantial discounts to the trading price of our common stock reservesstock. The effect of the conversions in the year ended December 31, 2019 and the period ended June 30, 2020 for the convertible notes we have outstanding, which places eachhas been to substantially dilute existing holders of common stock of our Company. However, there is no assurance that management will be successful in being able to continue to obtain additional funding or defend potential litigation by note into default.holders.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
On July 12, 2019, the Company entered into a binding Letter of Intent (“LOI”) to negotiate in good faith a transaction between 2705908 Ontario Inc. and PCT LTD for a definitive loan and option agreement to include the acquisition of at least 51% control of PCT LTD, in addition to the terms and commitments written in the letter of intent. On July 30, 2019 the LOI due diligence and negotiations were slated to terminate, but both parties agreed to extend the term of the LOI. On August 2, 2019, the Company and 2705908 Ontario Inc. executed an extension for the terms of the July 10, 2019 LOI to continue until August 19, 2019. The extension expired on August 19, 2019.
Not applicable.
On July 30, 2019 the Company accepted a settlement proposal from Annihilare, Inc. (a sub-registrant of the Company’s US EPA Registration No. 92108-1) and its affiliated company, Prime ITS (a prior owner of Annihilyzer Inc, which transferred previously noted intangible IT assets to PCT LTD for 2,250,000 shares of the Company’s common stock in November of 2016). The settlement agreement included credit to the Company by Prime ITS in the gross amount of $23,209 on the Company’s payable to Prime ITS for a combination of a portion of Marty Paris’ salary, a resignation from Marty Paris effective July 31, 2019, and equal valued amount of PCT’s inventory, for net credit to PCT in the amount of $13,939, which was received by the Company on July 31, 2019. The transaction was completed on August 1, 2019.
On August 8, 2019 the Company received notice from PRIME ITS that certain technology services utilized by the Company shall cease to be provided, effective September 8, 2019.
On August 8, 2019 the Company received notice from Annihilare, Inc. that certain intellectual properties developed jointly between the Company and Annihilare are to be discontinued from use by the Company and our customers. We dispute the claims from Annihilare that the intellectual properties are exclusively Annihilare’s and are in discussions with Annihilare on this point.
On August 12, 2019 the Company made an addendum to its Employment Contract with F. Jody Read, CEO, whereby 500,000 Preferred Series B shares were issued to Read. All other terms of the January 1, 2019 employment agreement remain in effect.
On August 12, 2019 the Company executed a new Employment Contract with Gary J. Grieco, President, whereby 500,000 Preferred Series B shares of PCT LTD will be issued to Grieco as soon as the Preferred Series B shares are established through the State of Nevada. Mr. Grieco’s prior employment had expired and this new agreement called for typical executive terms and an annual salary of $24,000, in addition to the 500,000 Preferred Series B shares.
On January 1, 2020, the Company entered into a four-year employment agreement with Gary, J. Grieco, its President and CEO, whereby Mr. Grieco will receive $48,000 per year commencing April 1, 2020, and receive 15,000,000 shares of the Company’s common stock for services to the Company as its President and CEO. In addition, once monthly revenue exceeds monthly expenses the salary will be increased and Mr. Grieco will be issued an additional 10,000,000 shares of the Company’s common stock. The employment agreement begins on January 1, 2020, and is automatically renewable for two years unless terminated earlier as per the terms of the agreement.
ITEM 6. EXHIBITS
Exhibit No. | Description |
3(i) | Amended and Restated Articles of Incorporation, as currently in effect (Incorporated by reference to Exhibit 3.1 of Form 8-K, filed April 13, 2018) |
3.1 | Amended Articles of Incorporation increasing authorized shares (Incorporated by reference to Exhibit 3.1 of Form 8-K, filed on October 25, 2019) |
3(ii) | Amended and Restated Bylaws, as currently in effect (Incorporated by reference to Exhibit 3.2 of Form 8-K, filed April 13, 2018) |
4.1 | Certificate of Designation of Series A Convertible Preferred Stock (Incorporated by reference to Exhibit 4.1 of Form 10-Q, filed on September 16, 2019) |
4.2 | Certificate of Designation of Series B – Super Voting Convertible Preferred Stock (Incorporated by reference to Exhibit 4.2 of Form 10-Q, filed on September 16, 2019) |
4.3 | Certificate of Designation of Series C Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 of Form 8-K, filed on October 25, 2019) |
4.4 | Power Up Note dated June 5, 2018 (Incorporated by reference to Exhibit 4.1 of Form 10-Q, filed August 20, 2018) |
4.5 | Second Power Up Note dated July 25, 2018 (Incorporated by reference to Exhibit 4.2 of Form 10-Q, filed August 20, 2018) |
4.6 | Third Power Up Note dated August 27, 2018 (Incorporated by reference to Exhibit 4.3 of Form 10-Q, filed November 21, 2019) |
4.7 | Fourth Power Up Note dated December 5, 2018 (Incorporated by reference to Exhibit 4.6 of Form 10-Q, filed on September 16, 2019) |
4.8 | Fifth Power Up Note dated January 15, 2019 (Incorporated by reference to Exhibit 4.7 of Form 10-Q, filed on September 16, 2019) |
4.9 | Sixth Power Up Note dated February 22, 2019 (Incorporated by reference to Exhibit 4.8 of Form 10-Q, filed on September 16, 2019) |
4.10 | GS Capital Note dated January 16, 2019 (Incorporated by reference to Exhibit 4.9 of Form 10-Q, filed on September 16, 2019) |
4.11 | JSJ Note dated January 22, 2019 (Incorporated by reference to Exhibit 4.10 of Form 10-Q, filed on September 16, 2019) |
4.12 | EMA Note dated January 22, 2019 (Incorporated by reference to Exhibit 4.11 of Form 10-Q, filed on September 16, 2019) |
4.13 | Adar Note dated February 20, 2019 (Incorporated by reference to Exhibit 4.12 of Form 10-Q, filed on September 16, 2019) |
4.14 | Peak One Note dated February 21, 2019 (Incorporated by reference to Exhibit 4.13 of Form 10-Q, filed on September 16, 2019) |
4.15 | Auctus Note dated March 13, 2019 (Incorporated by reference to Exhibit 4.14 of Form 10-Q, filed on September 16, 2019) |
4.16 | Peak One Opportunity Fund Note dated September 16, 2019 (Incorporated by reference to Exhibit 4.16 of Form 10-Q, filed on August 14, 2020) |
4.17 | Power-Up #8 Note dated October 8, 2019 (Incorporated by reference to Exhibit 4.17 of Form 10-Q, filed on August 14, 2020) |
4.18 | Power-Up #9 Note dated October 31, 2019 (Incorporated by reference to Exhibit 4.18 of Form 10-Q, filed on August 14, 2020) |
4.19 | Power-Up #10 Note dated March 2, 2020 (Incorporated by reference to Exhibit 4.19 of Form 10-Q, filed on August 14, 2020) |
4.20 | TFK Investments Note dated April 10, 2020 (Incorporated by reference to Exhibit 4.20 of Form 10-Q, filed on August 14, 2020) |
4.21 | Power-Up #11 Note dated April 16, 2020 (Incorporated by reference to Exhibit 4.21 of Form 10-Q, filed on August 14, 2020) |
4.22 | Herschbach 2005 Trust Consolidated Note dated May 5, 2020 (Incorporated by reference to Exhibit 4.22 of Form 10-Q, filed on August 14, 2020) |
4.23 | Power-Up #12 Note dated May 12, 2020 (Incorporated by reference to Exhibit 4.23 of Form 10-Q, filed on August 14, 2020) |
4.24 | Digital Ally Note dated July 7, 2020 (Incorporated by reference to Exhibit 4.24 of Form 10-Q, filed on August 14, 2020) |
4.25 | Reserve Capital Management Note dated July 15, 2020 (Incorporated by reference to Exhibit 4.25 of Form 10-Q, filed on August 14, 2020) |
10.1 | Agreement with Annihilyzer, Inc. dated November 29, 2016 (Incorporated by reference to Exhibit 10.1 of Form 8-K, filed April 20, 2017) |
10.2 | Amendment to Agreement with Annihilyzer, Inc. dated April 6, 2017 (Incorporated by reference to Exhibit 10.2 of Form 8-K, filed April 20, 2017) |
10.3 | Read Consolidated Promissory Note dated September 27, 2017 (Incorporated by reference to Exhibit 10.1 of Form 8-K, filed October 4, 2017) |
10.4† | Paris Employment Agreement (Incorporated by reference to Exhibit 10.5 of Form 10-Q, filed November 14, 2017) |
10.5 | Strategic Planning Services Agreement dated March 15, 2018 |
10.6 | Power Up Agreement dated June 5, 2018 (Included in Exhibit 4.1, which is incorporated by reference to Exhibit 4.1 of Form 10-Q, filed August 20, 2018) |
10.7 | Second Power Up Agreement dated July 25, 2018 (Included in Exhibit 4.2, which is incorporated by reference to Exhibit 4.2 of Form 10-Q, filed August 20, 2018 |
10.8 | Third Power Up Agreement dated August 27, 2018 (Included in Exhibit 4.3, which is incorporated by reference to Exhibit 4.3 of Form 10-Q, filed November 21, 2019) |
10.9 | Fourth Power Up Agreement dated December 15, 2018 (Incorporated by reference to Exhibit 10.9 of Form 10-Q, filed on September 16, 2019) |
10.10 | Fifth Power Up Agreement dated January 15, 2019 (Incorporated by reference to Exhibit 10.10 of Form 10-Q, filed on September 16, 2019) |
10.11 | Sixth Power Up Agreement dated February 22, 2019 (Incorporated by reference to Exhibit 10.11 of Form 10-Q, filed on September 16, 2019) |
10.12 | GS Capital Agreement dated January 16, 2019 (Incorporated by reference to Exhibit 10.12 of Form 10-Q, filed on September 16, 2019) |
10.13 | JSJ Agreement dated January 22, 2019 (Incorporated by reference to Exhibit 10.13 of Form 10-Q, filed on September 16, 2019) |
10.14 | EMA Agreement dated January 22, 2019 (Incorporated by reference to Exhibit 10.14 of Form 10-Q, filed on September 16, 2019) |
10.15 | Adar Agreement dated February 20, 2019 (Incorporated by reference to Exhibit 10.15 of Form 10-Q, filed on September 16, 2019) |
10.16 | Peak One Agreement dated February 21, 2019 (Incorporated by reference to Exhibit 10.16 of Form 10-Q, filed on September 16, 2019) |
10.17 | Auctus Agreement dated March 13, 2019 (Incorporated by reference to Exhibit 10.17 of Form 10-Q, filed on September 16, 2019) |
10.18† | Read Employment Agreement (Incorporated by reference to Exhibit 10.18 of Form 10-Q, filed on September 16, 2019) |
10.19† | Read Addendum to Employment Agreement (Incorporated by reference to Exhibit 10.19 of Form 10-Q, filed on September 16, 2019) |
10.20† | Grieco 2019 Employment Agreement (Incorporated by reference to Exhibit 10.20 of Form 10-Q, filed on September 16, 2019) |
10.21† | Grieco 2020 Employment Agreement Incorporated by reference to Exhibit 10.21 of Form 10-Q, filed on April 13, 2020) |
10.22 | Peak One Opportunity Fund Agreement dated September 16, 2019 (Incorporated by reference to Exhibit 10.22 of Form 10-Q, filed on August 14, 2020) |
10.23 | Power-Up #8 Agreement dated October 8, 2019 (Incorporated by reference to Exhibit 10.23 of Form 10-Q, filed on August 14, 2020) |
10.24 | Power-Up #9 Agreement dated October 31, 2019 (Incorporated by reference to Exhibit 10.24 of Form 10-Q, filed on August 14, 2020) |
10.25 | Power-Up #10 Agreement dated March 2, 2020 (Incorporated by reference to Exhibit 10.25 of Form 10-Q, filed on August 14, 2020) |
10.26 | TFK Investments Agreement dated April 10, 2020 (Incorporated by reference to Exhibit 10.26 of Form 10-Q, filed on August 14, 2020) |
10.27 | Power-Up #11 Agreement dated April 16, 2020 (Incorporated by reference to Exhibit 10.27 of Form 10-Q, filed on August 14, 2020) |
10.28 | Herschbach 2005 Trust Agreement dated May 12, 2020 (Incorporated by reference to Exhibit 10.28 of Form 10-Q, filed on August 14, 2020) |
31.1 | Principal Executive Officer Certification |
31.2 | Principal Financial Officer Certification |
32.1 | Section 1350 Certification |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Label Linkbase Document |
101.PRE | XBRL Taxonomy Presentation Linkbase Document |
† Indicates management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PCT LTD | ||
Date: | By: | /s/ Gary |
Gary | ||
Chief Executive Officer and | ||
Chairman |
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