PCT LTD (formerly Bingham Canyon Corporation,
(the “Company,” “PCT Ltd,” or “Bingham”), a Delaware corporation, was formed on February 27,
1986. The Company changed its domicile to Nevada on August 26, 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.”).
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 have been eliminated upon consolidation.
The preparation of the consolidated financial
statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingencies at the date of the financial statements as well as the reported amounts of revenues and expenses
during 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.
Cash and cash equivalents are considered
to be cash and highly liquid securities with original maturities of three months or less. The cash of $67,613 and $4,893 as of
December 31, 2019 and December 31, 2018, respectively, represents cash on deposit in various bank accounts. There were no cash
equivalents as of December 31, 2019 and December 31, 2018.
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 December 31, 2019, consisted of the following:
Our financial assets
and liabilities carried at fair value measured on a recurring basis as of December 31, 2018, consisted of the following:
(1) The Company has
estimated the fair value of these liabilities using the Binomial Model.
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 December 31, 2019, and December 31, 2018, the Company had a $10,517,873 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.
Under ASC 815-40-35, the Company has adopted
a sequencing policy whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary
pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain
securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date
of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuance
of securities to the Company’s employees or directors are not subject to the sequencing policy.
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 $16,250 and $Nil at December 31, 2019 and December 31, 2018, respectively.
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 December 31, 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 December 31, 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 December 31, 2019 and December 31, 2018 of such supplies
and equipment not yet placed in service amounted to $321,565 and $369,754, respectively.
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.
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. An impairment charge is recognized if the carrying
amount is not recoverable and the carrying amount exceeds the fair value of the long-lived assets as determined by projected discounted
net future cash flows. The recorded impairment expense was $Nil for the year ended December 31, 2019.
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.
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.
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.
On May 2014, the FASB issued ASU No. 2014-09, “Revenue
from Contracts with Customers” (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 recognizes revenue based on the
five criteria for revenue recognition established under Topic 606: 1) identify the contract, 2) identify separate performance obligations,
3) determine the transaction price, 4) allocate the transaction price among the performance obligations, and 5) recognize revenue
as the performance obligations are satisfied.
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 December
31, 2019.
The Company recognizes all share-based payments
to employees and directors, including grants of stock options, warrants and common stock awards in the consolidated statement of
operations and comprehensive loss as an operating expense based on their fair values as established at the grant date. Equity instruments
issued to non-employees include common stock awards or warrants to purchase shares of our common stock. These common stock awards
or warrants are either fully-vested and exercisable at the date of grant or vest over a certain period during which services are
provided. The Company expenses the fair market value of fully vested awards at the time of grant, and of unvested awards over the
period in which the related services are received. In accordance with Accounting Standards Update 2018-07, unvested awards are
no longer remeasured to fair value until vesting and rather the fair value is established at the grant date consistent with the
treatment of employee director awards.
The Company computes the estimated fair values
of stock options and warrants using the Black-Scholes option pricing model or a Monte Carlo valuation model. Market price at the
date of grant is used to calculate the fair value of restricted stock units and common stock awards.
Stock-based compensation expense is based on
awards ultimately expected to vest and is reduced for estimated forfeitures except for market-based warrants which are expensed
based on the grant date fair value regardless of whether the award vests. Forfeitures are estimated at the time of grant and revised,
if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Deferred income taxes are provided on a liability
method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards.
Deferred tax liabilities are recognized for taxable temporary differences, which are the differences between the reported amounts
of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company recognizes
the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than
not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized
in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized
upon ultimate settlement with the relevant tax authority.
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 December 31, 2019, there were outstanding common share equivalents (options, warrants, convertible debt and preferred
series A stock) which amounted to 1,697,208,559 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.
On January 1, 2019, the Company adopted
the new accounting standard ASU 2016-02, “Leases” (“ASU 2016-02”), and associated ASUs related to
ASU 842, Leases as discussed in the Leases accounting policy description.
On January 1, 2019, the Company adopted
the new accounting standard ASU 2018-07, “Compensation - Stock Compensation” (Topic 718): Improvements to Nonemployees
Share-Based Payment Accounting (“ASU 2018-07”) as discussed in the Stock-based compensation accounting policy description.
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 does not expect the adoption of ASU
2018-13 to have a material effect on the consolidated financial statements.
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. The Company has limited assets, has an accumulated
deficit of $26,505,567 and has negative cash flows from operations. As of December 31, 2019, the Company had a working capital
deficit of $14,065,748. 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.
Depreciation expense was $25,184 and
$26,376 for the year ended December 31, 2019 and 2018, respectively. During the year ended December 31, 2018, the Company recognized
an impairment charge of $26,550.
On July 30, 2019, the Company transferred
$17,876 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 $43,767. As result the Company recorded a gain on the settlement of debt of $16,706.
Amortization expense was $312,844 for the year
ended December 31, 2019, of which $18,693 relates to patents and $294,151 relates to technology rights. No impairment was recognized
during the years ended December 31, 2019 and 2018.
On May 10, 2019, the Company sold intangible assets with a carrying
value of $47,502 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.
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 $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. As of December 31, 2019, the Company did not have
any leases with terms greater than 12 months.
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 Company’s lease expired during
the year ended December 31, 2019 and the Company did not have any ROU assets or liabilities as of December 31, 2019. Expense related
to leases is recorded on a straight-line basis over the lease term, including rent holidays. During the year ended December 31,
2019, the Company recognized operating lease expense of $52,800. Operating lease costs are included within selling, administrative
and other expenses on the consolidated statements of operations.
Cash paid for amounts included in the
measurement of operating lease liabilities were $52,800 for the year ended December 31, 2019. During the year ended
December 31, 2019, the Company reduced its ROU liabilities by $43,330 from cash paid. The Company’s weighted average discount
rate is 41%.
NOTE 6. Notes Payable
The following tables summarize notes payable
as of December 31, 2019 and December 31, 2018:
Type
|
Original Amount
|
Origination
Date
|
Maturity
Date
|
Annual
Interest
Rate
|
Balance at
December 31,
2019
|
Balance at
December 31, 2018
|
Note Payable (aa)
|
$
|
150,000
|
5/18/2016
|
06/01/2019
|
19%
|
$
|
-
|
$
|
150,000
|
Note Payable **
|
$
|
25,000
|
5/8/2017
|
06/30/2018
|
0%
|
$
|
27,500
|
$
|
27,500
|
Note Payable
|
$
|
130,000
|
6/20/2018
|
01/02/2020
|
8%
|
$
|
130,000
|
$
|
130,000
|
Note Payable (a)
|
$
|
126,964
|
6/20/2018
|
01/02/2020
|
6%
|
$
|
-
|
$
|
126,964
|
Note Payable (b)
|
$
|
26,500
|
6/26/2018
|
10/01/2019
|
10%
|
$
|
-
|
$
|
26,500
|
Note Payable (l)
|
$
|
60,000
|
10/31/2018
|
12/30/2018
|
8%
|
$
|
-
|
$
|
60,000
|
Note Payable **
|
$
|
8,700
|
11/15/2018
|
06/30/2019
|
10%
|
$
|
8,700
|
$
|
8,700
|
Note Payable (c)
|
$
|
52,063
|
04/08/2019
|
04/08/2020
|
40%
|
$
|
-
|
$
|
-
|
Note Payable (d)
|
$
|
40,000
|
06/20/2019
|
12/31/2019
|
8%
|
$
|
-
|
$
|
-
|
Note Payable (e)
|
$
|
6,741
|
06/21/2019
|
04/08/2020
|
32%
|
$
|
-
|
$
|
-
|
Note Payable (d)
|
$
|
90,596
|
09/15/2019
|
03/16/2020
|
8%
|
$
|
90,596
|
$
|
-
|
Note Payable (f)
|
$
|
50,000
|
10/03/2019
|
04/03/2020
|
12%
|
$
|
37,500
|
$
|
-
|
Note Payable (g)
|
$
|
17,500
|
11/12/2019
|
11/12/2020
|
8%
|
$
|
17,500
|
$
|
-
|
Note Payable (h)
|
$
|
12,250
|
12/12/2019
|
12/05/2020
|
42%
|
$
|
-
|
$
|
-
|
Note Payable (i)
|
$
|
83,400
|
12/20/2019
|
06/19/2020
|
150%
|
$
|
80,192
|
$
|
-
|
Note Payable (j)
|
$
|
148,362
|
12/20/2019
|
11/27/2020
|
80%
|
$
|
145,404
|
$
|
-
|
Subtotal
|
|
|
|
|
|
$
|
537,392
|
$
|
529,664
|
Debt discount
|
|
|
|
|
|
$
|
(69,239)
|
$
|
(3,293)
|
Balance, net
|
|
|
|
|
|
$
|
468,153
|
$
|
526,371
|
Less current portion
|
|
|
|
|
|
$
|
(468,153)
|
$
|
(399,664)
|
Total long-term
|
|
|
|
|
|
$
|
-
|
$
|
126,707
|
|
|
|
|
|
|
|
|
|
|
** Currently in default
|
|
|
|
|
|
a)
|
On January 28, 2019, the Company agreed to convert $131,327 of principal
and interest of its note payable with a non-related party into 987,421 shares of the Company’s common stock. The Company
recorded a loss on settlement of debt of $38,319 equal to the difference between the fair value of the common shares of $177,736
and the carrying value of the note and interest.
|
|
b)
|
On February 1, 2019, the Company modified note by extending the maturity
date to October 1, 2019. Further, the Company and the lender agreed that the customer’s minimum monthly royalty payments
of $1,500 would be applied to reduce the principal and interest of the note. Total accounts receivable from the noteholder of $28,090
was applied to the note during the year ended December 31, 2019.
|
|
c)
|
On April 8, 2019, the Company entered into a promissory bank loan
with a non-related party for $52,063 of which $9,563 was the loan fee or original issue discount resulting in cash proceeds to
the Company of $42,500. The note is due on April 8, 2020 and results in an annual percentage rate of 40%. The note was repaid during
the year ended December 31, 2019.
|
|
d)
|
On June 20, 2019 the Company entered into a promissory note with
a non-related party for $40,000. The note is due December 31, 2019, is unsecured and bears an interest rate of 8% per annum. On
September 15, 2019, the Company received an additional $50,000 from the lender and issued a new promissory note for $90,596 which
was equal to the original $40,000 note, $596 of accrued interest and the additional $50,000 advanced. The promissory note is due
March 16, 2020, is unsecured and bears an interest rate of 8% per annum.
|
|
e)
|
On June 21, 2019, the Company entered into a promissory bank loan
with a non-related party for $6,741 of which $641 was the loan fee or original issue discount resulting in cash proceeds to the
Company of $6,100. The note is due on April 8, 2020 and results in an annual percentage rate of 32%. The note was repaid during
the year ended December 31, 2019.
|
|
f)
|
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, 2019, the
Company had repaid $12,500 of the loan.
|
|
g)
|
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.
|
|
h)
|
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 was repaid during the year ended December 31, 2019.
|
|
i)
|
On December 20, 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.
|
|
j)
|
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.
|
The following table summarizes notes payable,
related parties as of December 31, 2019 and December 31, 2018:
Type
|
Original Amount
|
Origination
Date
|
Maturity
Date
|
Annual
Interest
Rate
|
Balance at
December 31,
2019
|
Balance at
December 31, 2018
|
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%
|
$
|
325,000
|
$
|
350,000
|
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
|
10/09/2018
|
Demand
|
0%
|
$
|
5,000
|
$
|
5,000
|
Note Payable, RP
|
$
|
5,000
|
10/19/2018
|
Demand
|
0%
|
$
|
5,000
|
$
|
5,000
|
Note Payable, RP
|
$
|
3,000
|
10/24/2018
|
Demand
|
0%
|
$
|
-
|
$
|
3,000
|
Note Payable, RP
|
$
|
2,544
|
01/03/2019
|
06/30/2019
|
3%
|
$
|
-
|
$
|
-
|
Note Payable, RP (k)
|
$
|
15,000
|
08/16/2019
|
02/16/2020
|
8%
|
$
|
15,000
|
$
|
-
|
Subtotal
|
|
|
|
|
|
$
|
827,000
|
$
|
840,000
|
Debt discount
|
|
|
|
|
|
$
|
(43)
|
$
|
(13,174)
|
Balance, net
|
|
|
|
|
|
$
|
826,957
|
$
|
826,826
|
Less current portion
|
|
|
|
|
|
$
|
(826,957)
|
$
|
(93,000)
|
Total long-term
|
|
|
|
|
|
$
|
-
|
$
|
733,826
|
|
** Currently in default
|
|
|
|
|
|
k)
|
On August 16, 2019, the Company entered into a promissory note with
a Director and former CEO of the Company for $15,000. The note is due February 16, 2020, is unsecured and bears an interest rate
of 8% per annum.
|
The following table summarizes convertible
notes payable as of December 31, 2019 and December 31, 2018:
Type
|
Original Amount
|
Origination
Date
|
Maturity
Date
|
Annual
Interest
Rate
|
Balance at
December 31,
2019
|
Balance at
December 31, 2018
|
Convertible Note Payable (l)
|
$
|
450,000
|
03/28/2018
|
03/31/2021
|
8%
|
$
|
-
|
$
|
450,000
|
Convertible Note Payable (m)
|
$
|
38,000
|
07/30/2018
|
07/25/2019
|
12%
|
$
|
-
|
$
|
38,000
|
Convertible Note Payable (m)
|
$
|
53,000
|
08/29/2018
|
08/27/2019
|
12%
|
$
|
-
|
$
|
53,000
|
Convertible Note Payable (n) * **
|
$
|
50,000
|
12/06/2018
|
12/06/2019
|
12%
|
$
|
22,777
|
$
|
50,000
|
Convertible Note Payable (o) * **
|
$
|
65,000
|
12/06/2018
|
12/06/2019
|
12%
|
$
|
46
|
$
|
65,000
|
Convertible Note Payable (p)
|
$
|
63,000
|
12/12/2018
|
12/05/2019
|
22%
|
$
|
-
|
$
|
63,000
|
Convertible Note Payable (l)
|
$
|
539,936
|
01/15/2019
|
01/15/2022
|
8%
|
$
|
-
|
$
|
-
|
Convertible Note Payable (q)
|
$
|
33,000
|
01/16/2019
|
01/15/2020
|
12%
|
$
|
-
|
$
|
-
|
Convertible Note Payable (r) * **
|
$
|
100,000
|
01/18/2019
|
01/16/2020
|
8%
|
$
|
95,492
|
$
|
-
|
Convertible Note Payable (s) * **
|
$
|
60,000
|
01/29/2019
|
01/22/2020
|
8%
|
$
|
266,050
|
$
|
-
|
Convertible Note Payable (t) * **
|
$
|
50,000
|
02/01/2019
|
10/22/2019
|
24%
|
$
|
154,330
|
$
|
-
|
Convertible Note Payable (u) * **
|
$
|
60,000
|
02/21/2019
|
02/14/2022
|
0%
|
$
|
74,000
|
$
|
-
|
Convertible Note Payable (v) * **
|
$
|
55,125
|
02/21/2019
|
02/20/2020
|
12%
|
$
|
42,125
|
$
|
-
|
Convertible Note Payable (w)
|
$
|
53,000
|
02/26/2019
|
02/20/2020
|
12%
|
$
|
-
|
$
|
-
|
Convertible Note Payable (x) * **
|
$
|
5,000
|
03/18/2019
|
12/13/2019
|
24%
|
$
|
232,814
|
$
|
-
|
Convertible Note Payable (y)
|
$
|
38,000
|
05/02/2019
|
04/29/2020
|
12%
|
$
|
-
|
$
|
-
|
Convertible Note Payable (z) * **
|
$
|
26,000
|
09/16/2019
|
09/11/2022
|
0%
|
$
|
26,000
|
$
|
-
|
Convertible Note Payable (aa)
|
$
|
175,814
|
09/27/2019
|
09/25/2020
|
8%
|
$
|
175,814
|
$
|
-
|
Convertible Note Payable (bb)
|
$
|
53,000
|
10/08/2019
|
10/07/2020
|
12%
|
$
|
53,000
|
$
|
-
|
Convertible Note Payable (cc)
|
$
|
50,000
|
10/31/2019
|
10/29/2020
|
12%
|
$
|
50,000
|
$
|
-
|
Subtotal
|
|
|
|
|
|
$
|
1,192,448
|
$
|
719,000
|
Debt discount
|
|
|
|
|
|
$
|
(4,815)
|
$
|
(165,186)
|
Balance, net
|
|
|
|
|
|
$
|
1,187,633
|
$
|
553,814
|
Less current portion
|
|
|
|
|
|
$
|
(1,187,633)
|
$
|
(161,280)
|
Total long-term
|
|
|
|
|
|
$
|
-
|
$
|
392,534
|
* Embedded conversion feature accounted for as a derivative liability
at period end
** Currently in default
|
|
|
|
|
|
l)
|
On
January 15, 2019, the Company executed a new, consolidated convertible note with a non-related
party by extinguishing the March 28, 2018 convertible note in the amount of $450,000
with interest due of $28,898 and a $60,000 term note, dated October 31, 2018 with interest
due of $1,038. The new convertible note is in the amount of $539,936, is due on or before
January 15, 2022, has an 8% per annum interest rate and may be converted into shares
of the Company’s common stock at $0.20 per share. The new note incorporates an
anti-dilution feature if the Company issues more than 60,000,000 shares of its common
stock. 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 $292,651. The Company recorded a loss on extinguishment
of debt of $350,117 equal to the initial fair value of derivative liability on the new
note and the previous unamortized debt discount balance of one the old notes.
|
|
|
|
|
|
On March 27, 2019, the Company agreed
to convert $548,686 of principal ($539,936) and interest ($8,750) of its convertible note payable
into 3,597,989 shares of the Company’s common stock. The Company recorded a gain on settlement
of debt of $359,857 equal to the difference between both the fair value of the common shares of
$523,867 and the fair value of the conversion feature at conversion of $335,038 compared to the
carrying value of the note and interest.
|
|
m)
|
During the period, this note was paid off, resulting a pre-payment
penalty of 37%.
|
|
n)
|
During the year ended December 31, 2019, the Company defaulted on
the note, resulting in a default penalty of $15,000 added to the principal of the note. During the year ended December 31, 2019,
$42,223 of principal and $2,500 of interest of the convertible note payable was converted into 76,154,631 shares of the Company’s
common stock.
|
|
o)
|
During the year ended December 31, 2019, principal of $64,954 and
interest of $7,000 was converted into 78,030,000 shares of the Company’s common stock.
|
|
p)
|
On June 10, 2019, the embedded conversion option qualified for derivative
accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $142,265 and resulted in a discount
to the note payable of $60,000 and an initial derivative expense of $82,265. On June 19, 2019, the Company defaulted on the note,
resulting in a default penalty of $32,650 added to the principal of the note and the remaining discount was accelerated and recognized
to interest expense. During the year ended December 31, 2019, principal of $95,650 and $3,780 of interest of the convertible note
payable was converted into 31,174,816 shares of the Company’s common stock.
|
|
q)
|
On
January 16, 2019, the Company entered into a convertible promissory with a non-related
party for $33,000 of which $3,000 was an original issue discount resulting in cash proceeds
to the Company of $30,000. The note is due on January 15, 2020 and bears interest on
the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms
apply (from 12% to 37%, 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 June 19, 2019, the Company defaulted
on the note, resulting in the note becoming immediately convertible and a default penalty
of $16,500 added to the principal of the note.
|
|
|
|
|
|
On June 19, 2019, the embedded conversion
option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value
of the conversion feature was $116,540 and resulted in a discount to the note payable of $30,000
and an initial derivative expense of $86,540. Due to the note being in default, the remaining discount
was accelerated and recognized to interest expense. During the year ended December 31, 2019, $49,500
of principal and $1,980 of interest of the convertible note payable was converted into 32,622,223
shares of the Company’s common stock.
|
|
r)
|
On
January 18, 2019, the Company entered into a convertible promissory note with a non-related
party for $100,000 of which $5,000 was an original issue discount and $5,000 was paid
directly to third parties resulting in cash proceeds to the Company of $90,000. The note
is due on January 16, 2020 and bears interest on the unpaid principal balance at a rate
of 8% per annum. Stringent pre-payment terms apply (from 10% to 30%, 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 24% 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 64% of the average 2 lowest trading prices during the 10-trading day period prior
to the conversion date.
|
|
|
|
|
|
On July 17, 2019, the embedded conversion
option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value
of the conversion feature was $239,668 and resulted in a discount to the note payable of $90,000
and an initial derivative expense of $149,668. Due to the note being in default, the remaining discount
was accelerated and recognized to interest expense. During the year ended December 31, 2019, $4,508
of principal and $179 of interest was converted into 5,207,600 shares of the Company’s common
stock. There also was an unfulfilled conversion during the period due to lack of authorized shares,
further triggering default and penalties were assessed in the amount of $65,500 recorded in accrued
interest.
|
|
s)
|
On
January 29, 2019, the Company entered into a convertible promissory note with a non-related
party for $60,000 of which $3,000 was an original issue discount and $8,000 was paid
directly to third parties resulting in cash proceeds to the Company of $49,000. The note
is due on January 22, 2020 and bears interest on the unpaid principal balance at a rate
of 8% per annum. Stringent pre-payment terms apply (from 10% to 30%, 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 18% 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 the lower of 64% of the average 2 lowest trading prices during the 10-trading day
period prior to the conversion date or $0.12.
|
|
|
|
|
|
On July 28, 2019, the embedded conversion
option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value
of the conversion feature was $640,053 and resulted in a discount to the note payable of $49,000
and an initial derivative expense of $591,053. During the year ended December 31, 2019, the Company
defaulted on the note, resulting in a default penalty of $214,690 added to the principal of the
note. Due to the note being in default, the remaining discount was accelerated and recognized to
interest expense. During the year ended December 31, 2019, $8,640 of the convertible note payable
was converted into 7,500,000 shares of the Company’s common stock. There also was an unfulfilled
conversion during the period due to lack of authorized shares, further triggering default and penalties
were assessed in the amount of $294,000 recorded in accrued interest.
|
|
t)
|
On
February 1, 2019, the Company entered into a convertible promissory note with a non-related
party for $50,000 of which $5,000 was an original issue discount resulting in cash proceeds
to the Company of $45,000. The note is due on October 22, 2019 and bears interest on
the unpaid principal balance at a rate of 12% per annum and a default interest rate of
24% per annum. The Note may be converted by the Lender at any time after the date of
issuance into shares of Company’s common stock at a conversion price equal 50%
of the lowest trading price during the 20-trading day period prior to the conversion
date. As the closing sales price fell below $0.03, an additional 15% discount was attributed
to the conversion price. During the year ended December 31, 2019, the Company defaulted
on the note, resulting in a default penalty of $106,526 added to the principal of the
note.
|
|
|
|
|
|
The embedded conversion option qualified
for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion
feature was $158,142 and resulted in a discount to the note payable of $50,000 and an initial derivative
expense of $113,142. Due to the note being in default, the remaining discount was accelerated and
recognized to interest expense. During the year ended December 31, 2019, $2,196 of the principal
and $953 of interest was converted into 4,999,000 shares of the Company’s common stock. There
also was an unfulfilled conversion during the period due to lack of authorized shares, further triggering
default and penalties were assessed in the amount of $36,250 recorded in accrued interest.
|
|
u)
|
On
February 21, 2019, the Company entered into a convertible promissory note with a non-related
party for $60,000 of which $5,000 was an original issue discount and $8,000 was paid
directly to third parties resulting in cash proceeds to the Company of $47,000. The Company
also issued a warrant with a term of five years to purchase up to 300,000 shares of common
stock of the Company at an exercise price of $0.20 per share and subject to adjustment
for dilutive issuances and cashless exercise. The note is due on February 14, 2022 and
bears interest on the unpaid principal balance at a rate of 0% per annum. Stringent pre-payment
terms apply (from 10% to 40%, dependent upon the timeframe of repayment during the note’s
term) and in the event of default an additional 40% of the principal and interest balance
shall be owed. The Note may be converted by the Lender at any time after the date of
issuance into shares of Company’s common stock at a conversion price equal to the
lower of 60% of the lowest trading price during the 20-trading day period prior to the
conversion date or $0.12. If at any time the closing sales price falls below $0.01, then
an additional 10% discount will be attributed to the conversion price. During the year
ended December 31, 2019, the Company defaulted on the note, resulting in a default penalty
of $44,000 added to the principal of the note.
|
|
|
|
|
|
The embedded conversion option and
warrant qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value
of the conversion feature of $124,796 and the warrant of $51,856 resulted in a discount to the note
payable of $60,000 and an initial derivative expense of $129,652. Due to the note being in default,
the remaining discount was accelerated and recognized to interest expense. During the year ended
December 31, 2019, $30,000 of principal was converted into 31,860,367 shares of the Company’s
common stock.
|
|
v)
|
On
February 21, 2019, the Company entered into a convertible promissory note with a non-related
party for $55,125 of which $2,500 was an original issue discount and $2,625 was paid
directly to third parties resulting in cash proceeds to the Company of $50,000. The note
is due on February 20, 2020 and bears interest on the unpaid principal balance at a rate
of 8% per annum. Stringent pre-payment terms apply (from 10% to 30%, 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 24% 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 64% of the average 2 lowest trading prices during the 10-trading day period prior
to the conversion date.
|
|
|
|
|
|
On August 20, 2019, the embedded conversion
option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value
of the conversion feature was $172,120 and resulted in a discount to the note payable of $50,000
and an initial derivative expense of $122,120. Due to the note being in default, the remaining discount
was accelerated and recognized to interest expense. During the year ended December 31, 2019, $13,000
of principal was converted into 3,054,511 shares of the Company’s common stock.
|
|
w)
|
On
February 26, 2019, the Company entered into a convertible promissory with a non-related
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 February 20, 2020 and bears interest on
the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms
apply (from 12% to 37%, 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 June 19, 2019, the Company defaulted
on the note, resulting in the note becoming immediately convertible and a default penalty
of $26,500 added to the principal of the note.
|
|
|
|
|
|
On June 19, 2019, the embedded conversion
option qualified for derivative accounting and bifurcation under ASC 815-15. 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. During the year ended December 31, 2019, $79,500
of principal and $3,180 of interest was converted into 68,900,000 shares of the Company’s
common stock.
|
|
x)
|
On
March 18, 2019, the Company entered into a convertible promissory note with a non-related
party for $75,000 of which $10,250 was an original issue discount resulting in cash proceeds
to the Company of $64,750. The Company also issued a warrant with a term of five years
to purchase up to 187,500 shares of common stock of the Company at an exercise price
of $0.20 per share and subject to adjustment for dilutive issuances and cashless exercise.
The note is due on December 13, 2019 and bears interest on the unpaid principal balance
at a rate of 12% per annum and a default interest rate of 24% per annum. The Note may
be converted by the Lender at any time after the date of issuance into shares of Company’s
common stock at a conversion price equal to 50% of the lowest trading price during the
25-trading day period prior to the conversion date. During the year ended December 31,
2019, the Company defaulted on the note, resulting in a default penalty of $185,618 added
to the principal of the note.
|
|
|
|
|
|
The embedded conversion option and
warrant qualified for derivative accounting and bifurcation under ASC 815-15. 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 year ended
December 31, 2019, $27,804 of principal and $5,287 of interest was converted into 11,490,000 shares
of the Company’s common stock.
|
|
y)
|
On
May 2, 2019, the Company entered into a convertible promissory with a non-related party
for $38,000 of which $3,000 was an original issue discount resulting in cash proceeds
to the Company of $35,000. The note is due on April 29, 2020 and bears interest on the
unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply
(from 12% to 37%, 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 June 19, 2019, the Company defaulted on the
note, resulting in the note becoming immediately convertible and a default penalty of
$19,000 added to the principal of the note.
|
|
|
|
|
|
On June 19, 2019, the embedded conversion
option qualified for derivative accounting and bifurcation under ASC 815-15. 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. During the year ended December 31, 2019, $57,000
of principal and $2,280 of interest was converted into 59,440,816 shares of the Company’s
common stock.
|
|
z)
|
On
September 16, 2019, the Company entered into a convertible promissory note with a non-related
party for $26,000 of which $6,000 was an original issue discount resulting in cash proceeds
to the Company of $20,000. The note is due on September 11, 2022 and bears interest on
the unpaid principal balance at a rate of 0% per annum and a default interest rate of
0% per annum. The Company also issued a warrant with a term of five years to purchase
up to 300,000 shares of common stock of the Company at an exercise price of $0.10 per
share and subject to adjustment for dilutive issuances and cashless exercise. The Note
may be converted by the Lender at any time after the date of issuance into shares of
Company’s common stock at a conversion price equal 60% of the lowest trading price
during the 20-trading day period prior to the conversion date. As the closing sales price
fell below $0.01, an additional 10% discount was attributed to the conversion price.
|
|
|
|
|
|
The embedded conversion option qualified
for derivative accounting and bifurcation under ASC 815-15. 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.
|
|
aa)
|
During the year ended December 31, 2019, the $150,000 note and $25,814
of accrued interest was repaid by a cosigner to the loan. On September 27, 2019, the Company entered into a convertible promissory
note with the non-related party for $175,814 in consideration for repaying the note. The note is due on September 25, 2020 and
bears interest on the unpaid principal balance at a rate of 8% per annum and a default interest rate of 8% per annum. The Note
will be repaid in cash or by conversion to common shares at a mutually acceptable rate not less than the market price of the Company’s
common stock.
|
|
bb)
|
On October 8, 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. As the
note isn’t convertible until 180 days following issuance, no derivative liability was recognized as of December 31, 2019.
|
|
cc)
|
On October 31, 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. As the
note isn’t convertible until 180 days following issuance, no derivative liability was recognized as of December 31, 2019.
|
NOTE 7 – DERIVATIVE AND PREFERRED
SERIES A STOCK LIABILITIES
The embedded conversion option of (1) the convertible
debentures described in Note 6; (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, 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, 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.
|
|
December 31,
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
|
|
|
(3,258,054
|
)
|
|
|
—
|
|
Change in fair value of embedded conversion option
|
|
|
11,258,314
|
|
|
|
(24,057
|
)
|
Balance at the end of the period
|
|
$
|
10,517,873
|
|
|
$
|
322,976
|
|
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:
|
|
Expected Volatility
|
|
Risk-free Interest Rate
|
|
Expected Dividend Yield
|
|
Expected Life (in years)
|
|
|
|
|
|
|
|
|
|
At issuance
|
|
128-394%
|
|
1.60-2.51%
|
|
|
0
|
%
|
|
0.49-5.01
|
At December 31, 2019
|
|
180-360%
|
|
1.558-1.66%
|
|
|
0
|
%
|
|
0.40-4.20
|
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. The Company recorded a loss
on initial fair value of $90,283 and a gain on the change in fair value of the preferred stock of $5,931.
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.
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:
|
|
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 - STOCKHOLDERS’ DEFICIT
Preferred Stock
Series A Preferred Shares
Effective March 23, 2018, the Company amended
the articles of incorporation and authorized 10,000,000 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 December 31, 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. 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 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:
|
A.
|
Securities not subject to investment letter or other similar restrictions
on free marketability (covered by (B) below):
|
|
1)
|
If traded on a securities exchange (NASDAQ, AMEX, NYSE, etc.), the
value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty day period ending
three (3) days prior to the closing;
|
|
2)
|
If traded on a quotation system, such as the OTC:QX, OTC:QB or OTC
Pink Sheets, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty
day period ending three (3) days prior to the closing; and
|
|
3)
|
If there is no active public market, the value shall be the fair
market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then
outstanding shares of Preferred Stock.
|
|
B.
|
The method of valuation of securities subject to investment letter
or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as
an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1),
(2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the Company and the holders of at least
a majority of the voting power of all then outstanding shares of such Preferred Stock.
|
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 A stock on April 12, 2019 was $60,398 and was valued by using
the Binomial Model based on various assumptions.
As of December 31, 2019,
there were 500,000 shares of Series A Convertible Preferred Stock issued and outstanding.
Series B Preferred Shares
Effective August 13, 2019, 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 authorized
shares of preferred stock;
d)
authorize or issue, or obligate itself to issue, any other equity security, including any
other security convertible into or exercisable 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 any 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 $158,247 as temporary equity or “mezzanine”.
As of December 31, 2019, there were 1,000,000
shares of Series B Preferred Stock issued and 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:
The number of shares
constituting the Series C Convertible Preferred Stock shall be 5,500,000. Such number of shares may be increased or decreased by
resolution of the Board; provided, that no decrease shall reduce the number of shares of Series C Convertible Preferred Stock to
a number less than the number of shares then outstanding plus the number of shares reserved for 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.
Conversion Rights
Each Share shall be convertible
into shares of the Company’s Common Stock at a price per share of $0.01 (1 Share converts into 100 shares of Common Stock)
(the “Conversion Price”), 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 (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 office of this Company or any transfer agent for such 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:
|
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 Company
is disposed of;
|
|
b)
|
alter or change the rights, preferences or privileges of the Shares
so as to affect adversely the Shares;
|
|
c)
|
increase or decrease (other than by redemption or conversion) the
total number of authorized shares of preferred stock;
|
|
d)
|
authorize or issue, or obligate itself to issue, any other equity
security, including any other security convertible into or exercisable for any equity security (i) having a preference over, or
being on a parity with, the Shares with respect to upon liquidation, or (ii) having rights similar to any of the rights of the
Preferred Stock; or
|
|
e)
|
amend the Company’s Articles of Incorporation or bylaws.
|
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 December 31, 2019, there were no Series
C Preferred Shares issued or 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 December 31, 2019 was 498,880,300.
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, 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 January 1, 2019 the
fair value of the restricted stock award totaled $240,000 which will be expensed over vesting period. As of December 31, 2019,
375,000 shares were issued and the Company had recognized $116,728 of expense.
On January 28, 2019, the Company agreed to
convert $131,327 of principal and interest of the notes payable described in Note 6(a) into 987,421 shares of the Company’s
common stock.
On March 25, 2019, the
Company issued 200,000 shares of common stock to two employees of the Company as compensation in lieu of commission on sales of
the Company’s products. 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 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, 798,400 shares of Company’s common stock were issued and a $55,830 loss
on settlement of debt was recognized.
On March 27, 2019, the Company agreed to convert
$548,686 of principal ($539,936) and interest ($8,750) of the convertible note payable described in Note 6(l) into 3,597,989 shares
of the Company’s common stock. The Company recorded a gain on settlement of debt of $359,857 equal to the difference between
both the fair value of the common shares of $523,867 and the fair value of the conversion feature at conversion of $335,038 compared
to the carrying value of the note and interest.
During the year ended December 31, 2019, the
Company issued a total of 76,154,631 shares of the Company’s common stock upon the conversion of $42,223 of principal and
$2,500 of interest pursuant to the convertible note payable described in Note 6(n).
During the year ended December 31, 2019, the
Company issued a total of 78,030,000 shares of the Company’s common stock upon the conversion of $64,954 of principal and
$7,000 of interest pursuant to the convertible note payable described in Note 6(o).
During the year ended December 31, 2019, the
Company issued a total of 31,174,816 shares of the Company’s common stock upon the conversion of $95,650 of principal and
$3,780 of interest of the convertible note payable pursuant to the convertible note payable described in Note 6(p).
During the year ended December 31, 2019, the
Company issued a total of 32,622,223 shares of the Company’s common stock upon the conversion of $49,500 of principal and
$1,980 of interest of the convertible note payable and $179 of accrued interest pursuant to the convertible note payable described
in Note 6(q).
During the year ended December 31, 2019, the
Company issued a total of 5,207,600 shares of the Company’s common stock upon the conversion of $4,508 of principal and $179
of interest pursuant to the convertible note payable described in Note 6(r).
During the year ended December 31, 2019, the
Company issued a total of 7,500,000 shares of the Company’s common stock upon the conversion of $8,640 pursuant to the convertible
note payable described in Note 6(s).
During the year ended December 31, 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(t).
During the year ended December 31, 2019, the
Company issued a total of 31,860,367 shares of the Company’s common stock upon the conversion of $30,000 of principal pursuant
to the convertible note payable described in Note 6(u).
During the year ended December 31, 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(v).
During the year ended December 31, 2019, the
Company issued a total of 68,900,000 shares of the Company’s common stock upon the conversion of $79,500 of principal and
$3,180 pursuant to the convertible note payable described in Note 6(w).
During the year ended December 31, 2019, the
Company issued a total of 11,490,000 shares of the Company’s common stock upon the conversion of $27,804 of principal and
$5,287 of interest pursuant to the convertible note payable described in Note 6(x).
During the year ended December 31, 2019, the
Company issued a total of 59,440,816 shares of the Company’s common stock upon the conversion of $57,000 of principal and
$2,280 of interest pursuant to the convertible note payable described in Note 6(y).
During the year ended December 31, 2019, the
Company issued 24,928,288 shares of common stock upon the cashless exercise of 18,585,714 warrants.
On August 1, 2019, the Company entered into
a consulting agreement for investor relations services through December 31, 2019. The agreement called for 1,000,000 restricted
shares of common stock to be issued to the consultant. As of December 31, 2019, the Company recorded the fair value of the shares
of $15,000 for the consulting expense related to the consulting services provided.
On October 1, 2019, the Company entered into
a consulting agreement for investor relations services through March 31, 2020. The agreement called for a cash payment of $25,000
and 12,000,000 restricted shares of common stock to be issued to the consultant. As of December 31, 2019, the Company recorded
the fair value of the shares of $61,200 for the consulting expense related to the consulting services provided. At December 31,
2019, $30,600 was recorded as prepaid expenses.
On January 2, 2018, the Company sold 110,000 shares of common stock to an un-related party for $55,000.
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. Per the terms of the agreement, the consulting company received a non-refundable
$5,000 initial fee, will receive $2,500 per month beginning in April 2018, and was issued 2,000,000 fully vested non-forfeitable
shares of restricted common stock, valued at $1,000,000 ($0.50 per shares). The 2,000,000 common shares of the Company’s
stock were issued on June 12, 2018. As of December 31, 2018 the Company recorded the fair value of the common shares of $1,000,000
in common stock and additional paid in capital and has recorded $797,260 for the consulting expense related to the portion of the
12-month service agreement that has been completed.
On April 10, 2018 the Company issued 120,000
shares of common stock at $0.50 per share to an employee and Director of the Company for cash proceeds of $60,000.
On June 12, 2018, the Company entered into
a 6-month service agreement, expiring on December 12, 2018, for business development and the development of financial reports.
Per the terms of the agreement, the consulting company was issued 50,000 shares of restricted stock on June 29, 2018. As of December
31, 2018, the Company recorded the fair value of the common shares of $28,000 in common stock and additional paid in capital and
has recorded $28,000 for the consulting expense related to the portion of the 6-month service agreement that has been completed.
On July 2, 2018 the Company’s Board of
Directors authorized the issuance of 1,000,000 restricted shares of common stock to Life Sciences Journeys, Inc., for six months
of services outlined in the July 2, 2018 services agreement. The 1,000,000 restricted shares of common stock were issued to Life
Sciences Journeys, Inc. on October 9, 2018. The Company placed a stop transfer order on the shares but has since rescinded the
stop transfer order. The Company recorded the fair value of the common shares of $355,000 in common stock and additional paid in
capital and has recorded $355,000 for the consulting services, during the year ended December 31, 2018.
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 pursuant to the agreement the Company issued the consultant 100,000 common shares. As of December 31, 2018 the Company recorded
the fair value of the common shares of $17,000 in common stock and additional paid in capital and has recorded $2,615 for the consulting
expense related to the portion of the 6-month service agreement that has been completed.
NOTE 9 – STOCK OPTIONS
The Company did not grant any stock options
during the year ended December 31, 2018 or the year ended December 31, 2019.
Below is a table summarizing the options issued
and outstanding as of December 31, 2019:
|
|
Number of
warrants
|
|
Weighted average exercise price
$
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
|
2,287,500
|
|
|
|
0.34
|
|
|
Granted
|
|
|
|
—
|
|
|
|
—
|
|
|
Expired
|
|
|
|
(2,087,500
|
)
|
|
|
0.18
|
|
|
Settled
|
|
|
|
—
|
|
|
|
—
|
|
|
Balance, December 31, 2019
|
|
|
|
200,000
|
|
|
|
2.00
|
|
As at December 31, 2019, the following share stock options were
outstanding:
Date
|
|
Number
|
|
Number
|
|
Exercise
|
|
Weighted Average Remaining Contractual
|
|
Expiration
|
|
Proceeds to Company if
|
Issued
|
|
Outstanding
|
|
Exercisable
|
|
Price $
|
|
Life (Years)
|
|
Date
|
|
Exercised
|
|
01/26/2017
|
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
2.00
|
|
|
|
2.07
|
|
|
|
01/26/2022
|
|
|
|
400,000
|
|
|
|
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
400,000
|
|
The weighted average exercise prices are $2.00
for the options outstanding and exercisable, respectively. The intrinsic value of stock options outstanding at December 31, 2019
was $Nil.
NOTE 10 – 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 $0.00035 per share for 5 years and 300,000
warrants subject to an exercise price of $0.0288 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.
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
|
|
|
(18,628,986
|
)
|
|
|
0.00088
|
|
Balance, December 31, 2019
|
|
|
413,816,252
|
|
|
|
0.00053
|
|
As at December 31, 2019, the following share purchase warrants were
outstanding:
Date
|
|
Number
|
|
Number
|
|
Exercise
|
|
Weighted Average Remaining Contractual
|
|
Expiration
|
|
Proceeds to Company if
|
Issued
|
|
Outstanding
|
|
Exercisable
|
|
Price $
|
|
Life (Years)
|
|
Date
|
|
Exercised
|
|
11/28/2018
|
|
|
|
142,857,143*
|
|
|
|
142,857,143*
|
|
|
|
0.00035
|
*
|
|
|
1.91
|
|
|
|
11/28/2021
|
|
|
$
|
50,000
|
|
12/3/2018
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
0.10
|
|
|
|
3.93
|
|
|
|
12/3/2023
|
|
|
|
50,000
|
|
2/14/2019
|
|
|
|
152,899,585*
|
|
|
|
152,899,585*
|
|
|
|
0.00035
|
*
|
|
|
4.13
|
|
|
|
2/14/2024
|
|
|
|
53,515
|
|
3/13/2019
|
|
|
|
107,142,857*
|
|
|
|
107,142,857*
|
|
|
|
0.00035
|
*
|
|
|
4.20
|
|
|
|
3/13/2024
|
|
|
|
37,500
|
|
9/11/2019
|
|
|
|
10,416,667*
|
|
|
|
10,416,667*
|
|
|
|
0.00288
|
*
|
|
|
4.70
|
|
|
|
9/11/2024
|
|
|
|
30,000
|
|
|
|
|
|
413,816,252
|
|
|
|
413,816,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
221,015
|
*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 December 31, 2019 was $2,556,872.
NOTE 11 – 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, 8, 9 and 12 for more details.
NOTE 12 – 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.
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 was 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 December 31, 2019. The agreement called for 1,000,000 restricted
shares of common stock to be issued to the consultant. As of December 31, 2019, the Company recorded the fair value of the shares
of $15,000 for the consulting expense related to the consulting services provided.
On October 1, 2019, the Company entered into
a consulting agreement for investor relations services through March 31, 2020. The agreement called for a cash payment of $25,000
and 12,000,000 restricted shares of common stock to be issued to the consultant. As of December 31, 2019, the Company recorded
the fair value of the shares of $61,200 for the consulting expense related to the consulting services provided. At December 31,
2019, $30,600 was recorded as prepaid expenses.
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 July 30, 2019, the Company accepted the resignation of Marty Paris as
part of a settlement agreement by which PCT Corp. settled an invoice payable to Annihilare (“AMS”).
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 Series B shares 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 Series B shares 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. Mr. Grieco’s salary increased to $48,000 per year,
beginning on April 1, 2020 and the Company issued 15,000,000 fully-paid an non-assessable shares of the Company’s common
shares; upon obtaining profitability, the Company will issue and additional 10,000,000 restricted shares of its common stock, as
fully paid and non-assessable, as bonus compensation in lieu of cash payment.
Other Obligations and Commitments –
On April 12, 2018, 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, finalizing the transaction by executing the sale of the registration during 2019.
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”. Pursuant to the terms of 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. for a definitive
loan and option agreement to include the acquisition of at least 51% control 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.
NOTE 13 – INCOME TAXES
There was no provision for, or benefit
from, income tax during the years ended December 31, 2019 and 2018 respectively. The Company was subject to United States
federal and state income taxes at an approximate rate of 21% for the year ended December 31, 2019.
The components of the net deferred
tax asset as of December 31, 2019, and 2018:
For the year ended December 31,
|
|
2019
|
|
2018
|
Net operating loss carry forwards
|
|
$
|
6,089,157
|
|
|
$
|
2,607,659
|
|
Stock/options issued for services
|
|
|
(370,925
|
)
|
|
|
(323,275
|
)
|
Stock/option issued for acquisitions
|
|
|
(106,856
|
)
|
|
|
(106,856
|
)
|
Loss on settlement of debt
|
|
|
(14,220
|
)
|
|
|
—
|
|
Contributed services
|
|
|
(77,997
|
)
|
|
|
(77,997
|
)
|
Depreciation and Amortization
|
|
|
(246,353
|
)
|
|
|
(175,363
|
)
|
Meals & Entertainment
|
|
|
(1,809
|
)
|
|
|
(1,809
|
)
|
Loss on change in fair value of conversion features
|
|
|
(2,758,381
|
)
|
|
|
(46,820
|
)
|
Accretion of discount on convertible note
|
|
|
(170,340
|
)
|
|
|
(12,640
|
)
|
Loss on preferred share liability
|
|
|
(2,490
|
)
|
|
|
(17,710
|
)
|
Valuation allowance
|
|
$
|
(2,339,786
|
)
|
|
$
|
(1,845,189
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
Federal and state net operating loss carry
forwards at December 31, 2019 were $8,897,092. The net operating loss carry forwards expire between 2033 and 2039.
The following is a reconciliation of the
amount of benefit that would result from applying the federal statutory rate to pretax loss with the provision for income taxes
for the years ended December 31, 2019 and 2018, respectively:
For the Years Ended December 31,
|
|
2019
|
|
2018
|
Book income (loss) from operations
|
|
$
|
(3,481,498
|
)
|
|
$
|
(668,321
|
)
|
Stock/options issued for services
|
|
|
47,650
|
|
|
|
248,400
|
|
Depreciation & Amortization
|
|
|
70,990
|
|
|
|
70,710
|
|
Meals & Entertainment
|
|
|
—
|
|
|
|
1,550
|
|
Loss on settlement of debt
|
|
|
14,220
|
|
|
|
—
|
|
Loss on change in fair value of conversion feature
|
|
|
2,711,560
|
|
|
|
46,820
|
|
Accretion of discount on convertible note
|
|
|
157,700
|
|
|
|
12,640
|
|
Preferred share liability loss
|
|
|
(15,220
|
)
|
|
|
17,710
|
|
Change in valuation allowance
|
|
|
494,598
|
|
|
|
270,491
|
|
Provision for Income Taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
In June 2006, FASB issued FASB ASC 740-10-05-6.
The Company adopted FASB ASC 740-10-05-6 on January 1, 2013. Under FASB ASC 740-10-05-6, tax benefits are recognized only for the
tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured
as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax
benefits are tax benefits claimed in the company's tax return that do not meet these recognition and measurement standards.
Upon the adoption of FASB ASC 740-10-05-6,
the Company had no liabilities for unrecognized tax benefits and, as such, the adoption had no impact on its financial statements,
and the Company has recorded no additional interest or penalties. The Adoption of FASB ASC 740-10-05-6 did not impact the Company's
effective tax rates.
The Company's policy is to recognize potential
interest and penalties accrued related to unrecognized tax benefits with the income tax expense. For the years ended December 31,
2019, and 2018, the Company did not recognize any interest or penalties in its Statement of Operations, nor did it have any interest
or penalties accrued in its Balance Sheet at December 31, 2019 and 2018 relating to unrecognized benefits.
The tax years 2019 and 2018 remain
open to examination for federal income tax purposes and by other major taxing jurisdictions to which the Company is subject.
NOTE 14. SUBSEQUENT EVENTS
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 January 8, 2020, 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 received advances of $15,575.
From January 9, 2020
through January 13, 2020, the Company issued a total of 36,050,000 shares of common stock upon the conversion of $17,093 of principal,
$3,507 of interest and of fees pursuant to the convertible notes payable described in Note 6(n).
On February 7, 2020,
the Company agreed to settle $39,054 of principal and accrued interest outstanding on the note described in Note 6(f) through the
issuance of 39,000 Shares of Series C Preferred Stock and the payment of $54.
On February 7, 2020, the Company entered
into an agreement to settle the $175,814 convertible note payable described in Note 6(aa) and $5,279 of interest accrued on the
note through the issuance of 181,000 Shares of Series C Preferred Stock and the payment of $93.
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(n). The additional tranche consisted of a
$888 original issue discount resulting in cash proceeds to the Company of $8,000.
On March 5, 2020, the Company received
an additional tranche of $30,000 pursuant to the convertible note described in Note 6(n). The additional tranche consisted of a
$3,000 original issue discount resulting in cash proceeds to the Company of $27,000.
On March 20, 2020, the Company entered
into a consulting agreement. Pursuant to the agreement the consultant will provide investor relations services for a period of
six months. To date the Company had issued the consultant 150,000 shares of common stock for services received.
On March 9, 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
proceeds to the Company of $42,000. The note is due on March 2, 2021 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 March 9, 2020, the Company entered
into a promissory note with a non-related party for $20,000. The note is due May 28, 2020, is unsecured and bears an interest rate
of 8% per annum.
From March 1, 2020 through March 30,
2020, the Company sold 270,000 Series C Convertible Preferred Shares for $270,000.
On April 1, 2020, the
Company issued a promissory note for $100,000. The note bears interest at $2,500 per month is repayable in four monthly $27,500
payments commencing May 1, 2020. The Company issued the lender 250,000 shares of the Company’s common stock as consideration
for the loan.
On April 2, 2020, the
Company entered into a settlement agreement to settle the $60,000 and $26,000 convertible notes described in Notes 6(u) and (z).
The Company agreed to pay $100,000 to settle the principal and accrued interest and penalties relating to the two convertible notes.
On April 10, 2020, the Company entered into
a convertible promissory note with a non-related party for $150,000 of which $18,000 was an original issue discount resulting in
cash proceeds to the Company of $132,000. The note is due on April 9, 2021 and bears interest on the unpaid principal balance at
a rate of 5% per annum and any part of the note which is not paid when due shall bear interest at the rate of 12% per annum from
the due date until paid. The Note may be converted by the Lender at any time into shares of Company’s common stock at a conversion
price equal to 65% of the lowest trading price during the 25-trading day period prior to the conversion date.
On April 16, 2020, the Company entered into
a convertible promissory with a non-related party for $128,000 of which $3,000 was an original issue discount resulting in cash
proceeds to the Company of $125,000. The note is due on March 2, 2021 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 April 21, 2020, the Company issued 1,000,000
shares of common stock to an employee of the Company for cash proceeds of $10,000.
On April 24, 2020, the Company issued 2,750,000
shares of common stock for cash proceeds of $110,000.
On May 5, 2020, the Company consolidated
this note with the two notes described in Notes 6(d) and (g) into a new note with a principal amount of $118,644 and a maturity
date of May 5, 2021. The note beards interest at 8% per annum and in connection with the consolidation the Company issued the lender
15,000,000 shares of the Company’s common stock.
From April 1, 2020 through
May 8, 2020, the Company issued 9,246,186 shares of common stock upon the cashless exercise of 9,280,742 warrants.
On May 11, 2020, the Company entered
into a settlement agreement to settle the $60,000 convertible notes described in Note 6(s). The Company agreed to pay $100,000
to settle the principal and accrued interest and penalties relating the convertible note.
On May 12, 2020, the Company entered into a
convertible promissory with a non-related party for $83,000 of which $3,000 was an original issue discount resulting in cash proceeds
to the Company of $42,000. The note is due on November 8, 2021 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 July 6, 2020, the Company entered
into a consulting agreement. Pursuant to the agreement the consultant will provide investor relations services for 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 7, 2020, the Company entered
into a promissory note with a non-related party for $150,000. The note is due October 5, 2020, is unsecured and bears an interest
rate of 10% per annum.
On July 15, 2020, the Company entered
into a promissory note with a non-related party for $119,200. The note is repayable in $7,450 weekly payments.