The unaudited interim condensed consolidated
financial statements of PCT LTD (the “Company”) have been prepared in accordance with United States generally accepted
accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which,
in the opinion of management, are necessary for a fair presentation of our balance sheet, statements of operations, stockholders’
equity (deficit), and cash flows for the periods presented. All such adjustments are of a normal recurring nature. The
results of operations for the interim period are not necessarily indicative of the results to be expected for a full year.
Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the Company’s December 31, 2019 audited financial statements
as reported in its Form 10-K, filed on August 3, 2020.
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.
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.”).
There have been no changes to the significant
accounting policies of the Company from the information provided in Note 1 of the Notes to the Consolidated Financial Statements
in the Company's most recent Form 10-K.
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 March 31, 2020, there were outstanding common share equivalents (options, warrants, convertible debt, preferred
series A stock and preferred series C stock) which amounted to 669,955,797 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.
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 the adoption of ASU 2018-13 did not 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 $37,057,215 and has negative cash flows from operations. As of March 31, 2020, the Company had a working capital deficit
of $23,176,735. 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 $6,153 and
$5,884 for the three-months ended March 31, 2020 and 2019, respectively.
Amortization expense was $76,868 and $79,028
for the three-months ended March 31, 2020 and 2019, respectively.
NOTE 5. Notes
Payable
The following tables summarize notes payable
as of March 31, 2020 and December 31, 2019:
Type
|
Original
Amount
|
Origination
Date
|
Maturity
Date
|
Annual
Interest
Rate
|
Balance at
March 31,
2020
|
Balance at
December 31,
2019
|
Note Payable **
|
$ 25,000
|
05/08/2017
|
06/30/2018
|
0%
|
$ 27,500
|
$ 27,500
|
Note Payable **
|
$ 130,000
|
06/20/2018
|
01/02/2020
|
8%
|
$ 130,000
|
$ 130,000
|
Note Payable **
|
$ 8,700
|
11/15/2018
|
06/30/2019
|
10%
|
$ 8,700
|
$ 8,700
|
Note Payable
|
$ 90,596
|
09/15/2019
|
05/28/2020
|
8%
|
$ 90,596
|
$ 90,596
|
Note Payable (j)
|
$ 50,000
|
10/03/2019
|
04/03/2020
|
12%
|
$ -
|
$ 37,500
|
Note Payable
|
$ 17,500
|
11/12/2019
|
11/12/2020
|
8%
|
$ 17,500
|
$ 17,500
|
Note Payable **
|
$ 83,400
|
12/20/2019
|
06/19/2020
|
150%
|
$ 51,322
|
$ 80,192
|
Note Payable
|
$ 148,362
|
12/20/2019
|
11/27/2020
|
80%
|
$ 106,950
|
$ 145,404
|
Note Payable (a)
|
$ 26,933
|
01/08/2020
|
05/13/2020
|
318%
|
$ 10,983
|
$ -
|
Note Payable (b)
|
$ 33,660
|
02/19/2020
|
04/30/2020
|
585%
|
$ 14,520
|
$ -
|
Note Payable (c)
|
$ 20,000
|
02/28/2020
|
05/28/2020
|
8%
|
$ 20,000
|
$ -
|
Note Payable (d)
|
$ 100,000
|
03/31/2020
|
08/01/2020
|
30%
|
$ 100,000
|
$ -
|
Subtotal
|
|
|
|
|
$ 578,071
|
$ 537,392
|
Debt discount
|
|
|
|
|
$ (34,926)
|
$ (69,239)
|
Balance, net
|
|
|
|
|
$ 543,145
|
$ 468,153
|
Less current portion
|
|
|
|
|
$ (543,145)
|
$ (468,153)
|
Total long-term
|
|
|
|
|
$ -
|
$ -
|
|
|
|
|
|
|
|
** Currently in default
|
|
|
|
a)
|
On January 8, 2020, the Company sold future receivables with a non-related party for up to $87,540.
During the period $26,933 was sold, of which $11,358 was loan fees and original issue discount resulting in cash proceeds to the
Company of $15,575. The advance is to be repaid through $1,450 weekly payments. In connection with the advance, the Company granted
the lender a security interest in all accounts, equipment, intangibles and inventory.
|
|
b)
|
On February 19, 2020, the Company sold future receivables with a non-related party for $33,660,
of which $13,710 was loan fees and original issue discount resulting in cash proceeds to the Company of $19,950. The advance is
to be repaid through $660 daily payments. In connection with the advance, the Company granted the lender a security interest in
all accounts, equipment, intangibles and inventory.
|
|
c)
|
On February 28, 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.
|
|
d)
|
On March 31, 2020, the Company entered into a promissory note with a non-related party for $100,000.
The note is due August 1, 2020, is unsecured and bears interest at $2,500 per month, repayable in four monthly payments of $27,500
commencing May 1, 2020. Additionally, the Company issued the lender 250,000 shares of the Company’s common stock with a fair
market value of $8,225 as additional consideration for the loan.
|
The following table summarizes notes payable,
related parties as of March 31, 2020 and December 31, 2019:
Type
|
Original Amount
|
Origination
Date
|
Maturity
Date
|
Annual
Interest
Rate
|
Balance at
March 31,
2020
|
Balance at
December 31,
2019
|
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%
|
$ 314,214
|
$ 325,000
|
Note Payable, RP **
|
$ 17,000
|
06/20/2018
|
01/02/2020
|
5%
|
$ 17,000
|
$ 17,000
|
Note Payable, RP **
|
$ 50,000
|
07/27/2018
|
11/30/2018
|
8%
|
$ 50,000
|
$ 50,000
|
Note Payable, RP
|
$ 5,000
|
10/09/2018
|
Demand
|
0%
|
$ 5,000
|
$ 5,000
|
Note Payable, RP
|
$ 5,000
|
10/19/2018
|
Demand
|
0%
|
$ 5,000
|
$ 5,000
|
Note Payable, RP **
|
$ 15,000
|
08/16/2019
|
02/16/2020
|
8%
|
$ 15,000
|
$ 15,000
|
Note Payable, RP (e)
|
$ 1,500
|
02/11/2020
|
Demand
|
0%
|
$ 2,000
|
$ -
|
Note Payable, RP (f)
|
$ 2,000
|
02/11/2020
|
Demand
|
0%
|
$ 2,000
|
$ -
|
Subtotal
|
|
|
|
|
$ 818,214
|
$ 827,000
|
Debt discount
|
|
|
|
|
$ -
|
$ (43)
|
Balance, net
|
|
|
|
|
$ 818,214
|
$ 826,957
|
Less current portion
|
|
|
|
|
$ (818,214)
|
$ (826,957)
|
Total long-term
|
|
|
|
|
$ -
|
$ -
|
|
** Currently in default
|
|
|
|
e)
|
On February 11, 2020, the Company entered into a promissory note
with the Chairman and CEO of the Company for $1,500. The note is due on demand, is unsecured and bears an interest rate of 0% per
annum.
|
|
f)
|
On February 11, 2020, the Company entered into a promissory note
with the COO and Director of the Company for $2,000. The note is due on demand, is unsecured and bears an interest rate of 0% per
annum.
|
The following table summarizes convertible
notes payable as of March 31, 2020 and December 31, 2019:
Type
|
Original
Amount
|
Origination
Date
|
Maturity
Date
|
Annual
Interest
Rate
|
Balance at
March 31,
2020
|
Balance at
December 31,
2019
|
Convertible Note Payable (g) * **
|
$ 50,000
|
12/06/2018
|
12/06/2019
|
12%
|
$ 5,685
|
$ 22,777
|
Convertible Note Payable * **
|
$ 65,000
|
12/06/2018
|
12/06/2019
|
12%
|
$ 46
|
$ 46
|
Convertible Note Payable (h) * **
|
$ 100,000
|
01/18/2019
|
01/16/2020
|
24%
|
$ 105,041
|
$ 95,492
|
Convertible Note Payable * **
|
$ 60,000
|
01/29/2019
|
01/22/2020
|
18%
|
$ 266,050
|
$ 266,050
|
Convertible Note Payable * **
|
$ 50,000
|
02/01/2019
|
10/22/2019
|
24%
|
$ 154,330
|
$ 154,330
|
Convertible Note Payable * **
|
$ 60,000
|
02/21/2019
|
02/14/2022
|
0%
|
$ 74,000
|
$ 74,000
|
Convertible Note Payable (i) * **
|
$ 55,125
|
02/21/2019
|
02/20/2020
|
24%
|
$ 46,338
|
$ 42,125
|
Convertible Note Payable * **
|
$ 75,000
|
03/18/2019
|
12/13/2019
|
24%
|
$ 232,814
|
$ 232,814
|
Convertible Note Payable * **
|
$ 26,000
|
09/16/2019
|
09/11/2022
|
0%
|
$ 26,000
|
$ 26,000
|
Convertible Note Payable (j)
|
$ 175,814
|
09/27/2019
|
09/25/2020
|
8%
|
$ -
|
$ 175,814
|
Convertible Note Payable
|
$ 53,000
|
10/08/2019
|
10/07/2020
|
12%
|
$ 53,000
|
$ 53,000
|
Convertible Note Payable
|
$ 50,000
|
10/31/2019
|
10/29/2020
|
12%
|
$ 50,000
|
$ 50,000
|
Convertible Note Payable (k)
|
$ 8,888
|
02/19/2020
|
02/18/2021
|
5%
|
$ -
|
$ -
|
Convertible Note Payable (l)
|
$ 30,000
|
03/06/2020
|
03/05/2021
|
5%
|
$ 30,000
|
$ -
|
Convertible Note Payable (m)
|
$ 45,000
|
03/09/2020
|
03/02/2021
|
12%
|
$ 45,000
|
$ -
|
Subtotal
|
|
|
|
|
$ 1,088,304
|
$ 1,192,448
|
Debt discount
|
|
|
|
|
$ (32,539)
|
$ (4,815)
|
Balance, net
|
|
|
|
|
$ 1,055,765
|
$ 1,187,633
|
Less current portion
|
|
|
|
|
$ (1,055,765)
|
$ (1,187,633)
|
Total long-term
|
|
|
|
|
$ -
|
$ -
|
* Embedded conversion feature accounted for as a derivative liability
at period end
** Currently in default
|
|
|
|
g)
|
During the period ended March 31, 2020, $17,092 of principal and
$3,507 of interest of the convertible note payable was converted into 36,050,000 shares of the Company’s common stock.
|
|
h)
|
During the period ended March 31, 2020, the Company was further assessed default penalties and
interest on this convertible note as the note reached maturity. Additional default and penalties were assessed in the amount of
$72,795 of which $9,549 was recorded as a principal addition and $63,246 was recorded in accrued interest.
|
|
i)
|
During the period ended March 31, 2020, the Company was further assessed default penalties and
interest on this convertible note as the note reached maturity. Additional default and penalties were assessed in the amount of
$4,213 was recorded as a principal addition to the note.
|
|
j)
|
On February 7, 2020, the Company extinguished both promissory note (totaling $39,000) and convertible
note (totaling $181,000), including accrued interest with a non-related party through the issuance of 220,000 shares of preferred
series C stock. The Company recorded the difference between the fair value of the preferred series C stock of $264,000 and the
debt outstanding of $220,000 as a loss on extinguishment of debt of $44,000.
|
|
k)
|
On
February 19, 2020, the Company received another tranche on a convertible note originally
dated December 6, 2018. The new tranche had a principal amount of $8,888, with an original
issue discount of $888. The convertible note is due 365 days from issuance, bears interest
at 5% per annum and is convertible into common shares of the Company at 65% multiplied
by the lowest traded price or lowest closing bid price during the 25 days the Company’s
stock is tradable prior to the conversion date. Further, if at any time the stock price
is less than $0.30 an additional 20% discount is applied and if at any time the conversion
price is less than $0.01 and additional 10% is applied. Further, an additional 15% is
applied if the Company fails to comply with its reporting requirements. During the period,
all these additional discounts were triggered.
The
embedded conversion option qualified for derivative accounting and bifurcation under
ASC 815-15. The initial fair value of the conversion feature was $70,719 and resulted
in a discount to the note payable of $8,000 and an initial derivative expense of $62,719.
During
the period ended March 31, 2020, the entire amount was repaid.
|
|
l)
|
On March 6, 2020, the Company received another tranche on a convertible note originally dated December 6, 2018. The new tranche had a principal amount of $30,000, with an original issue discount of $4,000. The convertible note is due 365 days from issuance, bears interest at 5% per annum and is convertible into common shares of the Company at 65% multiplied by the lowest traded price or lowest closing bid price during the 25 days the Company’s stock is tradable prior to the conversion date. Further, if at any time the stock price is less than $0.30 an additional 20% discount is applied and if at any time the conversion price is less than $0.01 and additional 10% is applied. Further, an additional 15% is applied if the Company fails to comply with its reporting requirements. During the period, all these additional discounts were triggered.
The embedded conversion option qualified for derivative
accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $391,837 and resulted in a discount
to the note payable of $26,000 and an initial derivative expense of $365,837.
|
|
m)
|
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. As the
note isn’t convertible until 180 days following issuance, no derivative liability was recognized as of March 31, 2020.
|
NOTE 6. DERIVATIVE LIABILITIES
The embedded conversion option of (1) the convertible
debentures described in Note 5; (2) 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 5, the Company concluded that it only has sufficient shares to satisfy the conversion of some but not
all of the outstanding convertible notes, warrants and options. The Company elected to reclassify contracts from equity with the
earliest inception date first. As a result, none of the Company’s previously outstanding convertible instruments qualified
for derivative reclassification, however, any convertible securities issued after the election, including the warrants described
in Note 9, qualified for derivative classification. The Company reassesses the classification of the instruments at each balance
sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date
of the event that caused the reclassification.
The table below sets forth a summary of changes in the fair value
of the Company’s Level 3 financial liabilities.
|
|
March 31,
2020
|
|
December 31,
2019
|
Balance at the beginning of period
|
|
$
|
10,517,873
|
|
|
$
|
322,976
|
|
Original discount limited to proceeds of notes
|
|
|
34,000
|
|
|
|
540,750
|
|
Fair value of derivative liabilities in excess of notes proceeds received
|
|
|
428,556
|
|
|
|
1,653,887
|
|
Settlement of derivative instruments
|
|
|
(376,111
|
)
|
|
|
(3,258,054
|
)
|
Change in fair value of embedded conversion option
|
|
|
8,866,206
|
|
|
|
11,258,314
|
|
Balance at the end of the period
|
|
$
|
19,470,524
|
|
|
$
|
10,517,873
|
|
The Company uses Level 3 inputs for its valuation
methodology for the embedded conversion option and warrant liabilities as their fair values were determined by using the Binomial
Model based on various assumptions.
Significant changes in any of these inputs
in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the
lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the
calculations:
|
|
Expected Volatility
|
|
|
Risk-free Interest Rate
|
|
|
Expected Dividend Yield
|
|
Expected Life (in years)
|
At issuance during the period
|
|
336-344
|
%
|
|
0.39-1.47
|
%
|
|
|
0
|
%
|
|
|
1.00
|
|
At March 31, 2020
|
|
232-368
|
%
|
|
0.11-0.29
|
%
|
|
|
0
|
%
|
|
|
0.25-3.68
|
|
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.
NOTE 7. STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock
On February 7, 2020, the Company extinguished
a promissory note and convertible note, including accrued interest through the issuance of 220,000 shares of preferred series C
stock. The Company recorded the difference between the fair value of the preferred series C stock of $264,000 and the debt outstanding
of $220,000 as a loss on extinguishment of debt of $44,000.
From March 16, 2020 through March 30,
2020, the Company sold 270,000 shares of preferred series C stock for proceeds of $270,000.
The preferred series C stock sold during
the period contained a beneficial conversion feature as the conversion price was less than the fair value of the common stock which
the instrument is convertible at the commitment date. During the three-months ended March 31, 2020, the intrinsic value of the
270,000 shares sold was $270,000. As the preferred series C stock are have no stated maturity date and are convertible at any time,
the discount created in the preferred series C stock is fully amortized at issuance as a deemed dividend.
As of March 31, 2020, there were 490,000
shares of preferred series C stock issued and outstanding.
Common Stock
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 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 October 4, 2019, F. Jody Read resigned from the position of CEO and moved back into the role of COO. The terms of his employment
agreement remained unchanged. As of March 31, 2020, 750,000 shares were issued and the Company had recognized $130,911 of compensation
expense.
During the period ended March 31, 2020, $17,092
of principal and $3,507 of interest of a convertible note payable was converted into 36,050,000 shares of the Company’s common
stock as further described in Note 5(g).
On January 1, 2020, the Company issued 15,000,000
fully vested shares of the Company’s common stock to Gary J. Grieco, its President and CEO, pursuant to an employment agreement.
The Company recorded the fair value of the common shares of $99,000 as stock-based compensation.
On March 20, 2020, the Company issued 150,000
shares of common stock to a consultant. The Company recorded the fair value of the common shares of $5,880 in consulting expense.
On March 31, 2020, the Company issued 250,000
shares of common stock pursuant to a loan agreement. The Company recorded the fair value of the common shares of $8,225 in interest
expense.
NOTE 8. STOCK OPTIONS
Below is a table summarizing the options issued
and outstanding as of March 31, 2020:
|
|
Number of options
|
|
Weighted average exercise price
$
|
Balance, December 31, 2019
|
|
|
|
200,000
|
|
|
|
2.00
|
|
Granted
|
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
|
—
|
|
|
|
—
|
|
Settled
|
|
|
|
—
|
|
|
|
—
|
|
Balance, March 31, 2020
|
|
|
|
200,000
|
|
|
|
2.00
|
|
As at March 31, 2020, 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
|
|
|
|
1.82
|
|
|
|
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 March 31, 2020 was
$nil.
NOTE 9. WARRANTS
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 6.
The following table summarizes the continuity
of share purchase warrants:
|
|
Number of
warrants
|
|
Weighted average exercise price
$
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
413,816,252
|
|
|
|
0.00053
|
|
Adjustment to warrants outstanding
|
|
|
43,154,762
|
|
|
|
0.00056
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Settled
|
|
|
—
|
|
|
|
—
|
|
Balance, March 31, 2020
|
|
|
456,971,014
|
|
|
|
0.00048
|
|
As at March 31, 2020, 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
|
*
|
|
|
1.66
|
|
|
|
11/28/2021
|
|
|
$
|
50,000
|
|
12/3/2018
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
0.10
|
|
|
|
3.68
|
|
|
|
12/3/2023
|
|
|
|
50,000
|
|
2/14/2019
|
|
|
|
152,899,585*
|
|
|
|
152,899,585*
|
|
|
|
0.00035
|
*
|
|
|
3.88
|
|
|
|
2/14/2024
|
|
|
|
53,515
|
|
3/13/2019
|
|
|
|
107,142,857*
|
|
|
|
107,142,857*
|
|
|
|
0.00035
|
*
|
|
|
3.95
|
|
|
|
3/13/2024
|
|
|
|
37,500
|
|
9/11/2019
|
|
|
|
53,571,429*
|
|
|
|
53,571,429*
|
|
|
|
0.00056
|
*
|
|
|
4.45
|
|
|
|
9/11/2024
|
|
|
|
30,000
|
|
|
|
|
|
456,971,014
|
|
|
|
456,971,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
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 March 31, 2020 was $14,846,882.
NOTE 10. RELATED PARTY TRANSACTIONS
The Company has agreements with related
parties for consulting services, accrued rent, accrued interest, notes payable and stock options. See Notes to Financial Statements
numbers 5, 7, 8 and 11 for more details.
NOTE 11. COMMITMENTS AND CONTINGENCIES
Consulting Agreements –
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. The expense was
recognized over the service period, ending on March 31, 2020.
In addition to contracts for service,
the Company also regularly uses the professional services of securities attorneys, a US EPA specialist, professional accountants
and other public-company specialists.
Employment Agreements –
On 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 stock 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 stock were issued to Grieco. The employment
agreement begins on August 12, 2019, is automatically renewable for two years unless terminated earlier as per the terms of the
agreement. Gary Grieco entered the role of CEO of the Company upon F. Jody Read’s resignation on October 4, 2019 and entered
into a four-year employment agreement with the Company on January 1, 2020. Pursuant to the agreement Mr. Grieco will receive $48,000
per year commencing April 1, 2020 and receive 15,000,000 shares of the Company’s common stock for services to the Company
as its President and CEO. In addition, once monthly revenue exceeds monthly expenses the salary will be increased and Mr. Grieco
will be issued an additional 10,000,000 shares of the Company’s common stock. The employment agreement begins on January
1, 2020 and is automatically renewable for two years unless terminated earlier as per the terms of the agreement.
Other Obligations and Commitments –
On 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. The Company had issued the consultant 150,000 shares of common stock with a fair value of $5,880 for services received.
NOTE 12. SUBSEQUENT EVENTS
On April 2, 2020, the Company entered
into a settlement agreement to settle the $60,000 and $26,000 convertible notes described in Notes 5. 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
the three notes described in Notes 5 into a new note with a principal amount of $118,644 and a maturity date of May 5, 2021. The
note bears 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 5. 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 June 24, 2020, 50,000 shares of
preferred series C stock was converted into common stock (1 share converts into 100 shares of common stock), resulting in the issuance
of 5,000,000 shares of common stock.
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 8, 2020, the Company entered
into a consulting agreement. Pursuant to the agreement the consultant will provide business development and introductory services
for a period of five years in consideration for the issuance of 1,000,000 common shares of the Company and a 5% commission, paid
in shares, for any investments brokered.
On 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.
FORWARD-LOOKING STATEMENTS
This document contains
“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements
other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities
laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans,
strategies and objectives of management for future operations; any statements concerning proposed new services or developments;
any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions
underlying any of the foregoing.
Forward-looking statements
may include the words “may,” “could,” “estimate,” “intend,” “continue,”
“believe,” “expect” or “anticipate” or other similar words. These forward-looking statements
present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update
forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should,
however, consult further disclosures we make in this Quarterly Report on Form 10-Q, future Quarterly Reports on Form 10-Q, our
Annual Report on Form 10-K and Current Reports on Form 8-K.
Although we believe that
the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from
those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations,
as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these
risks and uncertainties include, but are not limited to:
•
|
our ability to efficiently manage and repay our debt obligations;
|
•
|
our inability to raise additional financing for working capital;
|
•
|
our ability to generate sufficient revenue in our targeted markets to support operations;
|
•
|
significant dilution resulting from our financing activities;
|
•
|
actions and initiatives taken by both current and potential competitors;
|
•
|
supply chain disruptions for components used in our products;
|
•
|
manufacturers inability to deliver components or products on time;
|
•
|
our ability to diversify our operations;
|
•
|
the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain;
|
•
|
adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
|
•
|
changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;
|
•
|
deterioration in general or global economic, market and political conditions;
|
•
|
inability to efficiently manage our operations;
|
•
|
inability to achieve future operating results;
|
•
|
the unavailability of funds for capital expenditures;
|
•
|
our ability to recruit, hire and retain key employees;
|
•
|
the global impact of COVID-19 on the United States economy and out operations;
|
•
|
the inability of management to effectively implement our strategies and business plans; and
|
•
|
the other risks and uncertainties detailed in this report.
|
In this form 10-Q references
to “PCT LTD”, “the Company”, “we,” “us,” “our” and similar terms refer
to PCT LTD and its wholly owned operating subsidiary, Paradigm Convergence Technologies Corporation (“Paradigm”).
COVID-19
The current and potential effects of
coronavirus may impact our business, results of operations and financial condition.
Actual or threatened epidemics,
pandemics, outbreaks, or other public health crises could materially and adversely impact or disrupt our operations, adversely
affect the local economies where we operate and negatively impact our customers’ spending in the impacted regions or depending
upon the severity, globally, which could materially and adversely impact our business, results of operations and financial condition.
For example, since December 2019, a strain of novel coronavirus (causing “COVD-19”) surfaced in China and has spread
into the United States, Europe and most other countries of the world, resulting in certain supply chain disruptions, volatilities
in the stock market, lower oil and other commodity prices due to diminished demand, massive unemployment, and lockdown on international
travels, all of which has had an adverse impact on the global economy. There is significant uncertainty around the breadth and
duration of the business disruptions related to COVID-19, as well as its impact on the U.S. economy. Moreover, an epidemic, pandemic,
outbreak or other public health crisis, such as COVID-19, could adversely affect our ability to adequately staff and manage our
business. The extent to which COVID-19 impacts our business, results of operations and financial condition will depend on future
developments, which are highly uncertain, rapidly changing and cannot be predicted, including new information that may emerge concerning
the severity of COVID-19 and the actions take to contain it or treat its impact.