The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NOTE 1. BASIS OF PRESENTATION AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim condensed consolidated
financial statements of PCT LTD (the “Company”) have been prepared in accordance with United States generally accepted
accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which,
in the opinion of management, are necessary for a fair presentation of our balance sheet, statements of operations, stockholders’
equity, 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, 2018 audited financial statements
as reported in its Form 10-K, filed on April 15, 2019.
Nature of Operations
PCT LTD (formerly Bingham Canyon Corporation,
(the “Company,” “PCT Ltd,” or “Bingham”), a Delaware corporation, was formed on August 27,
1986. The Company changed its domicile to Nevada on August 26, 1999.
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.”).
Principles of Consolidations
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.
Use of Estimates
The preparation of the condensed 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
Cash and cash equivalents are considered
to be cash and highly liquid securities with original maturities of three months or less. The cash of $37,298 and $4,893 as of
June 30, 2019 and December 31, 2018, respectively, represents cash on deposit in various bank accounts. There were no cash equivalents
as of June 30, 2019 and December 31, 2018.
Fair Value
Measurements
The Company follows ASC 820, “Fair
Value Measurements and Disclosures,” which defines fair value as the exchange price that would be received for an asset
or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize
the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs,
of which the first two are considered observable and the last is considered unobservable, is used to measure fair value:
|
•
|
Level 1 - Valuations for assets and liabilities traded in active markets from readily available pricing sources such as quoted prices in active markets for identical assets or liabilities.
|
|
•
|
Level 2 - Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
|
|
•
|
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
|
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 June 30, 2019, consisted of the following:
|
|
Total fair value at
June 30, 2019
$
|
|
Quoted prices in active markets
(Level 1)
$
|
|
Significant other observable inputs
(Level 2)
$
|
|
Significant unobservable inputs
(Level 3)
$
|
|
|
|
|
|
|
|
|
|
Description:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability (1)
|
|
|
3,349,099
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,349,099
|
|
Total
|
|
|
3,349,099
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,349,099
|
|
Our financial assets
and liabilities carried at fair value measured on a recurring basis as of December 31, 2018, consisted of the following:
|
|
Total fair value at
December 31,
2018
$
|
|
Quoted prices in active markets
(Level 1)
$
|
|
Significant other observable inputs
(Level 2)
$
|
|
Significant unobservable inputs
(Level 3)
$
|
|
|
|
|
|
|
|
|
|
Description:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred series A stock liability (1)
|
|
|
144,352
|
|
|
|
—
|
|
|
|
—
|
|
|
|
144,352
|
|
Derivative liability (1)
|
|
|
322,976
|
|
|
|
—
|
|
|
|
—
|
|
|
|
322,976
|
|
Total
|
|
|
467,328
|
|
|
|
—
|
|
|
|
—
|
|
|
|
467,328
|
|
(1) The Company has
estimated the fair value of these liabilities using the Binomial Model.
Derivative
and Preferred Series A Stock Liabilities
The Company accounts
for derivative instruments in accordance with ASC Topic 815, “Derivatives and Hedging” and all derivative instruments
are reflected as either assets or liabilities at fair value in the balance sheet. The Company uses estimates of fair value to value
its derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction
between willing and able market participants. In general, the Company’s policy in estimating fair values is to first look
at observable market prices for identical assets and liabilities in active markets, where available. When these are not available,
other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds,
default rates and credit spreads, relying first on observable data from active markets. Depending on the availability of observable
inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may
not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with
ASC 820 based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial
instruments at fair value as discussed above. As of June 30, 2019, and December 31, 2018, the Company had a $3,349,099 and $322,976
derivative liability, respectively and preferred series A stock liabilities of $0 and $144,352, respectively.
Fair value estimates
are made at a specific point in time, based on relevant market information and information about the financial statement. These
estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined
with precision. Changes in assumptions could significantly affect the estimates. See Note 7 for additional information.
Accounts Receivable
Trade accounts receivable are recorded at the
time product is shipped or services are provided including any shipping and handling fees. The Company provided allowances for
uncollectible accounts receivable equal to the estimated collection losses that will be incurred in collection of all receivables.
Accounts receivable is periodically evaluated for collectability bases on past credit history with customers and their current
financial condition. The Company’s management determines which accounts are past due and if deemed uncollectible, the Company
charges off the receivable in the period the determination is made. Based on management’s evaluation, the Company provided
an allowance for doubtful accounts of $0 at June 30, 2019 and December 31, 2018, respectively.
Inventories
Inventories are stated at the lower of
cost or market. Cost is determined by using the first in, first out (FIFO) method. We record the value of our inventory for estimated
obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based
upon assumptions about future demand, future pricing and market conditions. As of June 30, 2019 and December 31, 2018, the inventory
consisted of parts for equipment sold as replacement parts to existing customers or sold to new customers. The Company has recorded
a reserve allowance of $0 and $0 as of June 30, 2019 and December 31, 2018, respectively. The Company has determined that some
of the supplies inventory is necessary to be placed into service, after assembly into equipment to be used in product manufacturing
and classified as Machinery and Equipment. The balance at June 30, 2019 and December 31, 2018 of such supplies and equipment not
yet placed in service amounted to $306,225 and $319,735, respectively.
Property and Equipment
Property and equipment
are stated at purchased cost and depreciated utilizing a straight-line method over estimated useful lives ranging from 3 to 7 years
after the asset has been placed in service. Upon selling equipment that had been under a lease agreement, the company discontinues
the depreciation on that piece of equipment, as it transfers ownership to another entity. Additions and major improvements that
extend the useful lives of property and equipment are capitalized. Maintenance and repairs are charged to operations as incurred.
Upon trade-in, sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the
accounts and any related gains or losses are recorded in the results of operations.
Impairment of Long-lived Assets
The carrying values of the Company’s
long-lived assets are reviewed for impairment annually and whenever events or changes in circumstances indicate that they may not
be recoverable. When projections indicate that the carrying value of the long-lived asset is not recoverable, the carrying value
is reduced by the estimated excess of the carrying value over the fair value. Under similar analysis no impairment was recorded
during the six months ended June 30, 2019.
Intangible Assets
Costs to obtain or develop patents are capitalized
and amortized over the remaining life of the patents, and technology rights are amortized over their estimated useful lives. The
Company currently has the right to several patents and proprietary technology. Patents and technology are amortized from
the date the Company acquires or is awarded the patent or technology right, over their estimated useful lives, which range from
1 to 15 years. An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds
the fair value of the intangible assets as determined by projected discounted net future cash flows. The recorded impairment expense
was nil for the six months ended June 30, 2019.
Research and Development
Research and development costs are recognized
as an expense during the period incurred, which is until the conceptual formulation, design, and testing of a process is completed
and the process has been determined to be commercially viable.
Leases
In February 2016, the Financial Accounting
Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) ("ASC
842"), which requires lessees to recognize right-of-use ("ROU") assets and related lease liabilities on the balance
sheet for all leases greater than one year in duration. We adopted ASC 842 on January 1, 2019 using a modified retrospective transition
approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial
statements. The modified retrospective approach did not require any transition accounting for leases that expired before the earliest
comparative period presented. The adoption of this standard resulted in the recording of ROU assets and lease liabilities for our
lease agreements with original terms of greater than one year. Upon implementation, the Company recognized an initial operating
lease right-of-use asset of $43,330 and operating lease liability of $43,330. Due to the simplistic nature of the Company's leases,
no retained earnings adjustment was required. See Note 5 for further details.
Revenue Recognition
On May 2014, the FASB issued ASU No. 2014-09, Revenue
from Contracts with Customer (Topic 606). The new revenue recognition standard provides a five-step analysis of transactions
to determine when and how revenue is recognized. The core principal is that a company should recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflect the consideration to which the entity expects to be entitled
in exchange for those goods or services.
The Company has the following three revenue
streams:
1) product
sales (equipment and/or fluid solutions);
2) licensing
(contract-based use of the Company’s US EPA Product Registration, returning revenue in licensing fees and/or royalties
from minimum or actual fluid sales); and
3) equipment
leases (under systems service agreements, usually 3-year contracts for the provision of the Company’s equipment and
service of such, under contract to customers, with renewable terms).
The Company recognizes revenue from the sale
of products when the performance obligation is satisfied by transferring control of the product to a customer.
The Company recognizes revenue from the leasing
of equipment as the entity provides the equipment and the customer simultaneously receives and consumes the benefits through the
use of the equipment. This revenue generating activity would meet the criteria for a performance obligation satisfied over time.
As a result, the Company recognizes revenue over time by using the output method, as the Company can measure progress of the performance
obligation using the time elapsed under each obligation.
The Company’s licenses provide a right
to use and create performance obligations satisfied at a point in time. The Company recognizes revenue from licenses when the performance
obligation is satisfied through the transfer of the license. For licenses that include royalties the Company will recognize royalty
revenue as the underlying sales or usages occur, as long as this approach does not result in the acceleration of revenue ahead
of the entity’s performance.
The Company has disclosed disaggregated revenue
via revenue stream on the face of the statement of operations. The Company did not have any contract assets or liabilities at June
30, 2019.
Basic and Diluted Loss Per Share
Basic loss per share is computed by dividing
net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed
by dividing net loss by the weighted-average number of common shares and dilutive potential common shares outstanding during the
period. As of June 30, 2019, there were outstanding common share equivalents (options, warrants, convertible debt and preferred
series A stock) which amounted to 721,585,416 shares of common stock. These common share equivalents were not included in the computation
of diluted loss per share as their effect would have been anti-dilutive.
Recent Accounting Pronouncements
The Company has reviewed all other FASB issued
ASU accounting pronouncements and interpretations thereof that have effective dates during the period reported and in future periods.
The Company has carefully considered the new pronouncements that alter the previous GAAP and do not believe that any new or modified
principles will have a material impact on the Company’s reported financial position or operations in the near term.
NOTE 2. GOING CONCERN
The accompanying unaudited condensed consolidated
financial statements have been prepared assuming that the Company will continue as a going concern. The Company has limited assets,
has incurred losses since inception of $14,377,473 and has negative cash flows from operations. As of June 30, 2019, the Company
had a working capital deficit of $5,837,607. The Company has relied on raising debt and equity capital in order to fund its ongoing
day-to-day operations and its corporate overhead. The Company will require additional working capital from either cash flow from
operations, from debt or equity financing, or from a combination of these sources. These factors raise substantial doubt about
the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3. PROPERTY AND EQUIPMENT
Depreciation is computed using the straight-line method and is recognized
over the estimated useful lives of the property and equipment, which range from 3 to 7 years once placed into service. Depreciation
expense does not begin until documentation of equipment placed in service is provided. Machinery and leased equipment is not intended
to be sold to the customer at the end of the lease term. Depreciation expense was $12,701 and $12,946 for the six months ended
June 30, 2019 and 2018, respectively. Property and equipment at June 30, 2019 and December 31, 2018 consisted of the following:
|
|
June 30, 2019
|
|
December 31, 2018
|
Machinery and leased equipment
|
|
$
|
151,719
|
|
|
$
|
138,209
|
|
Machinery and equipment not yet in service
|
|
|
358,760
|
|
|
|
369,754
|
|
Office equipment and furniture
|
|
|
20,064
|
|
|
|
20,064
|
|
Website
|
|
|
2,760
|
|
|
|
2,760
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
$
|
533,303
|
|
|
$
|
530,787
|
|
Less: Accumulated Depreciation
|
|
|
(43,516
|
)
|
|
|
(30,815
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
489,787
|
|
|
|
499,972
|
|
NOTE 4. INTANGIBLE ASSETS
Amortization is computed using the straight-line
method and is recognized over the estimated useful lives of the intangible assets, which range from 1 to 15 years. Amortization
expense was $156,400 and $153,912 for the six months ended June 30, 2019 and 2018, respectively. Intangible assets at June 30,
2019 and December 31, 2018 consisted of the following:
|
|
June 30, 2019
|
|
December 31, 2018
|
Patents
|
|
$
|
4,505,489
|
|
|
$
|
4,514,989
|
|
Technology rights
|
|
|
200,000
|
|
|
|
235,500
|
|
Intangible, at cost
|
|
|
4,705,489
|
|
|
|
4,750,489
|
|
Less: Accumulated amortization
|
|
|
(844,616
|
)
|
|
|
(690,714
|
)
|
Net Carrying Amount
|
|
$
|
3,860,873
|
|
|
$
|
4,059,775
|
|
Estimated Future Amortization Expense:
|
|
$
|
|
For year ending December 31, 2019
|
|
|
155,168
|
|
For year ending December 31, 2020
|
|
|
303,613
|
|
For year ending December 31, 2021
|
|
|
302,003
|
|
For year ending December 31, 2022
|
|
|
302,003
|
|
For year ending December 31, 2023 to December 31, 2034
|
|
|
2,798,086
|
|
Total
|
|
|
3,860,873
|
|
On May 10, 2019, the Company sold intangible assets with a carrying
value of $92,502 for $111,323 of cash of which $53,823 was received subsequent to June 30, 2019, and the settlement of $33,677
of liabilities owed to the buyer. The Company recorded a gain on sales of intangible assets of $52,498.
NOTE 5 – LEASES
In February 2016, the FASB issued ASU
No. 2016-02, Leases, which introduced a lessee model that requires the majority of leases to be recognized on the balance
sheet. On January 1, 2019, the Company adopted the ASU using the modified retrospective transition approach and elected the transition
option to recognize the adjustment in the period of adoption rather than in the earliest period presented. The Company elected
the package of practical expedients permitted under the transition guidance within the new standard, which among other things,
allowed us to carry forward the historical lease classification. Adoption of the new standard resulted in the recording of additional
net lease assets and lease liabilities of approximately $43,330 and $43,330 respectively, as of January 1, 2019. Leases with an
initial term of 12 months or less are not recorded on the balance sheet.
The depreciable lives of operating lease
assets and leasehold improvements are limited by the expected lease term. The Company's leases generally do not provide an implicit
rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities.
The Company used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date.
The following table sets forth the ROU
assets and liabilities as of June 30, 2019:
|
|
June 30, 2019
|
Operating lease right-of-use asset
|
|
$
|
19,695
|
|
|
|
|
|
|
Operating lease liability:
|
|
|
|
|
Current operating lease liability
|
|
$
|
21,704
|
|
Noncurrent operating lease liability
|
|
|
—
|
|
Total operating lease liability
|
|
$
|
21,704
|
|
Expense related to leases is recorded
on a straight-line basis over the lease term, including rent holidays. During the six months ended June 30, 2019, the Company recognized
operating lease expense of $30,809. Operating lease costs are included within selling, administrative and other expenses on
the condensed consolidated statements of income.
Cash paid for amounts included in the
measurement of operating lease liabilities were $28,800 for the six months ended June 30, 2019. During the six months
ended June 30, 2019, the Company reduced its ROU liabilities by $21,626 from cash paid.
Our weighted average discount rate is
41% and the weighted average remaining lease term is 5 months. Lease payments over the next five years and thereafter are as follows:
|
|
June 30, 2019
|
2019 - remaining
|
|
$
|
24,000
|
|
2020 and thereafter
|
|
|
—
|
|
Total lease payments
|
|
|
24,000
|
|
Less: imputed interest
|
|
|
(2,296
|
)
|
Total ROU liabilities
|
|
$
|
21,704
|
|
As previously disclosed
in our 2018 Form 10-K under the prior guidance of ASC 840, minimum payments under operating lease agreements as of December 31,
2018 were as follows:
|
|
December 31, 2018
|
|
2019
|
|
|
$
|
52,950
|
|
|
2020
|
|
|
|
—
|
|
|
Total
|
|
|
$
|
52,950
|
|
NOTE 6. Notes
Payable
The following tables summarize notes payable
as of June 30, 2019 and December 31, 2018:
Type
|
Amount
|
Origination
Date
|
Maturity
Date
|
Annual
Interest
Rate
|
Balance at
June 30,
2019
|
Balance at
December 31, 2018
|
Note Payable***
|
|
$
|
150,000
|
|
|
5/18/2016
|
|
6/1/2019
|
|
|
19.00
|
%
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Note Payable ***
|
|
$
|
25,000
|
|
|
5/8/2017
|
|
6/30/2018
|
|
|
0.00
|
%
|
|
$
|
27,500
|
|
|
$
|
27,500
|
|
Note Payable
|
|
$
|
130,000
|
|
|
6/20/2018
|
|
1/2/2020
|
|
|
8.00
|
%
|
|
$
|
130,000
|
|
|
$
|
130,000
|
|
Note Payable (a)
|
|
$
|
126,964
|
|
|
6/20/2018
|
|
8/31/2018
|
|
|
6.00
|
%
|
|
$
|
—
|
|
|
$
|
126,964
|
|
Note Payable (b)
|
|
$
|
26,500
|
|
|
6/26/2018
|
|
10/1/2019
|
|
|
10.00
|
%
|
|
$
|
10,090
|
|
|
$
|
26,500
|
|
Note
Payable (g)
|
|
$
|
60,000
|
|
|
10/30/2018
|
|
12/30/2018
|
|
|
8.00
|
%
|
|
$
|
—
|
|
|
$
|
60,000
|
|
Note
Payable ***
|
|
$
|
8,700
|
|
|
11/15/2018
|
|
6/30/2019
|
|
|
10.00
|
%
|
|
$
|
8,700
|
|
|
$
|
8,700
|
|
Note
Payable (c)
|
|
$
|
52,063
|
|
|
4/8/2020
|
|
4/8/2020
|
|
|
41.38
|
%
|
|
$
|
42,854
|
|
|
$
|
—
|
|
Note
Payable (d)
|
|
$
|
40,000
|
|
|
6/20/2019
|
|
12/31/2019
|
|
|
8.00
|
%
|
|
$
|
40,000
|
|
|
$
|
—
|
|
Note
Payable (e)
|
|
$
|
6,741
|
|
|
6/21/2019
|
|
4/8/2020
|
|
|
41.38
|
%
|
|
$
|
6,741
|
|
|
$
|
—
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
415,885
|
|
|
$
|
529,664
|
|
Debt Discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(9,579
|
)
|
|
$
|
(3,293
|
)
|
Balance, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
406,306
|
|
|
$
|
526,371
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(406,306
|
)
|
|
$
|
(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 $18,000
was applied to the note during the six months ended June 30, 2019. At June 30, 2019, the remaining balance of the note was $10,090.
|
|
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 41.38%.
|
|
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.
|
|
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 41.38%.
|
The following table summarizes notes payable,
related parties as of June 30, 2019 and December 31, 2018:
Type
|
Amount
|
Origination
Date
|
Maturity
Date
|
Annual
Interest
Rate
|
Balance at
June 30,
2019
|
Balance at
December 31, 2018
|
Note Payable, RP ***
|
|
$
|
30,000
|
|
|
4/10/2018
|
|
1/15/2019
|
|
|
3.00
|
%
|
|
$
|
30,000
|
|
|
$
|
30,000
|
|
Note Payable, RP
|
|
$
|
380,000
|
|
|
6/20/2018
|
|
1/2/2020
|
|
|
8.00
|
%
|
|
$
|
380,000
|
|
|
$
|
380,000
|
|
Note Payable, RP
|
|
$
|
350,000
|
|
|
6/20/2018
|
|
1/2/2020
|
|
|
5.00
|
%
|
|
$
|
339,000
|
|
|
$
|
350,000
|
|
Note Payable, RP
|
|
$
|
17,000
|
|
|
6/20/2018
|
|
1/2/2020
|
|
|
5.00
|
%
|
|
$
|
17,000
|
|
|
$
|
17,000
|
|
Note Payable, RP ***
|
|
$
|
50,000
|
|
|
7/27/2018
|
|
11/30/2018
|
|
|
8.00
|
%
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
Note Payable, RP
|
|
$
|
5,000
|
|
|
10/9/2018
|
|
Demand
|
|
|
0.00
|
%
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
Note Payable, RP
|
|
$
|
5,000
|
|
|
10/19/2018
|
|
Demand
|
|
|
0.00
|
%
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
Note Payable, RP **
|
|
$
|
3,000
|
|
|
10/24/2018
|
|
Demand
|
|
|
0.00
|
%
|
|
$
|
—
|
|
|
$
|
3,000
|
|
Note Payable, RP (f)**
|
|
$
|
2,544
|
|
|
1/3/2019
|
|
6/30/2019
|
|
|
3.00
|
%
|
|
$
|
—
|
|
|
$
|
—
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
826,500
|
|
|
$
|
840,000
|
|
Debt Discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(6,637
|
)
|
|
$
|
(13,174
|
)
|
Balance, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
819,863
|
|
|
$
|
826,826
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(819,863
|
)
|
|
$
|
(93,000
|
)
|
Total long-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
733,826
|
|
** Paid off during the period
***Currently in default
|
|
f)
|
On January 3, 2019, the Company entered into a promissory note with
the Chairman and President of the Company for $2,544. The note is due June 30, 2019, is unsecured and bears an interest rate of
3.0% per annum. At June 30, 2019, the remaining balance of this note was $0.
|
The following table summarizes convertible
notes payable as of June 30, 2019 and December 31, 2018:
Type
|
Amount
|
Origination
Date
|
Maturity
Date
|
Annual
Interest
Rate
|
Balance at
March 31,
2019
|
Balance at
December 31, 2018
|
Convertible Note Payable (g)
|
|
$
|
450,000
|
|
|
3/28/2018
|
|
3/31/2021
|
|
|
8.00
|
%
|
|
$
|
—
|
|
|
$
|
450,000
|
|
Convertible Note Payable **
|
|
$
|
38,000
|
|
|
7/30/2018
|
|
7/25/2019
|
|
|
12.00
|
%
|
|
$
|
—
|
|
|
$
|
38,000
|
|
Convertible
Note Payable **
|
|
$
|
53,000
|
|
|
8/29/2018
|
|
8/27/2019
|
|
|
12.00
|
%
|
|
$
|
—
|
|
|
$
|
53,000
|
|
Convertible
Note Payable (h) *
|
|
$
|
50,000
|
|
|
12/6/2018
|
|
12/6/2019
|
|
|
5.00
|
%
|
|
$
|
36,123
|
|
|
$
|
50,000
|
|
Convertible
Note Payable (i) *
|
|
$
|
65,000
|
|
|
12/6/2018
|
|
12/6/2019
|
|
|
5.00
|
%
|
|
$
|
43,599
|
|
|
$
|
65,000
|
|
Convertible
Note Payable(j) ***
|
|
$
|
63,000
|
|
|
12/12/2018
|
|
12/5/2019
|
|
|
22.00
|
%
|
|
$
|
42,800
|
|
|
$
|
63,000
|
|
Convertible
Note Payable (g)
|
|
$
|
539,936
|
|
|
1/15/2019
|
|
1/15/2020
|
|
|
8.00
|
%
|
|
|
—
|
|
|
|
—
|
|
Convertible
Note Payable (k) ***
|
|
$
|
33,000
|
|
|
1/16/2019
|
|
1/15/2020
|
|
|
22.00
|
%
|
|
$
|
49,500
|
|
|
$
|
—
|
|
Convertible Note Payable (l)
|
|
$
|
100,000
|
|
|
1/18/2019
|
|
1/16/2020
|
|
|
8.00
|
%
|
|
$
|
100,000
|
|
|
$
|
—
|
|
Convertible Note Payable (m)
|
|
$
|
60,000
|
|
|
1/29/2019
|
|
1/22/2020
|
|
|
8.00
|
%
|
|
$
|
60,000
|
|
|
$
|
—
|
|
Convertible
Note Payable (n) *
|
|
$
|
50,000
|
|
|
2/1/2019
|
|
10/22/2019
|
|
|
12.00
|
%
|
|
$
|
50,000
|
|
|
$
|
—
|
|
Convertible
Note Payable (o) *
|
|
$
|
60,000
|
|
|
2/21/2019
|
|
2/14/2022
|
|
|
0.00
|
%
|
|
$
|
60,000
|
|
|
$
|
—
|
|
Convertible Note Payable (p)
|
|
$
|
55,125
|
|
|
2/21/2019
|
|
2/20/2020
|
|
|
8.00
|
%
|
|
$
|
55,125
|
|
|
$
|
—
|
|
Convertible
Note Payable (q) ***
|
|
$
|
53,000
|
|
|
2/26/2019
|
|
2/20/2020
|
|
|
22.00
|
%
|
|
$
|
79,500
|
|
|
$
|
—
|
|
Convertible Note Payable (r)
|
|
$
|
75,000
|
|
|
3/18/2019
|
|
12/13/2019
|
|
|
12.00
|
%
|
|
$
|
75,000
|
|
|
$
|
—
|
|
Convertible
Note Payable (s) ***
|
|
$
|
38,000
|
|
|
5/2/2019
|
|
4/29/2020
|
|
|
22.00
|
%
|
|
|
57,000
|
|
|
|
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
708,647
|
|
|
$
|
719,000
|
|
Debt Discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(212,597
|
)
|
|
$
|
(165,186
|
)
|
Balance, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
496,050
|
|
|
$
|
553,814
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(488,141
|
)
|
|
$
|
(161,280
|
)
|
Total long-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,909
|
|
|
$
|
392,534
|
|
* Embedded conversion feature accounted for as a derivative liability
** Paid off during the period
|
g)
|
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.
|
|
h)
|
During the six months ended June 30, 2019, $14,877 of principal ($13,877)
and interest ($1,000) of the convertible note payable was converted into 9,355,000 shares of the Company’s common stock.
|
|
i)
|
During the six months ended June 30, 2019, $23,401 of principal ($21,401)
and interest ($2,000) of the convertible note payable was converted into 9,040,000 shares of the Company’s common stock.
|
j)
|
In
the prior year, on December 12, 2018, the Company entered into a convertible promissory
with a non-related party for $63,000 of which $3,000 was an original issue discount resulting
in cash proceeds to the Company of $60,000. The note is due on December 5, 2019 and bears
interest on the unpaid principal balance at a rate of 12% per annum. 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 (June 10, 2019) of the date of issuance into shares of Company’s common stock
at a conversion price equal to 61% of the average 3 lowest trading prices during the
15-trading day period prior to the conversion date.
|
|
|
|
One June 10, 2019, the embedded conversion
option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging.
The initial fair value of the conversion feature was $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 $25,500 added to the principal of the note
and the remaining discount was accelerated and recognized to interest expense. During the six months
ended June 30, 2019, $45,700 of the convertible note payable was converted into 7,946,913 shares
of the Company’s common stock.
|
k)
|
On
January 16, 2019, the Company entered into a convertible promissory with a non-related
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 Derivatives and Hedging.
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.
|
|
l)
|
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. Due to this provision, the Company considered whether the embedded conversion
option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The note isn’t convertible
until 180 days following funding and no derivative liability was recognized as of June 30, 2019.
|
|
m)
|
On January 29, 2019, the Company entered into a convertible promissory
note with a non-related 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. Due to this provision, the Company considered whether the embedded
conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The note isn’t
convertible until 180 days following funding and no derivative liability was recognized as of June 30, 2019.
|
n)
|
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 be
attributed to the conversion price.
|
|
|
|
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 $158,142 and resulted in a discount to the note payable
of $50,000 and an initial derivative expense of $113,142. During the period ended June 30, 2019,
the Company recorded accretion of $18,326 increasing the carrying value of the note to $18,326.
|
o)
|
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.
|
|
|
|
The embedded conversion option and
warrant qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging.
The initial fair value of the conversion feature of $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. During
the period ended June 30, 2019, the Company recorded accretion of $7,909 increasing the carrying
value of the note to $7,909.
|
|
p)
|
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. Due to this provision, the Company considered whether the embedded conversion
option qualifies for derivative accounting under ASC 815-15 Derivatives and Hedging. The note isn’t convertible until 180
days following funding and no derivative liability was recognized as of June 30, 2019.
|
q)
|
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 Derivatives and Hedging.
The initial fair value of the conversion feature was $187,924 and resulted in a discount to the
note payable of $50,000 and an initial derivative expense of $137,924. Due to the note being in
default, the remaining discount was accelerated and recognized to interest expense.
|
r)
|
On
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.
|
|
|
|
The embedded conversion option and
warrant qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging.
The initial fair value of the conversion feature of $139,196 and the warrant of $25,401 resulted
in a discount to the note payable of $75,000 and an initial derivative expense of $99,847. During
the period ended June 30, 2019, the Company recorded accretion of $18,430 increasing the carrying
value of the note to $18,430.
|
s)
|
On
May 2, 2019, the Company entered into a convertible promissory with a non-related 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 Derivatives and Hedging.
The initial fair value of the conversion feature was $135,455 and resulted in a discount to the
note payable of $35,000 and an initial derivative expense of $100,455. Due to the note being in
default, the remaining discount was accelerated and recognized to interest expense.
|
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.
|
|
June 30,
2019
|
|
December 31,
2018
|
|
|
|
|
|
Balance at the beginning of period
|
|
$
|
322,976
|
|
|
$
|
—
|
|
Original discount limited to proceeds of notes
|
|
|
331,750
|
|
|
|
100,000
|
|
Fair value of derivative liabilities in excess of notes proceeds received
|
|
|
749,825
|
|
|
|
247,033
|
|
Settlement of derivative instruments
|
|
|
(257,268
|
)
|
|
|
—
|
|
Change in fair value of embedded conversion option
|
|
|
2,201,816
|
|
|
|
(24,057
|
)
|
Balance at the end of the period
|
|
$
|
3,349,099
|
|
|
$
|
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
|
|
128-301%
|
|
2.11-2.51%
|
|
|
0
|
%
|
|
0.49-5.00
|
At June 30, 2019
|
|
160-336%
|
|
1.71-2.23%
|
|
|
0
|
%
|
|
0.32-4.71
|
On December 1, 2018, the Company’s Board
of Director authorized an offering for 1,000,000 Preferred Series “A” stock at $0.10 per share and with 100%, regular
or cashless exercise at $0.10 per share of common stock warrant coverage. At December 31, 2018, the Company received $60,000 of
subscriptions for the issuance of 600,000 shares of Preferred Series “A” stock to three accredited investors who are
related parties. On December 1, 2018, the Company issued 600,000 warrants subject to cashless exercise at $0.10 per share for 5
years.
The Company was unable to issue the subscriber
the preferred shares until the Company filed a Certificate of Designation and the Preferred Series “A” stock had been
duly validly authorized. As the Company had not filed the Certificate of Designation, and as the Company could not issue the preferred
shares to settle the proceeds received, it was determined the subscriptions were settleable in cash. As a result, the Company classified
the subscriptions received as a liability in accordance with ASC 480 Distinguishing Liabilities from Equity. The fair value of
the liability of the preferred series A stock at December 31, 2018 was $144,352.
On March 29, 2019, the Company executed a settlement
agreement that included the settlement of 100,000 of the Series A Preferred Shares and 100,000 of the warrants subscribed for as
part of the December 1, 2018 offering. The Company agreed to issue 164,000 shares of its common stock as payment in full $25,000
owed to the subscriber for services rendered; the Company agreed to accept conversion and exercise of the purchased 100,000 Preferred
Series A shares into 100,000 shares of the Company’s common stock and the Company shall accept the cashless conversion of
100,000 warrant into 34,400 shares of the Company’s restricted common stock; and, as inducement for and consideration for
the settlement of the Company’s debt, the Company agrees to grant 500,000 additional shares of the Company’s restricted
stock. The Company recorded the fair value of the shares issued of $103,792 and recorded a loss on the settlement of the subscriptions
and the amounts payable of $55,830.
On April 12, 2019, the Company filed the Certificate
of Designation for the Series A Convertible Preferred Stock. The fair value of the liability of the preferred series A stock on
April 12, 2019 was $60,398. On April 12, 2019, the Company adjusted the fair value of the preferred series A stock to $60,398 and
reclassified the fair value of the preferred series A stock to mezzanine equity.
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
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 June 30, 2019. The preferred stock may be issued
from time to time by the board of directors as shares of one or more classes or series.
On December 1, 2018, the Company’s Board
of Director authorized an offering for 1,000,000 Preferred Series “A” stock at $0.10 per share and with 100%, regular
or cashless exercise at $0.10 per share of common stock warrant coverage. At December 31, 2018, the Company received $60,000 of
subscriptions for the issuance of 600,000 shares of Preferred Series “A” stock to three accredited investors who are
related parties. 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 June 30, 2019, there were 500,000 shares
of Series A Convertible Preferred Stock 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. The number of shares outstanding of the registrant’s common stock as of June 30, 2019 was 76,859,961.
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 June 30, 2019, 375,000
shares were issued and the Company had recognized $88,052 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, 3,597,989 shares of Company’s common stock were issued and a $55,830 loss
on settlement of debt was recognized.
From June 11, 2019 to June 27, 2019, the Company
issued a total of 9,040,000 shares of common stock upon the conversion of $23,401 of principal ($21,401) and interest ($2,000)
pursuant to the convertible note payable described in Note 6(i).
From June 12, 2019 to June 27, 2019, the Company
issued a total of 9,355,000 shares of common stock upon the conversion of $14,877 of principal ($13,877) and interest ($1,000)
pursuant to the convertible note payable described in Note 6(h).
From June 19, 2019 to June 27, 2019, the Company
issued a total of 7,946,913 shares of common stock upon the conversion of $45,700 of principal pursuant to the convertible note
payable described in Note 6(j).
NOTE 9 – STOCK OPTIONS
The Company did not grant any stock options
during the year ended December 31, 2018 or the six months ended June 30, 2019.
Below is a table summarizing the options issued
and outstanding as of June 30, 2019:
|
|
Number of
warrants
|
|
Weighted average exercise price
$
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
|
2,287,500
|
|
|
|
0.34
|
|
|
Granted
|
|
|
|
—
|
|
|
|
—
|
|
|
Expired
|
|
|
|
(1,905,000
|
)
|
|
|
0.16
|
|
|
Settled
|
|
|
|
—
|
|
|
|
—
|
|
|
Balance, June 30, 2019
|
|
|
|
382,500
|
|
|
|
1.24
|
|
As at June 30, 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
|
|
01/01/2016
|
|
|
|
75,000
|
|
|
|
75,000
|
|
|
|
0.33
|
|
|
|
0.50
|
|
|
|
12/31/2019
|
|
|
|
25,000
|
|
|
01/01/2016
|
|
|
|
90,000
|
|
|
|
90,000
|
|
|
|
0.33
|
|
|
|
0.50
|
|
|
|
12/31/2019
|
|
|
|
30,000
|
|
|
09/15/2016
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
1.00
|
|
|
|
0.50
|
|
|
|
12/31/2019
|
|
|
|
10,000
|
|
|
10/01/2016
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
1.00
|
|
|
|
0.50
|
|
|
|
12/31/2019
|
|
|
|
7,500
|
|
|
01/26/2017
|
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
2.00
|
|
|
|
2.58
|
|
|
|
01/26/2022
|
|
|
|
400,000
|
|
|
|
|
|
|
382,500
|
|
|
|
382,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
472,500
|
|
The weighted average exercise prices are $1.24
for the options outstanding and exercisable, respectively. The intrinsic value of stock options outstanding at June 30, 2019 was
$Nil.
NOTE 10 – WARRANTS
As described in Note 6, on from February 14
through March 13, 2019, the Company issued 487,500 warrants subject to an exercise price of $0.20 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 of $0.20, 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
|
|
|
|
0.17
|
|
Adjustment to warrants outstanding
|
|
|
420,891,071
|
|
|
|
0.00035
|
|
Granted
|
|
|
487,500
|
|
|
|
0.20
|
|
Settled
|
|
|
(100,000
|
)
|
|
|
0.10
|
|
Balance, June 30, 2019
|
|
|
421,928,571
|
|
|
|
0.00047
|
|
As at June 30, 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
|
*
|
|
|
2.42
|
|
|
|
11/28/2021
|
|
|
$
|
50,000
|
|
|
12/3/2018
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
0.10
|
|
|
|
4.43
|
|
|
|
12/3/2023
|
|
|
|
50,000
|
|
|
2/14/2018
|
|
|
|
171,428,571
|
*
|
|
|
171,428,571
|
*
|
|
|
0.00035
|
*
|
|
|
4.63
|
|
|
|
2/14/2024
|
|
|
|
60,000
|
|
|
3/13/2018
|
|
|
|
107,142,857
|
*
|
|
|
107,142,857
|
*
|
|
|
0.00035
|
*
|
|
|
4.71
|
|
|
|
3/13/2024
|
|
|
|
37,500
|
|
|
|
|
|
|
421,928,571
|
|
|
|
421,928,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
197,500
|
|
*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 June 30, 2019 was $1,959,643.
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, 9, 8 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. The Company placed
a stop transfer order on the shares, discussed the benefits of services provided by Life Sciences Journeys and rescinded its stop
transfer, allowing the contract to continue through its end.
On November 28, 2018, the Company re-engaged
the services of a prior contractor for finance assistance related to obtaining a line of credit based on the Company’s equipment
and/or contracts, through November 27, 2019. If the Company obtains a line of credit based on the Company’s equipment and/or
contracts the Company will incur a fee of 4% of financings from $1,000,000 to $5,000,000, 3% of financings from $5,000,001 to $10,000,000,
and 0.25% of financings over $10,000,000.
On December 3, 2018, the Company engaged
a consultant for services related to business development in the healthcare market. The contract is in place through June 3, 2019
and the consultant received 100,000 restricted shares of the Company’s common stock for the services.
In addition to contracts for service,
the Company also regularly uses the professional services of securities attorneys, a US EPA specialist, professional accountants
and other public-company specialists.
Employment Agreements –
On September 1, 2017, the Company entered into
a five-year employment agreement with Marion E. Paris, Jr. to be the Vice President for Business Development and Director of Intellectual
Properties for Paradigm. Under the terms of the employment agreement, Mr. Paris is to be paid an annual base salary of $90,000
and other benefits, including four weeks paid vacation.
On January 1, 2019, the Company entered into
a four-year employment agreement with F. Jody Read in his role as Chief Executive Officer. The terms of the contract call for an
annual salary of $90,000 for the first year, effective March 1, 2019 and increasing to $120,000 once the Company’s revenue
exceeds monthly expenses, then incrementally over time and with certain operation results, up to $200,000/year. The salary may
be paid, at the employee’s discretion, either in cash or in common stock. A $1,000 per month allowance will be granted to
the executive for housing near the Company’s South Carolina facility. The employment agreement awards the CEO 1,500,000 restricted
shares of the Company’s restricted stock, which shall vest in the following manner: 375,000 shares on March 1, 2019, 375,000
shares on March 1, 2020, 375,000 shares on March 1, 2021 and the final 375,000 shares on March 1, 2022.
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.
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.
NOTE 13. SUBSEQUENT EVENTS
2705908 Ontario Inc.
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
but continue discussions.
On July 30, 2019, the Company accepted
a settlement proposal from Annihilare, Inc. (a sub-registrant of the Company’s US EPA Registration No. 92108-1) and its affiliated
company, Prime ITS (a prior owner of Annihilyzer Inc, which transferred previously noted intangible IT assets to PCT LTD for 2,250,000
shares of the Company’s common stock in November of 2016). The settlement agreement included credit to the Company by Prime
ITS in the gross amount of $23,209 on the Company’s payable to Prime ITS for a combination of a portion of Marty Paris’
salary, a resignation from Marty Paris effective July 31, 2019, and equal valued amount of PCT’s inventory, for net credit
to PCT in the amount of $13,939, which was received by the Company on July 31, 2019. The transaction was completed on August 1,
2019.
On August 8, 2019, the Company received
notice from PRIME ITS that certain technology services utilized by the Company shall cease to be provided, effective September
8, 2019. The Company will obtain competitive quotes from other technology services providers.
On August 8, 2019, the Company
received notice from Annihilare, Inc. that certain intellectual properties developed jointly between the Company and
Annihilare are to be discontinued from use by the Company and its customers. The Company disputes the claims from Annihilare
that the intellectual properties are exclusively Annihilare’s and are in discussions with Annihilare on this point.
Until this issue is resolved, the impact to the Company is minimal because the Company’s healthcare customers primarily
benefit from the disinfecting fluid solutions utilized by deploying the Company’s Annihilyzer Infection Control System,
along with the Company-owned, patent-protected RFID disinfectant/material tracking system. The disputed issue is relative to
a protocol software system, which is not a necessary feature of the Company’s Annihilyzer Infection Control System. The
protocol software system is considered a complimentary feature and the Company expended employee time and expertise in
its development.
On August 12, 2019, the Company amended
the Employment Contract with F. Jody Read, CEO, whereby 500,000 Preferred Series B shares will be issued to Read as soon as the
Preferred Series B shares are designated with the State of Nevada. All other terms of the January 1, 2019 employment agreement
remain in effect.
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 will be issued to Grieco as soon
as the Preferred Series B shares are designated with the State of Nevada. The employment agreement begins on August 12, 2019, is
automatically renewable for two years unless terminated earlier as per the terms of the agreement.
Effective August 20, 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 – Super Voting Convertible Preferred Stock. Holders of the Series B Preferred Stock are entitled to cast
five hundred votes for each share held on all matters presented to stockholders for vote, which shall vote along with holders of
the Company’s common stock. In addition, the Series B Preferred Stock shall be redeemed at par value by the Company upon
the successful receipt by the Company of at least $1,000,000 in equity capital following the issuance of the Series B Preferred
Stock.
From July 1, 2019 through August 9, 2019, the Company issued a total
of 157,924,689 shares of common stock upon the conversion of $113,847 of principal, $7,132 of interest and of fees pursuant to
the convertible notes payable described in Note 6.
On August 16, 2019, the Company issued
5,989,500 shares of common stock upon the cashless exercise of 6,000,000 warrants.
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, including conversion of debt;
|
•
|
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 inability of management to effectively implement our strategies and business plans; and
|
•
|
the other risks and uncertainties detailed in this report.
|
In this form 10-Q references
to “PCT LTD”, “the Company”, “we,” “us,” “our” and similar terms refer
to PCT LTD (formerly Bingham Canyon Corporation) and its wholly owned operating subsidiary, Paradigm Convergence Technologies Corporation
(“PCT Corp.” or “Paradigm”).