UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

 

OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For transition period from ___ to ____

 

Commission file number: 000-31549

 

PCT LTD

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other jurisdiction of incorporation or organization)

90-0578516

(I.R.S. Employer Identification No.)

4235 Commerce Street, Little River, South Carolina

(Address of principal executive offices)

29566

(Zip Code)

 

Registrant’s telephone number, including area code: (843) 390-7900

 

N/A

(Former name, former address and former fiscal year, if changed since last report.)

 

Securities registered under Section 12(b) of the Act: None

 

Securities registered under Section 12(g) of the Act: Common Stock

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☑

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐ The registrant does not have a Web site.

 

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐

Non-accelerated filer ☑

Accelerated filer ☐

Smaller reporting company ☑

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☑

 

As of June 30, 2019 the aggregate market value of the Registrant’s common equity held by non-affiliates computed by reference to the closing price ($0.005) of the Registrant’s most recently completed second fiscal quarter was $335,861.

 

The number of shares outstanding of the registrant’s common stock as of July 27, 2020 was 579,701,486, which does not include 242,134,306 shares of common stock reserved against default/conversion of convertible debt.

 

Documents incorporated by reference: None

 

 
 

 

TABLE OF CONTENTS

 

  PART I  
Item 1. Business 3  
Item 1A. Risk Factors 13  
Item 1B. Unresolved Staff Comments 21  
Item 2. Properties 21  
Item 3. Legal Procedures 21  
Item 4. Mine Safety Disclosures 21  
       
  PART II    
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 22  
Item 6. Selected Financial Data 25  
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25  
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 28  
Item 8. Financial Statements and Supplementary Data 29  
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 60  
Item 9A. Controls and Procedures 60  
Item 9B. Other Information 60  
       
  PART III    
Item 10. Directors, Executive Officers and Corporate Governance 61  
Item 11. Executive Compensation 63  
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 65  
Item 13. Certain Relationships and Related Transactions, and Director Independence 65  
Item 14. Principal Accounting Fees and Services 66  
       
  PART IV    
Item 15. Exhibits, Financial Statement Schedules 67  
Signatures   68  

 

     

 

 

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 objections 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 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q 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, especially related to purchasing critical inventory;

• 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 and hire key employees;

• the inability of management to effectively implement our strategies and business plans; and

• the other risks and uncertainties detailed in this report.

 

Readers of this report should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this report. Before you invest in our common stock, you should be aware that the occurrence of the events described in the section entitled “Risk Factors” and elsewhere in this report could negatively affect our business, operating results, financial condition and stock price. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this report to conform our statements to actual results or changed expectations.

 

In this annual report references to “PCT LTD,” “we,” “us,” “our” and “the Company” refer to PCT LTD and its wholly-owned operating subsidiary, Paradigm Convergence Technologies Corporation (“PCT Corp.).

 

     

 

 

AVAILABLE INFORMATION

 

We file annual, quarterly and special reports and other information with the SEC.  You can read these SEC filings and reports over the Internet at the SEC’s website at www.sec.gov.  You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm.  Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt to of a written request to us at PCT LTD, 4235 Commerce Street, Little River, South Carolina 29566.

 

 

PART I

 

ITEM 1. BUSINESS

 

Historical Development

 

On February 27, 1986, PCT LTD, formerly known as Bingham Canyon Corporation (“PCTL”) was incorporated in the State of Delaware as Hystar Aerospace Marketing Corporation of Delaware (“Hystar-Delaware”) and was a subsidiary of Nautilus Entertainment, Inc., (now called VIP Worldnet, Inc.), a Nevada corporation. Hystar-Delaware completed a change of domicile merger on August 26, 1999 with then named Bingham Canyon Corporation, now named PCT LTD, a Nevada corporation.

 

On August 31, 2016, PCTL (then known as Bingham Canyon Corporation) entered into a Securities Exchange Agreement (the “Exchange Agreement”) with Paradigm Convergence Technologies Corporation, a Nevada corporation (“PCT Corp.”). Pursuant to the terms of the Exchange Agreement, PCT Corp. became the wholly-owned subsidiary of PCTL after the exchange transaction. PCTL is a holding company which, through PCT Corp., is engaged in the business of marketing new products and technologies through licensing and joint ventures.

 

PCTL and PCT Corp. are located in Little River, SC. PCT Corp. was formed June 6, 2012 under the name of EUR-ECA, Ltd., which was changed in September 2015 to PCT Corp.

 

Business Strategy

 

PCTL focuses its business on acquiring, developing and providing sustainable, environmentally safe disinfecting, cleaning and tracking technologies. The company acquires and holds rights to innovative products and technologies, which are commercialized through its wholly owned operating subsidiary, PCT Corp. PCT Corp. is a technology development, design, assembly and manufacturing company specializing in providing cleaning/sanitizing/disinfectant fluid solutions and fluid-generating equipment that creates environmentally safe solutions for global sustainability. PCT Corp. markets new products and technologies for the Healthcare, Agriculture, and Oil & Gas industries through multi-year system and service contracts that provide equipment and support for our customers.

 

The Company holds and defends its patents, trademarks, intellectual property and distribution rights to its innovative products and technologies. While a direct-sales capability is in place and will continue to be expanded, it is not PCT Corp.’s intent to be the sole distributor of its proprietary products. Members of PCT Corp.’s management also act in supportive roles for the development of manufacturers’ representatives who are involved in selling its products. In addition to the direct sales program, senior management is responsible for continuing to develop the distribution and licensing program operations for the technology; to develop new opportunities and applications for the products, and to promote the brands. PCT Corp.’s senior management intends to also continue the pursuit of new technologies – particularly technologies which are complementary to or enhance applications opportunities for its existing products - upon which it will build and expand its business.

 

PCT Corp. has developed several models of electro-chemical activation generators and systems for the production of Hydrolyte®, an EPA registered, highly effective sanitizer/disinfectant microbiocide that is environmentally responsible and for use around humans and animals. Hydrolyte® has been market tested with commercial customers and is now fully launched into the hospital and healthcare market. Management intends to focus on leveraging the opportunities presented by Hydrolyte® during the second half of 2018 and first half of 2019 within the healthcare market, as well as building into its oil and gas and agriculture markets.

 

  3  

 

PCT Corp.’s revenue streams have, in the past, been derived primarily from master service contracts, placing its Annihilyzer Infection Control Systems and other models of its equipment into clients’ locations and benefitting from recurring monthly revenue for typically 3-5 year contract periods, as well as licensing and distributor agreements, along with some outright sales of equipment. PCT Corp. made a “soft” launch in 2017 and management focused on establishing distributor operations and direct sales in addition to expanding its equipment production capabilities. Direct sales of equipment and Hydrolyte® have been managed by members of the senior management team. During 2019, the PCT Corp. added additional distributors and supplemental EPA registrants (licenses), in addition to building on existing distributors that have existing healthcare, and other industry, customer relationships. The existing distributors, from the years 2017, 2018 and 2019 are based in New Jersey/New York, North Carolina, Ohio, and Florida. Management expects to continue vetting and add more strategically located and specific industry focused distributors and is in negotiations with several potential entities for certain market segments.

 

In building out its production capabilities, PCT Corp. developed strategic operating relationships with firms that are leaders in production, manufacturing, and distribution within the various industries where the markets for our technologies exist. Management believes that this strategy, properly executed, should allow for the most rapid possible rollout of the products and solid capture of market share.

 

Principal Technology: Hydrolyte® and Catholyte

 

Paradigm’s generator systems make two products in the cleansers, hard-surface sanitizers and disinfectants categories:

  Hydrolyte® US EPA Registration No. 92108-1, is a highly effective hard surface sanitizer and/or disinfectant with the lowest EPA toxicity rating possible (“4”); and,

 

  Catholyte, a similarly safe, mild detergent, degreaser and surfactant that is easily applied using mop buckets, sprayers and floor cleaning machines for basic janitorial cleaning purposes.

 

Both products are outputs of a single process of electrochemical activation (“ECA”) generation process using the Company’s technology and input ingredients derived from naturally-occurring salt minerals and water. Commercially, the primary product is Hydrolyte® and the second product of the process, Catholyte, is a very useful and effective product for which parallel markets exist and profitable revenue streams are being developed.

 

The company had two registrations of Hydrolyte® with the U. S. Environmental Protection Agency (“EPA”) during 2019, but retained only the most valuable Registration (92108-1) at the end of 2019, having sold the duplicate registration to a third party entity. Hypochlorous acid- (HOCl-) based solutions such as Hydrolyte® are approved for specific uses and with specific directions by the Food and Drug Administration (“FDA”) for cleaning and sanitizing applications and by the United States Department of Agriculture (“USDA”) for use in food processing. These “approvals” are covered in various Federal Codes.

 

By nature, Hydrolyte® is a metastable, aqueous solution of hypochlorous acid, generated through the ECA process. It has a high redox potential (900 millivolts) and a greater biocidal effect than chlorine and other toxic chemicals. Hydrolyte® is 99.5% water + salt, rendering it of less concern to humans, yet it is effective against the various classes of pathogens comprising bacteria, viruses, spores, and yeast. Organisms in these categories include C. diff, TB, Parvovirus. Norovirus, Listeria, E. Coli, HIV, Hepatitis C, Influenza A, Candida and antibiotic resistant strains such as MRSA, VRE, and CRE. Using Hydrolyte® in decontamination and sterilization processes generally eliminates the need for the use of other highly toxic chemical biocides (such as ammonia, chlorine bleach and glutaraldehyde) which are commonly used in sanitizing, disinfection and decontamination.

 

  4  

 

Although it has been well known for many years that an aqueous solution of hypochlorous acid (HOCl), branded by the Company as “Hydrolyte®”, (commonly called “anolyte”) can deliver extremely effective decontamination and disinfectant results, previous challenges in the production technology had rendered its use economically infeasible in most applications. The primary drawbacks with previous anolyte production technology were: 1) the inability to generate anolyte in high enough concentrations (Parts Per Million – PPM) of the active ingredient, HOCL; 2) high enough commercial volumes from the generators (as opposed to 1 quart to 1 gallon, small volume batch or low flow generators); 3) reliability of the generators or fluids; and, 4) the relatively short time that the product maintained its maximum decontaminative efficacy (“shelf life”) and consistency.

 

This Company’s proprietary production, distribution and applications technologies have solved these problems. Its production equipment allows the Hydrolyte® solution to be produced consistently with specific, predetermined concentration of HOCl within the range of concentrations typically employed (50 to 600 PPM) as well as the desired pH level (the pH scale measures how acidic or Alkaline a substance is) that may be desirable for any given application. To resolve the maintenance of efficacy issue, PCT Corp. has perfected generation (production) equipment which is small enough to be located on the customer’s facility, allowing for production-on-demand rather than maintaining stored product inventory. For customers who will not use enough product to justify the on-site equipment, the company intends to engage industry-specific distribution and commercial services companies to provide the products to end-user customers on a regular delivery schedule. The combination of the on-site generation and delivery solutions should assure end-users will always be supplied with fresh, full strength product.

 

Production: Hydrolyte® is generated with the company’s proprietary equipment. The production technology for Hydrolyte® generates a product with predetermined PPM and pH properties, i.e., the equipment can be calibrated to deliver any desired PPM level; and, we believe it is superior to any other known production process or equipment available in the market today. The scalable Hydrolyte® generation systems technology largely will be housed in portable and mobile units, which can be readily moved within a building or from site to site, although more permanent installations, probably employing larger generation systems, will be made in situations where such installation is appropriate or required. The Company’s models of Hydrolyte® generator equipment is classified, dependent upon configuration and volume of output:

 

Annihilyzer Infection Control System – Hospital/Healthcare
Annihilyzer Infection Control System – Rack Model
Hydrolyte Generator – Large and Medium Volume
SurvivaLyte Manual Generator – Small Volume
Annihilyzer Hospital 360 SMART Spray Cart
School/Hospitality Industry and General Business 360 SMART Spray Cart

 

Other models of Hydrolyte® generating equipment are in research and development.

 

  5  

 

Markets: The primary applications for the Hydrolyte® technology are in cleaning, sanitizing, and disinfecting in a variety of market sectors and settings, including:

 

  Institutional facilities, such as hospitals, nursing homes, hotels, correctional facilities and schools;

 

  The agriculture industry for pre- and post-harvest disinfection of crops, sanitization in food processing, and certain applications in animal husbandry;

 

  The oil and gas industry where Hydrolyte® can provide a process to disinfect water used in hydraulic fracking processes (“frac water”) and to kill sulfate reducing bacteria in “sour” oil and gas wells; and Catholyte can be used to clean equipment and aid in product recovery when applied “down hole”; and.

 

  Other potential market opportunities are available, e.g., disinfecting and sanitizing of water in public and private water systems and industrial waste-water systems.

 

Management determined that the most direct paths to rapid revenue and earnings growth are in the institutional facilities and agriculture markets, although the agricultural market present some EPA-related barriers. The preponderance of business development and marketing resources are currently being devoted to these two markets. Management intends to also work to maintain our position and expertise in the oil and gas industry to assure that current customer relationships are maintained, business opportunities at hand are pursued and that we are properly positioned for a roll-out as, and when, drilling activity increases as anticipated. As further market development occurs, the Company anticipates considering and acting upon factual information.

 

Institutional Facilities: Hospitals, Health Care Facilities & Schools

 

PCT Corp.’s senior research and development personnel have developed several models of equipment to be deployed as a state-of-the-art integrated product dispensing, tracking (patented RFID tracking features) and management systems for applications in the institutional facilities market. This integrated technologies solution, branded as PCT’s Annihilyzer® Infection Control System, has been designed most particularly for hospitals, large long-term care, assisted living and nursing home facilities. In various configurations (utilizing a rack model) it in can be deployed in other health care facilities including urgent care centers, medical, dental and veterinary offices. It is adaptable to deployment in schools, prisons, hotels, and many other facilities, although the primary marketing and sales goal for PCT Corp. remains with the hospital market. A complete and custom turn-key cleaning and disinfection program solution can be provided to each facility.

 

At the physical core of the Annihilyzer® System is PCT Corp.’s on-site generation equipment, housed in the Annihilyzer® Filling Station (the Hydrolyte® generating portion of the equipment), also containing the Company’s patented tracking system, managed disbursement and bottling system for fluid production, containerization and use. Spray bottles and other containers are labeled when filled or refilled with product identification and date of production using printed labels and radio-frequency identification (“RFID”) tags. Reading these labels and tags before use assures that the correct and “fresh” product is always being used. Each room is also given an RFID tag. By reading the RFID room tags with a mobile app in a Mobile Data Terminal (ruggedized smartphone), the system tracks what is cleaned and disinfected, when, with what product, and by whom. The station is Wi-Fi connected to smartphones, so it can receive and store all of the data collected. The data can be used to generate a complete record of all cleaning, disinfecting and sanitizing activity, including personnel time and task data – a cost saving convenience to management.

 

  6  

 

The Company created and offers a proprietary automated state-of-the-art Electrostatic Spray Cart for use in hospital (or hospitality-industry) settings, allowing for rapid disinfecting of rooms once a patient (guest) has vacated the room. This system is designed to reduce the turnover time required between patients/guests, potentially increasing revenue opportunities, and improving efficiency of hospital/hotel personnel. A smaller scaled model of the electrostatic spray cart is available to other industries, such as hotels, transportation, schools, and other businesses.

 

PCT Corp. deploys its on-site production equipment under service contracts, charging an installation and set-up fee followed by monthly contract fees (some pricing models may include, or may be based on, a price per gallon of product used), over a contract period of approximately 3 – 5 years. The equipment is deployed and maintained through PCT Corp.’s personnel at first, then through specially-trained distributors. The Company is exploring the use of licensed commercial services companies to provide the future on-site support, as required. The product generators and other components of the on-site systems are currently monitored remotely by a PCT Corp. equipment specialist(s), but we are considering contracting with a monitoring company that is highly experienced and provides round the clock expertise in remote monitoring and response systems. The precise nature of any functional problems that may occur with any of the system’s components are, in most cases, automatically communicated via the internet to the monitoring and control center of the equipment. Any problem is then resolved through a three-tiered problem response system: first by remote access to the computerized system controls, second by an on-site technician call, and third through a “rapid replacement” program. If problems are not resolved by the first or second tier responses, then PCT Corp. would overnight ship replacement parts or, if necessary, a complete station or system and have the defective unit returned for repair.

 

Agricultural Antimicrobial Pesticide

 

In the agricultural sector our microbicide is branded as “Hydrolyte® Green.” Our testing and field trials continue to indicate that it can provide pre-harvest disinfection and decontamination solutions for any number of field crops that are affected by various bacterial and fungal pathogens. Through USDA grants and multiple studies by universities around the world, hypochlorous acid solutions have been tested and proven effective in post-harvest applications to include sanitizing at point of harvest, point of packing, and points of sale.

 

While Hydrolyte Green® is effective in these post-harvest applications, the Company’s major objective is to deliver solutions for pre-harvest pathogen contaminations, where a multitude of microbial infestations of many crops still need effective solutions that will qualify for regulatory approvals necessary to bring the treatment solution into commercial use. PCT Corp.’s agricultural research program continued throughout 2019 and is intended to support a continuous rollout of scientifically tested and certified applications for the treatment and prevention of numerous specific microbial infestations of a wide variety of crops. This research activity is expected to capture the test data required for regulatory approvals, and market acceptance of, the specific uses for the specific crops. During 2018, we executed a distribution and license agreement with an agricultural chemical specialty company and are actively involved in additional field trials of Hydrolyte Green®. The US EPA product registration “system” has presented the Company with challenges that have yet to be overcome so that commercial entry in this industry may move forward. For this reason, PCT Corp.’s prior agricultural-focused distributor allowed its distribution and license agreement to lapse after October 1, 2019, having paid the Company $100,000 for the 1-year rights associated with the agreement.

 

While company management, technical staff and consultants are certain of the ability of Hydrolyte® to mitigate most microbes; further testing and documentation are required to determine optimal protocols for treatment, including application concentrations, volumes, and frequency, as well as optimal delivery techniques (which could be any or all of: root drenching, foliar spray or injection) needed to produce the most effective and least costly solutions to microbial infestations. It must also be demonstrated and certified by independent third-party testing that the treatment does no harm to the plants or the crops to be harvested and leaves no chemical residual inside the crop.

 

  7  

 

PCT Corp. undertook a long-term testing and field trial program with an independent agricultural pesticide research firm to determine the feasibility of pre-harvest use of Hydrolyte® to treat various microbial infestations in as many different crops as possible. The research in this field continues, to-date. Management has identified several microbial crop infestation problems for which safe and effective treatment solutions have yet to be found and for which there is preliminary evidence that a properly researched Hydrolyte® treatment protocol could provide such a solution. Management anticipates positive results from independent testing leading to the creation, over time, of multiple business opportunity targets on which to build a solid consistent, long-term revenue stream with solid growth potential for the foreseeable future.

 

Testing/Research: Five years ago (2015), an opportunity was identified for research into a possibly significant opportunity for commercialization of a formulation of the company’s Hydrolyte® product. A critical agricultural market was seeking solutions to eradicate a serious and threatening microbial infestation. The company’s management determined that our product’s microbicide capability could provide a readily deployable and effective solution to the problem. Three months (late 2015 and early 2016) were spent determining the research requirements, target-market requirements and the potential for successful commercialization in the identified market. Two seasoned professionals with the necessary expertise were brought on board, and the project was launched from the Company’s facility in Little River, South Carolina, during the fourth quarter of 2015.

 

To demonstrate that the company could provide a viable solution, research protocols were developed, and a series of laboratory tests and preliminary trials were performed at a major university by agricultural scientists who were experts on the crop and the infestation. The results of these tests and the trial analysis were very favorable, showing a >97% percent kill rate on the treated microbes in the laboratory and a >88% kill rate in the field trial environment.

 

Encouraged by early laboratory and field trial results, management secured the services of a consulting specialist in the target crop and the microbial pathogen causing the disease. Working with the consultant, management determined the market to be viable for the use of the company’s Hydrolyte® in effectively treating the disease.

 

The second field trial, for nine months during 2016, was extensive and involved a larger-scale operation over a greater length of time. Specific third-party reports to the company indicated “good to excellent control of the disease source, economically feasible, EPA registration possible” and a continuing very high field kill rate. Upon receiving these results, the Company began developing plans to make certain it will be prepared to “supply fluid product in commercial quantities.”

 

Preventive, curative and health maintenance programs for the application of the Company’s Hydrolyte® were discussed and developed, with input and encouragement by the fruit’s national growing association, as well as from nationally recognized educational and research institutions.

 

In March 2017, the company began a much larger-scale field trial of our product on a 20-acre plot that has trees showing widespread presence of the disease. We, and our consulting specialist, expect to replicate and to validate previous results and further define the best possible methodology and protocols for effective application of the Hydrolyte® solution. Because the results of the trial were positive, as expected, management continued to expand its commercial field trial usage of Hydrolyte Green ® with its agriculture distributor and licensee and is gaining valuable research data to be used in further commercialization efforts during 2019:

 

  Finalize regulatory approvals to enter the market as the only-known resource for resolving this agricultural disease with no known negative effects to the fruit;

 

  Finalize designs for, and assemble, large volume product generation and delivery systems best suited to the agricultural working environment;

 

  Pursue additional EPA approvals for additional applications in the agricultural markets; and,

 

  Forecast, with greater accuracy, product deployment protocols through research and development input for use in the distribution and sales of product in this market.

  

Although regulatory agency progress within this market was much slower than expected during 2019 due at least in part to financial constraints, the Company continues its field trials and compiling documented results.

 

  8  

 

Oil and Gas Industry

 

World market prices for oil decreased during the past several years in response to increased production coming on line simultaneously with a softening of the growth in demand. The oil and gas industry in the U.S. and elsewhere has experienced unprecedented expansion and prosperity due to an influx of technological advances enabling the discovery and accurate location and identification of significant domestic oil and gas reserves. Advances in drilling technology, fracturing equipment and chemical methodology greatly enhanced recovery rates and revenue growth. This growth surge in supply reduced the United States’ dependency on foreign oil, and, we believe, contributed to lowering the U.S. trade deficit, reducing unemployment rates in oil producing areas, reducing heating and cooling costs, and providing lucrative investment opportunities. However, during 2014 and 2015 the steadily increasing supply of oil on a global scale led to reduced prices and decreased drilling activity in the U.S. From a June 20, 2014 price of $115 per barrel, the price dropped to historic lows below $30 in February 2016. The drop in the market price of oil led to a great reduction in drilling activity causing a corresponding loss of opportunities to sell the company’s products and services in the oil & gas industry. By the end of 2017, the price of oil had recovered to the $50 to $55 range. A stable market in this price range is expected to lead to renewed opportunities in this industry in 2018. As opportunities emerge, we plan to use oil-field service companies to market and distribute our Hydrolyte® and Catholyte products to their clients/customers. Management is currently seeking an appropriate opportunity to re-enter this market.

 

Management believes that the benefits of our proven technologies continue to be desirable for, and should continue to be used in, hydraulic fracturing drilling worldwide. Some of the benefits of our products and systems include: elimination of highly toxic chemicals currently used for decontamination, reduced negative environmental impact, reduced recovery costs, improved product quality, and potentially opening new areas for oil and gas retrieval. As a result, management is preparing for expanding business opportunities in this sector in the mid-term future. As part of this preparation, Paradigm is developing a large-scale system utilizing Hydrolyte® to decontaminate water and fluid going “down hole” in oil and gas-well drilling; and to decontaminate recovered “frac” water for reuse in the fracking process. Operational experience has shown that Hydrolyte® not only effectively decontaminates the water supply of microbes, but also does not cause corrosive damage to gas and oil recovery equipment; nor does it cause any loss of performance to the other chemicals, additives, and propellants currently used in drilling and fracking processes.

 

Hydrolyte® also addresses another problem in the oil and gas industry. In a separate application, Hydrolyte® can be used to reduce the sulfur content of crude oil in the ground. There are sulfite-producing microbes in crude oil which cause higher levels of hydrogen sulfide (“H2S”) and “sour” wells with sour crude oil which is less valuable than “sweet” crude which has low H2S. It has been demonstrated that Hydrolyte® is effective in reducing or eliminating these microbes, thus improving the quality and value of the oil recovered from the treated well.

 

Hydrolyte® can reduce the costs of transporting contaminated water from the wellbore to a treatment facility and back for reuse, thus reducing the need for construction of water processing capacity, providing a substantial reduction in the costs of drilling, and enabling a sustainable increase in efficiency. The company intends to maintain an active marketing program; and, expects that there will be renewed opportunities for revenue growth from the frac drilling and related oil-field applications.

 

We delivered a large volume order of Hydrolyte® to a distributor of oilfield chemicals for use by one of its customers during 2018 and have delivered, under a 2019 commercial collaboration agreement, additional Hydrolyte® large volume equipment to Meeker, Oklahoma. Collaboration in oilfield/gas industry testing, along with preliminary conversations and observations about the Cannabis market, regarding models of delivery of the fluids to the oil and gas market.

 

  9  

 

Marketing, Sales and Distribution of Hydrolyte®

 

Marketing and sales activities were nominal in the first half of 2019 while management focused on the final stage of product development, establishing supply chain agreements, and building sufficient physical production capacity to meet expected demand. Distributor and customer relationships were established through management’s existing contacts and provide a solid base of sales and revenue after the first half 2019 launch of this new and expanded stage of operations. Paradigm has agreements with distributors in the Northeast, in Florida and in Ohio with manufacturers’ representative firms. Management has additional distribution opportunities under development in multiple markets and intends to more fully expand the distribution network in 2020. Management, working with consultants well-known to management, intends to continue to seek and establish distributor and/or joint venture opportunities and agreements for the marketing and sales of PCT Corp.’s products and services.

 

While a major portion of the sales effort is expected to be provided directly by our internal sales team and distributors, PCT Corp. developed and put in place its own formal marketing program with expanded participation in industry trade shows, advertising in trade publications, internet marketing and sales support, along an impactful and credible company image, which integrates all products and technologies under one cohesive appearance. All marketing and branding material will incorporate a consistent look and will display prominent logo recognition.

 

A direct sales function with clinical expertise is expected to be established to support large customers and pursue promising joint venture opportunities. PCT Corp. expects to use its production, operations and research and development facility in Little River, South Carolina to display its products and technologies, while considering strategic assembly capabilities in other part of the United States. The Little River location provides a meeting and demonstration area where working models and simulations allow first-hand interaction and live demonstrations for interested parties. Little River hosts on-site visits for training, as well as allowing for research and development to freely occur in a controlled environment.

 

The Institutional program for PCT Corp.’s healthcare sales program began with agreements with prospective customers for pilot/demonstration installations at their facilities; those pilot installations were completed early in 2019 and the Company is venturing away from “trial” installation, and into long term agreements without a pre-test trial period. The sales pipeline for this market is filling up with qualified and seriously interested healthcare clients and we are gleaning solid information, becoming more adept at determining the length of time from inception-to-“contract” within this complex market.

 

Production, Assembly and Principal Suppliers

 

Hydrolyte® Generation and Equipment Production: PCT Corp. moved into its operations, research and development and production facility in Little River, South Carolina on December 15, 2016. The research, development and testing spaces were suitable and functional as already built. A new design and layout for a final systems assembly area and an expanded testing area was finalized in January 2018. During 2019, PCT Corp. fully designed and built the following Hydrolyte® generating systems in the Little River facility:

 

Annihilyzer Infection Control System – Hospital/Healthcare
Annihilyzer Infection Control System – Rack Model
Hydrolyte Generator – Large and Medium Volume
SurvivaLyte Manual Generator – Small Volume
Annihilyzer Hospital 360 Electrostatic SMART Spray Cart
School/Hospitality Industry and General Business Electrostatic 360 SMART Spray Cart

 

Annihilyzer® Systems Assembly: Annihilyzer generator systems are assembled and tested in Little River and the other outsourced components for the Annihilyzer® Infection Control Systems are shipped to Werks Manufacturing Inc., in Ft. Wayne, Indiana for final assembly of the Annihilyzer® Kiosk and Filling Station cabinet. The Kiosks, Filling Stations and the 360 Electrostatic Spray Carts are fabricated by Werks, where PCT LTD’s patented RFID technology is inserted, as well.

 

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Competition

 

In all our target markets, PCT Corp. will compete directly with large firms selling competing, but toxic, traditional cleanser and disinfectant products that are manufactured off-site and shipped to customers or distributors. These competitors have longer operating histories, more experience, substantially greater financial and human resources, greater size, more substantial research and development and marketing operations, established distribution channels and are well positioned in the market to fight aggressively to defend their market share. However, the combined markets in which PCT Corp. is engaged are so massive that its competitive position as environmentally-responsible and, growing numbers of installations in various markets, combined with being less expensive, are allowing PCT Corp. to prosper. The Company’s on-site generation technology provides a substantial competitive advantage in addition to its unique properties.

 

There are a limited number of potential competitors providing some form of anolyte-based biocide. Based on management’s research these companies are largely in early operating stages, concentrated in local or regional markets and have no technology or pricing advantage. These include Aquaox, Ecologic Solutions, and MIOX Corporation.

 

In the institutional facilities and agricultural industries, PCT Corp. believes that its proprietary integrated technologies solutions in production, distribution, applications management and tracking will continue to provide a competitive advantage in direct competition. In the oil and gas industry Paradigm has demonstrated the effectiveness and efficiencies of its products and processes and commercial acceptance from its customers. It is well positioned with respect to other companies providing anolyte-based biocides.

 

Intellectual Property

 

EPA product registrations of disinfectants and pesticides allow the registered products to be sold and distributed with labels identifying specific laboratory tested and proven kill claims of its effectiveness against specific microbial pathogens. Below is a summary of recent EPA registrations, EPA sub-registrations and other intellectual property the Company has acquired. The Company continues to hold certain intellectual properties relative to the Soloplax biodegradable plastics technology but does not anticipate pursuing commercialization of the technology associated in the foreseeable future.

 

On December 15, 2016, Paradigm acquired an EPA sub-registration (#82341-1-92108), which provides for entry into the facilities and agricultural markets described previously in this document. The company is actively pursuing sales under this registration and label. In addition, the Company has registered its products in several states, under its US EPA No. 92108-1.

 

On March 13, 2017, the Company entered into a Registration Transfer Agreement (“Transfer Agreement”) and a Data License and Assignment Agreement (“Data Agreement”) with a third party. Pursuant to the Transfer Agreement, the Company received United States Environmental Protection Agency’s (“EPA”) Registration number 82341-4 for Excelyte® VET for a one-time fee of $125,000.

 

On April 6, 2017, Paradigm, acquired the complete intellectual property, including know-how, trade secrets and patent rights to the hardware, firmware and software comprising the product inventory generation, disbursement, containerization, tracking and reporting system, trademarked as the Annihilyzer® System. The Annihilyzer® System is designed to be employed on-site in healthcare facilities. The company already owns IP rights in the generation system employed in this integrated technology system.

 

The Company has developed proprietary know-how related to the reactor cells and generation systems that generate our Hydrolyte® and Catholyte products. Paradigm continues, through its research and development program, to perfect the production innovation, know-how, trade secrets and patentable innovations incorporated into the improved production, inventory management and reporting systems. Current focus is on customizing system and equipment design to suite the production parameters and conditions in various specific venues and applications, e.g., agricultural field setting vs. packing house or oil and gas field.

 

On April 12, 2018 the Company entered into an agreement to purchase the original US EPA Registration No. 83241-1 for EcaFlo® Anolyte. The Company paid a $5,000 deposit on the agreement with the remaining balance due in increments during the second quarter of 2018 to finalize the agreement. The Company continued to make installment payments to complete the purchase of this label and, during 2019, sold the rights to this registration to a third-party for a price that included the remaining portion of the registration that PCTL had not yet paid to the owner, thus completing the transaction and conveying the registration to the new owner.

 

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Research and Development

 

PCT Corp.’s research and development costs for the years ended 2019 and 2018 were $6,149, and $14,000, respectively. During that period, PCTL continued ongoing research and development testing of the application of the Hydrolyte® technology in the oil and gas industry; as a biocide in institutional facilities, such as, hospitals, jails and medical facilities; and continued in trial tests in agriculture and food processing.

 

Management estimated that 2019 research and development expenditures would be approximately $250,000 to support on-going laboratory and field-trial work in the agricultural sector and continued generator and other equipment and systems engineering and testing for future products. During 2019, we spent significantly less than anticipated due to financial constraints and certain obstacles in the agricultural market. We expect to maintain a robust research and development program in agricultural, commercial and industrial opportunities and applications in the foreseeable future as we overcome certain regulatory obstacles.

 

In October 2015, Paradigm entered an agreement with Florida Pesticide Research, Inc. to conduct agricultural research intended to support an aggressive rollout of tested and certified applications for the treatment and prevention of numerous specific microbial infestations of a wide variety of crops. While company management, technical staff and consultants are confident of Hydrolyte® Green’s ability to kill many damaging microbe, further testing and testing validation is required to determine proper application concentrations, volumes, frequency and delivery techniques (which could be any or all of: root drenching, foliar spray or injection) needed to be most effective and least costly. It also must be demonstrated that the treatment does no harm to the plants or the product to be harvested and that no harmful residual remains in the crop because of the treatment. Management intends to maintain and expand the testing and demonstration program currently in place to other crops to target various additional crop infestation problems for the foreseeable future.

 

Government Regulations and Compliance with Environmental Laws

 

PCTL is not aware of any existing or probable government regulations that would negatively impact our operations, other than requiring additional time for protocol approval in the agricultural market. As a licensor of water treatment technology, the Company is not subject to government regulations for the removal of oils, solids and pathogens from water, other than normal safety standards and certifications (such as UL or CE) for goods that we manufacture for demonstrations and joint ventures, and our product lines. However, prospective customers are subject to local, state and federal laws and regulations governing water quality, environmental quality and pollution control. To date, compliance with government regulations has had no material effect on the company’s operations, capital, earnings, or competitive position, and the cost of such compliance has not been material. The Company is unable to assess or predict at this time what effect additional regulations or legislation could have on its activities.

 

In addition, PCT Corp.’s prospective customers will be subject to the Clean Water Act which regulates the discharge of pollutants into streams and other waters of the U.S. (as defined in the statute) from a variety of sources. If wastewater or runoff from facilities or operations may be discharged into surface waters, the Clean Water Act requires that person to apply for and obtain discharge permits, conduct sampling and monitoring and, under certain circumstances, reduce the quantity of pollutants in those discharges. The federal government may delegate Clean Water Act authority to the states.

 

Employees

 

At the end of 2019, PCT Corp. had nine full-time employees, no part-time employees and four contract consultants who are engaged on a regular basis. Management confers with outside expert consultants, attorneys and accountants as necessary. The company anticipates engaging additional full-time employees in 2020. We anticipate that a portion of employee compensation likely would include direct stock grants, or the right to acquire stock in the company, which would dilute the ownership interest of holders of existing shares of our common stock.

 

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ITEM 1A. RISK FACTORS

 

You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to PCTL’s securities. The risks and uncertainties described below are not the only risks and uncertainties facing us. Additional risks not currently known to us or that we currently believe are immaterial may also impair our operating results, financial condition, and liquidity. Our business is also subject to general risks and uncertainties that affect many other companies. For purposes of this section, references to our business include the business of our wholly-owned subsidiary, PCT Corp. The risks discussed below are not presented in order of importance or probability of occurrence.

 

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. Fore 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 tock 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.

 

Risks Related to Our Business

 

We have a history of losses and may never become profitable.

We have recorded net losses for the past two years and have significant accumulated deficits. We have relied upon loans and advances for operating capital. Total revenues will be insufficient to pay off existing debt and fund research and development.  We cannot assure you that we can identify suitable license or joint venture opportunities, or that any such agreements will be profitable. We may be required to rely on further debt financing, further loans from related parties, and private placements of our common and preferred stock for our additional cash needs. Such funding sources may not be available or the terms of such funding sources may not be acceptable to the Company.

 

Our inability to generate sufficient cash flows may result in us not being able to continue as a going concern.

 

Our overall cash position as of December 31, 2019 provides limited liquidity to fund day-to-day operations. The Company’s independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern. We may need to seek additional financing or sell our assets to support our continued operations; however, there are no assurances that any such financing or asset sale can be obtained or achieved on commercially reasonable terms, if at all. In view of these conditions, our ability to continue as a going concern depends on our ability to generate sufficient cash flows from our new technology products or to obtain the necessary financing for operations. The outcome of these matters cannot be predicted at this time. The consolidated financial statements for the year ended December 31, 2019 do not include any adjustment to the amounts and classification of assets and liabilities that might be necessary should we be unable to continue business operations. Any such adjustment could be material.

  

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Our indebtedness could adversely affect our business and limit our ability to plan for or respond to changes in our business, and we may be unable to generate sufficient cash flow to satisfy significant debt service obligations.

 

As of December 31, 2019, our consolidated indebtedness was $2,482,743 (net of discounts), with approximately $826,957 due to related parties. Our indebtedness could have important consequences, including the following:

 

    increasing our vulnerability to general adverse economic and industry conditions;

 

    reducing the availability of our cash flow for other purposes;

 

    limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate, which would place us at a competitive disadvantage compared to our competitors that may have less debt; and

 

    having a material adverse effect on our business if we fail to comply with the covenants in our debt agreements, because such failure could result in an event of default that, if not cured or waived, could result in all or a substantial amount of our indebtedness becoming immediately due and payable.

 

Further, a large amount of our current indebtedness is in default, which subjects us to potential litigation, increased fees and expenses, increased interest rates and other potential damages.

 

Our ability to repay our significant indebtedness will depend on our ability to generate cash, whether through cash from operations or cash raised through the issuance of additional equity-based securities. To a certain extent, our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control. If our business does not generate sufficient cash flow from operations or if future equity financings are not available to us in amounts sufficient to enable us to fund our liquidity needs, our financial condition and operating results may be adversely affected. If we cannot make scheduled principal and interest payments on our debt obligations in the future, we may need to refinance all or a portion of our indebtedness on or before maturity, sell assets, delay capital expenditures, cease operations or seek additional equity.

 

Despite the Company’s indebtedness levels, we are able to incur substantially more debt, including secured debt. This could further increase the risks associated with its leverage.

 

The Company may incur substantial additional indebtedness in the future. The terms of current debt agreements do not fully prohibit it from doing so. To the extent that the Company incurs additional indebtedness, the risks associated with its substantial indebtedness describe above, including its possible inability to service its debt, will increase.

 

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A significant portion of our current debt is in default, which may subject us to litigation by the debt holders.

 

As of December 31, 2019, we only had cash and cash equivalents of $67,613 and had a significant amount of short-term debt in default. The short-term debt agreements provide legal remedies for satisfaction of defaults, including increased interest rates, default fees and other financial penalties. As of the date of this Annual Report none of the lenders have pursued their legal remedies, although several lends have sent us demand letters. Management’s plan is to raise additional funds in the form of debt or equity in order to continue to fund losses until such time as revenues are able to sustain the Company. To date, the main source of funding has been through the issuance of convertible notes with provisions that allow the holder to convert the debt and accrued and unpaid interest at substantial discounts to the trading price of our common stock. The effect of the conversions in the year ended December 31, 2019 for the convertible notes has been to substantially dilute existing holders of common stock of our Company. However, there is no assurance that management will be successful in being able to continue to obtain additional funding or defend potential litigation by note holders.

 

We will need additional capital in the future to finance our planned growth, which we may not be able to raise or it may only be available on terms unfavorable to us or our stockholders, which may result in our inability to fund our working capital requirements and harm our operational results.

 

We have and expect to continue to have substantial working capital needs. Our cash on hand, together with cash generated from product sales, services, cash equivalents and short-term investments will not meet our working capital and capital expenditure requirements for the next twelve months. In fact, we will be required to raise additional funds throughout 2019 or we will need to limit operations until such time as we can raise substantial funds to meet our working capital needs. In addition, we will need to raise additional funds to fund our operations and implement our growth strategy, or to respond to competitive pressures and/or perceived opportunities, such as investment, acquisition, marketing and development activities.

 

If we experience operating difficulties or other factors, many of which may be beyond our control, cause our revenues or cash flows from operations, if any, to decrease, we may be limited in our ability to spend the capital necessary to complete our development, marketing and growth programs. We require additional financing, in addition to anticipated cash generated from our operations, to fund our working capital requirements.  Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our business or otherwise respond to competitive pressures would be significantly limited. In such a capital restricted situation, we may curtail our marketing, development, and operational activities or be forced to sell some of our assets on an untimely or unfavorable basis.

 

We are highly dependent on our officers and directors. The loss of any of them, whose knowledge, leadership and technical expertise upon which we rely, could harm our ability to execute our business plan.

 

Our success depends heavily upon the continued contributions of our current officers and directors, whose knowledge, leadership and technical expertise may be difficult to replace at this stage in our business development, and on our ability to retain and attract experienced experts, and other technical and professional staff.   If we were to lose the services of our officers or directors, our ability to execute our business plan would be harmed and we may be forced to limit operations until such time as we could hire suitable replacements.

 

At this stage of our business operations, even with our good faith efforts, potential investors have an increased probability of losing their entire investment.

 

Because the nature of our business is expected to change as a result of shifts in the industries in which we operate, competition, and the development of new and improved technology, management forecasts are not necessarily indicative of future operations and should not be relied upon as an indication of future performance. Further, we have raised substantial debt and equity to fund our business operations, which to date have generated insufficient revenue to support our working capital needs.

 

While Management believes its estimates of projected occurrences and events are within the timetable of its business plan, our actual results may differ substantially from those that are currently anticipated. If our revenues do not increase to a level to support our working capital needs, we will be forced to seek equity capital to fund our operations and repay our substantial debt balances, which may not be available to us at all or on acceptable terms.

  

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Our ability to license our products and technologies on a commercially viable basis is unproven, which could have a detrimental effect on our ability to generate or sustain revenues.

 

The technologies we offer to waste water and water from oil and gas drilling have never been utilized on a full-scale commercial basis. The Hydrolyte™ technology was only recently developed and all of the tests conducted to date with respect to the technology have been performed in a limited scale or small commercial scale environment and the same or similar results may not be obtainable at competitive costs on a large-scale commercial basis. Accordingly, the Hydrolyte™ technology may not perform successfully on a commercial basis and may never generate any revenues or be profitable.

 

We may not be able to successfully protect our intellectual property rights.

 

We rely on a combination of product registration, trademark, patent and other proprietary rights laws to protect the intellectual property rights that we own or license. It is possible that third parties may challenge our rights to such intellectual property. In addition, there is a risk of third parties infringing upon our licensors’ or our intellectual property rights and producing counterfeit products. These events may result in lost revenue as well as litigation, which may be expensive and time-consuming even if a favorable outcome is obtained. There can be no assurance that adequate remedies would be available for any infringement of the intellectual property rights owned or licensed by us. Any such failure to successfully protect our intellectual property rights may have a material adverse effect on our competitive position.

 

Because our technology products are designed to provide a solution which competes with existing methods, we are likely to face resistance to change, which could impede our ability to commercialize this business.

       

Our Hydrolyte™ products are designed to provide a solution to replacing traditional chemicals that are used in the treatment of bacteria and scaling in industrial water processes. Specifically, we believe it can provide a cost effective and environmentally friendly solution in industrial facilities, agriculture, oil and gas and other industries that consume large amounts of water in their industrial processes. Currently, large and well-capitalized service companies provide traditional chemical equipment and services in these areas. These competitors have strong relationships with their customers’ personnel, and there is a natural reluctance for businesses to change to new technologies. This reluctance is increased when potential customers make significant capital investments in competing technologies. Because of these obstacles, we may face substantial barriers to commercializing our business.

 

To the extent demand for our products increase, our future success will be dependent upon our ability to ramp up manufacturing production capacity.

 

We intend to continue marketing our products and services. To the extent demand for our products and services, or other products we may develop, increases significantly in future periods, one of our key challenges will be to ramp up production capacity to meet sales demand, while maintaining product quality. Our inability to meet any future increase in sales demand, access capital for inventory, may hinder growth or increase dilution.

 

Component shortages could result in our inability to produce volume to adequately meet customer demand. This could result in a loss of sales, delay in deliveries and injury to our reputation.

     

Single source components used in the manufacture of our products may become unavailable or discontinued. Delays caused by industry allocations, or obsolescence may take weeks or months to resolve. In some cases, parts obsolescence may require a product re-design to ensure quality replacement components. These delays could cause significant delays in manufacturing and loss of sales, leading to adverse effects significantly impacting our financial condition or results of operations.

 

We may acquire assets or other businesses in the future.

 

We may consider acquisitions of assets or other business. Any acquisition involves a number of risks that could fail to meet our expectations and adversely affect our profitability. For example:

 

• The acquired assets or business may not achieve expected results;

 

• We may incur substantial, unanticipated costs, delays or other operational or financial problems when integrating the acquired assets;

 

• We may not be able to retain key personnel of an acquired business;

 

• Our management’s attention may be diverted; or

 

• Our management may not be able to manage the acquired assets or combined entity effectively or to make acquisitions and grow our business internally at the same time.

 

If these problems arise, we may not realize the expected benefits of an acquisition.

 

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Risk Related to Our Industries

 

Global increases in the supply of natural gas or oil may reduce drilling operations in shale deposits, which could adversely affect the attractiveness of our Hydrolyte™ technology in the oil and gas industry.

 

The development of new horizontal drilling techniques and the discovery of unconventional oil and gas in new shale areas throughout the U.S. and world market have opened up an enormous opportunity for the Hydrolyte™ technology to replace traditional chemicals used to kill bacteria in waters used for hydraulic fracturing. These fracturing operations rely on enormous supplies of clean water to be pumped downhole to break the rock that holds the oil and gas. Much of the water used in drilling oil and natural gas wells and the resulting water that flows back needs to be treated and creates an opportunity for our Hydrolyte™ technology. However, horizontal drilling in shale areas is very expensive; and if current oil prices remain depressed, horizontal drilling may not be cost-effective, and the lack thereof may adversely affect the market for the Hydrolyte™ technology.

 

If federal and state legislation and regulatory initiatives relating to horizontal drilling are passed, then it could materially and adversely affect our results of operations.

 

Our business relies upon supplying chemical-free solutions for cleaning the large amounts of water used in hydraulic fracturing applications. Objections have been raised by environmentalists, some land owners and some government officials including environmental authorities that there have been adverse side effects affecting the purity of the water supply as a result of the injection of chemicals and water in connection with horizontal drilling. Although we believe that Hydrolyte™ is a chemical-free solution which should result in increased business, we cannot assure you that legislation or rules will not be passed or action taken by environmental authorities that will preclude the use of horizontal drilling.

 

At the state level, certain states and localities have implemented moratoriums and certain obligations on oil and gas companies using horizontal drilling. The adoption of any future federal, state or local laws or implementing regulations imposing reporting or permitting obligations on, or otherwise limiting, the horizontal drilling process could make it more difficult to perform, or even prohibit oil and gas companies from using horizontal drilling, to complete gas and oil wells. These additional costs to drillers could result in reduced oil and gas drilling. This would reduce our potential licensing revenue. If this were to occur more widely in the United States, the demand for Hydrolyte™ may be eliminated or substantially reduced. If any such federal or state legislation on horizontal fracturing were passed, our revenues and results of operations could be adversely affected.

 

Risks Related to PCTL’s Common Stock

 

We have been late in filing our SEC Reports several times over the last two years and may not be able to timely file our reports in the future.

 

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, are required to file quarterly, annual and current reports, proxy statements and other information with the SEC. Over the last two years, we have been late in filing some of our quarterly reports and our annual report. There can be no assurance we will not become delinquent in our reporting requirements in the future, which may results in Rule 144 becoming unavailable for resales of our common stock or the SEC seeking to deregister our common stock from reporting under the 34 Act.

 

There is a limited trading market for our shares of common stock on the OTC Pink.  You may not be able to sell your shares of common stock if you need money.

 

Our common stock is traded on the OTC Pink, an inter-dealer automated quotation system for equity securities.  There has been limited trading activity in our common stock, and when it has traded, the price has fluctuated widely.  We consider our common stock to be “thinly traded” and any last reported sale prices might not be a true market-based valuation of the common stock.  Stockholders may experience difficulty selling their shares if they choose to do so because of the illiquid market and limited public float for our common stock.

 

Since PCTL has been a shell company as defined in subparagraph (i) of Rule 144 any “restricted securities” issued by the Company, while we were a shell company, cannot be publicly sold for at least one year from September 2, 2016, the date we filed a Current Report on Form 8-K regarding Paradigm’s operations. In addition, we must have filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months.

 

Compliance with the criteria for securing exemptions under federal securities laws and the securities laws of the various states is extremely complex, especially in respect of those exemptions affording flexibility and the elimination of trading restrictions in respect of securities received in exempt transactions and subsequently disposed of without registration under the Securities Act or state securities laws.

 

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Because our common stock is deemed a low-priced “Penny” stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.

 

Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act of 1934, as amended, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:

 

• Deliver to the customer, and obtain a written receipt for, a disclosure document;

• Disclose certain price information about the stock;

• Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;

• Send monthly statements to customers with market and price information about the penny stock; and

• In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.

 

Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.

 

Financial Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may limit a shareholder’s ability to buy and sell our common shares.

 

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

 

If we fail to maintain effective internal controls over financial reporting, then the price of our common stock may be adversely affected.

 

Our internal control over financial reporting may have weaknesses and conditions that could require correction or remediation, the disclosure of which may have an adverse impact on the price of our common stock. We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

 

Transfers of our securities may be restricted by virtue of state securities “blue sky” laws that prohibit trading absent compliance with individual state laws.  These restrictions may make it difficult or impossible to sell shares in those states.

 

Transfers of our common stock may be restricted under the securities or securities regulation laws promulgated by various states and foreign jurisdictions, commonly referred to as “blue sky” laws.  Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions.  Because the securities registered hereunder have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them should be aware that there may be significant state blue sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities.  These restrictions may prohibit the secondary trading of our common stock.  Investors should consider the secondary market for our securities to be a limited one.

 

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We do not intend to pay dividends on our common stock in the foreseeable future.

 

For the foreseeable future, we intend to retain any earnings to finance the development of our business, and we do not anticipate paying any cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of our board of directors (the “Board”) and will be dependent upon then-existing conditions, including our operating results and financial condition, capital requirements, contractual restrictions, business prospects and other factors that our Board considers relevant. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment.

 

We have the ability to issue additional shares of our common stock and shares of preferred stock without obtaining stockholder approval, which could cause your investment to be diluted.

 

Our Articles of incorporation authorizes the Board of Directors to issue up to 1,000,000,000 shares of common stock and up to 10,000,000 shares of preferred stock, of which we have designated 1,000,000 shares as Series B and 5,500,000 shares of Series C.  The power of the Board of Directors to issue shares of common stock, preferred stock or warrants or options to purchase shares of common stock or preferred stock is generally not subject to stockholder approval.  Accordingly, any additional issuance of our common stock, or preferred stock that may be convertible into common stock, may have the effect of diluting your investment. Along these lines, at December 31, 2018 we had approximately 44.6 million shares of common stock outstanding and ended 2019 with approximately 498.9 million shares outstanding, an increase of 11.2 times. In addition, as of July 27, 2020 we had approximately 579.7 million shares outstanding.

 

Our Board of Directors has issued Series B Preferred Stock with voting terms that may not be beneficial to common stockholders and has the ability to affect adversely stockholder voting power and allows our current management to perpetuate their control over us.

 

Our Articles of Incorporation allow us to issue shares of preferred stock without any vote or further action by our stockholders. Along these lines, our Board of Directors authorized 1,000,000 shares of Series B Preferred Stock, which were issued to two members of our current management (Messrs. Grieco and Read). These shares have superior voting rights (500 to 1) over shares of our Common Stock. Further, our Board of Directors has the ability to fix and determine the relative rights and preferences of additional series of preferred stock. Our Board of Directors has the authority to issue additional series of preferred stock without further stockholder approval, including large blocks of preferred stock that would grant to the holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock, superior voting or conversion rights and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock.

 

By issuing preferred stock, PCTL may be able to delay, defer or prevent a change of control.

 

PCTL is authorized to issue a total of 2,500,000 shares of “blank check” preferred stock and has issued: 500,000 shares of Series A Preferred Stock, 1,000,000 shares of Series B Preferred Stock (which contain voting rights of 500-to-1) and 490,000 shares of Series C Preferred Stock. PCTL’s Board of Directors can determine the rights, preferences, privileges and restrictions granted to, or imposed upon, the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series. It is possible that PCTL’s Board of Director, in determining the rights, preferences and privileges to be granted when the preferred stock is issued, may include provisions that have the effect of delaying, deferring or preventing a change in control, discouraging bids for our common stock at a premium over the market price, or that adversely affect the market price of and the voting and other rights of the holders of PCTL’s common stock.

 

Future sales of our common stock may result in a decrease in the market price of our common stock, even if our business is doing well.

 

The market price of our common stock could drop due to sales of a large number of shares of our common stock in the market or the perception that such sales could occur. This could make it more difficult to raise funds through future offerings of common stock.

 

  19  

 

Our articles of incorporation and bylaws contain provisions that could discourage an acquisition or change of control of us.

 

Our articles of incorporation authorize our board of directors to issue preferred stock and common stock without stockholder approval. If our board of directors’ elects to issue preferred stock, it could be more difficult for a third party to acquire control of us. In addition, provisions of the articles of incorporation and bylaws could also make it more difficult for a third party to acquire control of us.

 

There are limitations in connection with the availability of quotes and order information on the OTC Pink.

 

Trades and quotations on the OTCBB involve a manual process and the market information for such securities cannot be guaranteed. In addition, quote information, or even firm quotes, may not be available.  The manual execution process may delay order processing and intervening price fluctuations may result in the failure of a limit order to execute or the execution of a market order at a significantly different price.  Execution of trades, execution reporting and the delivery of legal trade confirmation may be delayed significantly.  Consequently, one may not be able to sell shares of our common stock at the optimum trading prices.

 

There are delays in order communication on the OTC Pink.

 

Electronic processing of orders is not available for securities traded on the OTC Pink and high order volume and communication risks may prevent or delay the execution of one’s OTC Pink trading orders. This lack of automated order processing may affect the timeliness of order execution reporting and the availability of firm quotes for shares of our common stock. Heavy market volume may lead to a delay in the processing of OTC Pink security orders for shares of our common stock, due to the manual nature of the market. Consequently, one may not able to sell shares of our common stock at the optimum trading prices.

 

There is a risk of market fraud on the OTC Pink.

 

OTC Pink securities are frequent targets of fraud or market manipulation. Not only because of their generally low price, but also because the OTCBB reporting requirements for these securities are less stringent than for listed or NASDAQ traded securities, and no exchange requirements are imposed. Dealers may dominate the market and set prices that are not based on competitive forces. Individuals or groups may create fraudulent markets and control the sudden, sharp increase of price and trading volume and the equally sudden collapse of the market price for shares of our common stock.

 

There is a limitation in connection with the editing and canceling of orders on the OTC Pink.

 

Orders for OTC Pink securities may be canceled or edited like orders for other securities. All requests to change or cancel an order must be submitted to, received and processed by the OTC Pink. Due to the manual order processing involved in handling OTC Pink trades, order processing and reporting may be delayed, and one may not be able to cancel or edit one’s order. Consequently, one may not able to sell their shares of our common stock at the optimum trading prices.

 

Increased dealer compensation could adversely affect our stock price.

 

The dealer’s spread (the difference between the bid and ask prices) may be large and may result in substantial losses to the seller  of shares of our common stock may incur an immediate “paper” loss due to the price spread.  Moreover, dealers trading on the OTC Pink may not have a bid price for shares of our common stock on the OTC Pink.  Due to the foregoing, demand for shares of our common stock on the OTC Pink may be decreased or eliminated.

 

Additional Risks and Uncertainties

 

If any of the risks that we face actually occur, irrespective of whether those risks are described in this section or elsewhere in this report, our business, financial condition and operating results could be materially adversely affected.

 

  20  

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

 

ITEM 2. PROPERTIES

 

On, November 20, 2016, PCT Corp. signed a 3-year lease for a 12,000 square foot facility in Little River, South Carolina, which became effective December 1, 2016. Since November 1, 2019, the Company leases the premises on a month to month basis. Monthly lease payments are $5,400 and are based upon a mutually accepted rent and expense schedule between the Company and the new property owners. The facility, in Strand Industrial Park at 4235 Commerce Street, houses operations, research and development, production, assembly and testing. All operations for PCTL and PCT Corp. are performed from the Little River, SC facility.

 

 

ITEM 3. LEGAL PROCEEDINGS

 

We may become involved in various routine legal proceedings incidental to our business. However, to our knowledge as of the date of this report, other than described below, there are no material pending legal proceedings to which we are a party or to which any of our property is subject.

 

Property HVAC Dispute

 

On May 14, 2019, we settled a demand for the payment of $7,317 with an attorney representing a local heating, ventilation and air conditioning company that replaced an air conditioning unit in our leased building. We paid $1,000 of the bill for the replacement of an external HVAC, as mandated in our lease for the premises; the remaining portion of the outstanding invoice was due from our then Landlord, as per our lease agreement, and the $7,317 we paid to the attorneys was deducted from our rent due and paid to our previous Landlord.

 

Annihilare Litigation

 

On August 8, 2019, we received notice from Annihilare Medical Systems, Inc (“Annihilare”) that certain intellectual properties developed jointly between us and Annihilare were to be discontinued from use by us and our customers. We dispute the claims from Annihilare that the intellectual properties are exclusively Annihilare’s, and

 

In May of 2020, we filed a complaint in the United States District Court for the Western District of North Carolina (Charlotte Divisions – Civil Action No. 3:20-cv-00287), against Annihilare, Marion E. Paris, Jr. and Clay Parker Sipes. Seeking damages for:

 

1. Two counts of Patent infringement;

2. Trademark infringement;

3. Federal unfair competition, false designation of origin, and false and misleading description of representation;

4. Trademark dilution;

5. Federal cybersquatting;

6. Violation of Defend Trade Secrets Act;

7. Violation of North Carolina’ Trade Secrets Protection Act;

8. Violation of North Carolina and common law unfair competition

9. Breach of fiduciary duty;

10. Breach of duty of loyalty and faithless service;

11. Breach of consulting agreements;

12. Breach of employment agreements;

13. Tortious interference with prospective business relationships;

14. Unjust enrichment;

15. Conversion;

16. Civil conspiracy; and

17. Injunctive relief.

 

These claims arise from several consulting agreements and an acquisition agreements between us and the Defendants surrounding the purchase of Annihilyzer® Intellectual property by us and subsequent infringement of the intellectual properties. The case is currently ongoing.

 

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable to our operations.

  

  21  

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

 

 PCT LTD’s common stock is quoted on the OTC Pink market under the symbol “PCTL.” Our common stock has traded infrequently on the OTC Pink. Which limits our ability to locate accurate high and low bid prices for each quarter during the last two fiscal years. Therefore, the following table lists the available quotations for the high and low closing prices for fiscal 2019 and 2018 obtained through Yahoo! Finance. The quotations reflect inter-dealer prices without retail mark-up, markdown, or commissions and may not represent actual transactions.

 

    2018 2019
    HIGH LOW HIGH LOW
1st Quarter $0.60 $0.37 $0.23 $0.12
2nd Quarter $0.75 $0.31 $0.20 $0.0050
3rd Quarter $0.61 $0.29 $0.0408 $0.0020
4th Quarter $0.43 $0.11 $0.0059 $0.0015

 

On July 27, 2020, the closing price of shares of common stock of the Company was $0.047.  However, we consider our common stock to be thinly traded and, as a result, any reported sales prices may not be a true market-based valuation of the common stock.

  

(b) Holders of Common Stock

 

We had 255 stockholders of record as of July 27, 2020 and 579,701,486 shares outstanding, which does not include 242,134,306 shares of common stock reserved against default on convertible debt. We have not declared dividends on our common stock and do not anticipate paying dividends on our common stock in the foreseeable future.

 

(c) Dividends

 

In the future we intend to follow a policy of retaining earnings, if any, to finance the growth of the business and do not anticipate paying any cash dividends in the foreseeable future. The declaration and payment of future dividends on the Common Stock will be the sole discretion of board of directors and will depend on our profitability and financial condition, capital requirements, statutory and contractual restrictions, future prospects and other factors deemed relevant.

 

(d) Securities Authorized for Issuance under Equity Compensation Plans

 

None.

 

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Recent Sales of Unregistered Securities

 

  Peak One Opportunity Fund Note Conversions

 

During the quarter ended December 31, 2019, the Company issued Peak One Opportunity Fund, LP shares of its common stock upon partial conversion of the promissory note dated February 14, 2019 as follows:

 

Date of Conversion Principal Amount Converted Conversion Price

Number of

Shares Issued

Principal Balance Remaining
10/3/2019 $7,000 $0.0011 6,363,636 $48,000
10/22/2019 $7,000 $0.0010 7,000,000 $41,000
11/6/2019 $11,000 $0.0009 12,941,176 $30,000
Total $25,000   26,304,812  

 

Power Up Lending Group Ltd Note Conversions

 

During the quarter ended December 31, 2019, the Company issued Power Up Lending Group LTD shares of its common stock upon partial conversion of the promissory note dated December 12, 2018 as follows:

 

Date of Conversion Principal Amount Converted Conversion Price

Number of

Shares Issued

Principal Balance Remaining
10/7/2019 $21,450 plus $3,780 in interest $0.0020 12,615,000 $0.00

 

During the quarter ended December 31, 2019, the Company issued Power Up Lending Group LTD shares of its common stock upon partial conversion of the promissory note dated January 16, 2019 as follows:

 

Date of Conversion Principal Amount Converted Conversion Price

Number of

Shares Issued

Principal Balance Remaining
10/11/2019 $23,500 $0.0018 13,055,556 $26,000
10/15/2019 $22,500 $0.0015 15,000,000 $3,500
10/21/2019 $3,500 plus $1,980 in interest $0.0012 4,566,667 $0.00
Total $49,500   32,622,223  

 

During the quarter ended December 31, 2019, the Company issued Power Up Lending Group LTD shares of its common stock upon partial conversion of the promissory note dated February 26, 2019 as follows:

 

Date of Conversion Principal Amount Converted Conversion Price

Number of

Shares Issued

Principal Balance Remaining
10/21/2019 $13,000 $0.0012 11,083,333 $66,200
10/22/2019 $18,900 $0.0012 15,750,000 $47,300
10/24/2019 $14,100 $0.0012 11,750,000 $33,200
10/28/2019 $18,900 $0.0012 15,750,000 $14,300
10/29/2019 $14,300 plus $3,180 in interest $0.0012 14,566,667 $0.00
Total $79,500   68,900,000  

 

During the quarter ended December 31, 2019, the Company issued Power Up Lending Group LTD shares of its common stock upon partial conversion of the promissory note dated May 2, 2019 as follows:

 

Date of Conversion Principal Amount Converted Conversion Price

Number of

Shares Issued

Principal Balance Remaining
11/4/2019 $15,700 $0.0010 15,700,000 $41,300
11/5/2019 $15,600 $0.0010 15,600,000 $25,700
11/6/2019 $20,100 $0.0010 20,100,000 $5,600
11/8/2019 $5,600 plus $2,280 in interest $0.0010 8,040,816 $0.00
Total $57,000   59,440,816  

 

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Peak One Investments LLC Warrant Exercises

 

On October 7, 2019, the Company issued Peak One Investments LLC 6,399,302 shares of common stock upon the cashless exercise of 6,424,286 warrants.

 

On October 18, 2019, the Company issued Peak One Investments LLC 6,498,105 shares of common stock upon the cashless exercise of 6,528,571 warrants.

 

Other Issuances

 

On October 1, 2019, the Company issued 12,000,000 shares of restricted common stock to a consultant for public relations services to be performed through March 31, 2020.

 

During the quarter ended December 31, 2019, the Company issued Crown Bridge Partners, LLC shares of its common stock upon partial conversion of the promissory note dated November 28, 2018 as follows:

 

Date of Conversion Principal Amount Converted Conversion Price

Number of

Shares Issued

Principal Balance Remaining
1/9/2020 $6,491 plus $500 in fees $0.0006 11,750,000 $16,286
1/13/2020 $10,601 plus $3,007 of interest and fees $0.0006 24,300,000 $5,685
Total $17,093   36,050,000  

 

Subsequent Issuances After Year-End

 

On January 2, 2020, the Company entered into a four-year employment agreement with Gary, J. Grieco, its President and CEO, whereby Mr. Grieco will receive $48,000 per year commencing April 1, 2020, and was issued 15,000,000 shares of the Company’s common stock for services. 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.

 

On February 7, 2020, the Company accepted a conversion of $220,000 of debt (two previous notes) into 220,000 restricted shares of the Company’s Preferred Series C shares.

 

On March 1, 2020, 375,000 restricted shares of the Company’s common stock vested for issuance to F. Jody Read, the Company’s current COO as per the employment contract of January 1, 2019.

 

From March 1, 2020 through March 30, 2020, the Company sold 270,000 Series C Convertible Preferred Shares to six accredited investors for a total of $270,000.

 

On March 9, 2020, the Company entered into an agreement to settle a $175,814 convertible note payable and $5,279 of interest accrued on the note through the issuance of 181,000 Shares of Series C Preferred Stock, valued at $181,000 and the payment of $93. On the same date, the Company entered into an agreement to settle a $39,053.58 convertible note payable for an additional 39,000 Shares of Series C Preferred Stock, valued at $39,000 and the payment of $53.58

 On April 1, 2020, the Company executed a note for $100,000 with a non-related party, which included the issuance of 250,000 restricted shares of the Company’s common stock.

On April 1, 2020, the Company issued Peak One Investments LLC 4,623,093 shares of common stock upon the cashless exercise of 4,640,371 warrants.

On April 21, 2020 the Company sold 1,000,000 restricted shares of common stock to an employee of the Company for $10,000.

On April 24, 2020 the Company sold 2,750,000 restricted shares of the Company’s common stock to an accredited investor for $110,000.

  24  

 

On May 5, 2020, the Company executed a consolidated note with a non-related party in the amount of $118,644, which included the issuance of 15,000,000 restricted shares of the Company’s common stock.

 

On May 8, 2020, the Company issued Peak One Investments LLC 4,623,093 shares of common stock upon the cashless exercise of 4,640,371 warrants.

 

On March 20, 2020 the Company issued 150,000 restricted shares of the Company’s common stock for services provided in March of 2020.

On July 6, 2020, the Company executed a consulting contract for one year of investor relations services for $3,000 per month and which includes the issuance of 1,000,000 restricted shares of the Company’s common stock.

All of the above-described issuances were exempt from registration pursuant to Section 4(a)(2) and/or Regulation D of the Securities Act as transactions not involving a public offering. With respect to each transaction listed above, no general solicitation was made by either the Company or any person acting on its behalf. All such securities issued pursuant to such exemptions are restricted securities as defined in Rule 144(a)(3) promulgated under the Securities Act, appropriate legends have been placed on the documents evidencing the securities and may not be offered or sold absent registration or pursuant to an exemption therefrom.

 

Issuer Purchase of Securities

 

We did not repurchase any of our equity securities during the year ended December 31, 2019.

 

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable to smaller reporting companies.

 

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Executive Overview

 

On August 31, 2016, PCT LTD entered into a Securities Exchange Agreement (the “Exchange Agreement”) with Paradigm Convergence Technologies Corporation, a Nevada corporation (“Paradigm”). Pursuant to the terms of the Exchange Agreement, Paradigm became the wholly-owned subsidiary of PCT LTD after the exchange transaction. PCT LTD is a holding company, which through Paradigm is engaged in the business of marketing new products and technologies through licensing and joint ventures.

 

PCT LTD had not recorded revenues for the two fiscal years prior to its acquisition of Paradigm and was dependent upon financing to continue basic operations. Paradigm has recorded revenue since it initiated operations in 2012; however, those revenues have not been sufficient to finance operations, recording annual net losses of $16,578,564 and $3,182,483 for the years ended December 31, 2019 and 2018.

 

PCT LTD remains dependent upon additional financing to continue operations. The Company intends to raise additional financing through private placements of its common/preferred stock and debt financing. We expect that we would issue such stock pursuant to exemptions to the registration requirements provided by federal and state securities laws. The purchasers and manner of issuance will be determined according to our financial needs, as discussed below, and the available exemptions to the registration requirements of the Securities Act of 1933. We also note that if we issue more shares of our common stock, then our stockholders may experience dilution in the value per share of their common stock.

  

  25  

 

The expected costs for the next twelve months include:

 

  continuation of commercial launch of non-toxic sanitizing, disinfecting and sterilizing products and technologies with a strong emphasis on health care facilities, including hospitals, nursing homes, assisted living facilities, clinics and medical, dental and veterinarian offices;

 

  continued research and development on product generation units including those designed for on-site deployment at customers’ facilities;

 

  accelerated research and development and initial commercialization on applications of the products in the agricultural sector, most specifically with respect to abatement of a specific crop disease crisis caused by a bacterium in the U.S. and elsewhere;

 

  acquiring available complementary technology rights;

 

  payment of short-term debt;

 

  hiring of additional personnel in 2020; and

 

  general and administrative operating costs.

 

Management projects these costs to total approximately $2,700,000. To minimize these costs, the Company intends to maintain its practice of controlling operating overheads with efficient facilities commitments, generally below market salaries and consulting fees, and rigorous prioritization of expenditure requirements. Based on its understanding of the commercial readiness of its products and technologies, the capabilities of its personnel (current and being hired), established business relationships and the general market conditions, management believes that the Company expects to be covering its fixed operating expenses (“burn rate”) by the end of the third quarter of 2020.

  

Liquidity and Capital Resources

 

SUMMARY OF BALANCE SHEET   Year ended
December 31, 2019
  Year ended
December 31, 2018
Cash and cash equivalents   $ 67,613     $ 4,893  
Total current assets   $ 224,738     $ 281,742  
Total assets   $ 4,374,775     $ 4,846,988  
Total liabilities   $ 14,290,486     $ 3,141,401  
Accumulated deficit   $ (26,505,567 )   $ (9,927,003 )
Total stockholders’ equity (deficit)   $ (10,134,356 )   $ 1,705,587  

 

The Company recorded a net loss of $16,578,564 and had a working capital deficit of $14,065,748 for the year ended December 31, 2019. We have recorded significant incremental increases in revenues from operations since inception and we are establishing ongoing source of revenue sufficient to cover our operating costs. During 2019 and 2018 the Company relied on raising equity capital and borrowing from stockholders and third parties to fund its ongoing day-to-day operations and its corporate overhead. As December 31, 2019 we had $67,613 in cash compared to $4,893 in cash at December 31, 2018. We had total liabilities of $14,290,486 at December 31, 2019 compared to $3,141,401 at December 31, 2018.

 

Total assets decreased by $472,213 to $4,374,775 at December 31, 2019 compared to $4,846,988 at December 31, 2018. This decrease is primarily from depreciation and amortization recorded on intangible assets and property and equipment during the year ended December 31, 2019 and a decrease in prepaid expenses. This was offset by increases in cash and accounts receivable.

 

  26  

 

Total liabilities increased by $11,149,085 to $14,290,486 at December 31, 2019 compared to $3,141,401 at December 31, 2018. This increase is primarily additions to convertible notes payable (net of discount) of approximately $633,819, derivative liabilities of $10,194,897 and to accrued expenses of approximately $527,668 related to accrued expenses of mostly interest during the year ended December 31, 2019.

 

Our current cash flow is not sufficient to meet our monthly expenses of approximately $225,000 and to fund future research and development. We intend to rely on additional debt financing, loans from existing shareholders and private placements of common/preferred stock for additional funding; however, there is no assurance that additional funding will be available. We do not have material commitments for future capital expenditures. However, we cannot assure that we will be able to obtain short-term financing, or that sources of such financing, if any, will continue to be available, and if available, that they will be on favorable terms.

   

During the next 12 months we anticipate incurring additional costs related to the filing of Exchange Act periodic reports. We believe we will be able to meet these costs through funds provided by management, significant stockholders and/or third parties. We may also rely on the issuance of our common stock in lieu of cash to convert debt or pay for expenses.

 

The table below presents information regarding cash flows:

 

SUMMARY OF CASH FLOWS     Year ended
December 31, 2019
  Year ended
December 31, 2018
Net cash used in operating activities     $ (799,417 )   $ (836,702)
Net cash provided by (used in) investing activities     $ 103,807     $ (226,443)
Net cash provided by operating activities     $ 758,330     $ 1,060,200
Net change in cash     $ 62,720     $ (2,945)

 

Commitments and Obligations

 

At December 31, 2019 the Company recorded notes payable totaling approximately $2,482,743 (related, non-related and convertible, net of debt discount) compared to notes payable totaling $1,907,011 (related, non-related and convertible, net of debt discount) at December 31, 2018. These notes payable represent cash advances received and expenses paid from third parties and related parties. The notes carry interest from 0% to 150% and are due ranging from on demand to February 14, 2022.

 

Paradigm was committed to one lease for office and production space during 2019, located in Little River, South Carolina, having moved all office operations from Lenexa, Kansas on December 31, 2017. The South Carolina lease amount was $4,800 per month, through November 30, 2019 at which time a new owner purchased the building and the Company went on a month-to-month rental basis.

  

Results of Operations

 

SUMMARY OF OPERATIONS   Year ended December 31,
    2019   2018
Revenues   $ 708,405     $ 266,122  
Total operating expenses   $ 2,390,341     $ 2,934,065  
Total other expenses   $ 14,896,628     $ 514,540  
Net loss   $ 16,578,564     $ 3,182,483  
Basic and diluted loss per share   $ (0.09 )   $ (0.07 )

 

     Revenues increased to $708,405 for the year ended December 31, 2019 compared to $266,122 for the year ended December 31, 2018. The revenue increases for 2019 were due to the increased volume of fluids sold, the sale of fluid producing equipment, licensing revenue from EPA sub registration, and placing equipment under the Company’s 2- and 3-year Systems Service Agreements during the year.

 

Total operating expenses decreased to $2,390,341 for the 2019 year compared to $2,934,065 for the 2018 year. The total operating expense decrease for 2019 was due to a decrease in general and administrative expenses and a reduction in other operating activities due to limited availability of cash, and was somewhat offset by an increase in cost of sales. Cost of sales increased as a result of increased sales in 2019 over 2018.

 

  27  

 

General and administrative expenses decreased to $1,922,941 for the 2019 year compared to $2,509,924 for the 2018 year. The decrease in general and administrative expense for 2019 was mainly due to a decrease in stock-based compensation expenses incurred to consultants.

 

Research and development expenses decreased to $6,149 for the 2019 year compared to $14,000 for the 2018 year. Research and development expenses were expected to be higher in 2019, but due to difficulties in financing such research and development, we did, in fact, decrease our research and development expense during the year.

 

Depreciation and amortization expenses increased to $338,028 for the 2019 year compared to $336,708 for the 2018 year. Depreciation and amortization expenses increased in 2019 due to placing equipment into service during the year and amortization of new intangible assets.

 

Total other income (expenses) increased to $14,896,628 for the 2019 year compared to $514,540 for the 2018 year. The overall increase was mainly from an increase in loss on fair value of derivative liability of $12,689,225. Interest expense increased by $1,834,483 and loss on settlement of debt increased by 67,703 in 2019 as there was an increase in notes payable outstanding accruing interest during 2019. These increases were offset by gain on sale of intangibles of $52,498 and a gain on fair value of preferred series A stock liability of $156,825.

 

As a result of the changes described above, the net loss increased to $16,578,564 for the 2019 year compared to $3,182,483 for the 2018 year.

 

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

  

Critical Accounting Policies

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to smaller reporting companies. 

 

  28  

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

 

PCT LTD

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Report of Independent Registered Public Accounting Firm 30
   
Consolidated Balance Sheets 31
   
Consolidated Statements of Operations 32
   
Consolidated Statements of Stockholders’ Equity (Deficit) 33
   
Consolidated Statements of Cash Flows 34
   
Notes to the Consolidated Financial Statements 35

 

  29  

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders of PCT LTD:

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of PCT LTD (“the Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2019 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

 

Explanatory Paragraph Regarding Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

/s/ Sadler, Gibb & Associates, LLC

 

We have served as the Company’s auditor since 2015.

 

Salt Lake City, UT

July 31, 2020

 

 

 

  30  

 

PCT LTD

Consolidated Balance Sheets

 

   

December 31,

2019

  December 31,
2018
ASSETS                
CURRENT ASSETS                
Cash and cash equivalents   $ 67,613     $ 4,893  
Accounts receivable, net     111,915       49,140  
Inventory     —         7,105  
Prepaid expenses     43,100       218,494  
Other current assets     2,110       2,110  
Total current assets     224,738       281,742  
                 
PROPERTY AND EQUIPMENT                
Property and equipment, net     440,109       499,972  
                 
OTHER ASSETS                
Intangible assets, net     3,704,429       4,059,775  
Deposits     5,499       5,499  
Total other assets     3,709,928       4,065,274  
                 
TOTAL ASSETS   $ 4,374,775     $ 4,846,988  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                
CURRENT LIABILITIES                
Accounts payable   $ 315,228     $ 350,593  
Accrued expenses – related parties     84,538       54,033  
Accrued expenses     890,104       362,436  
Current portion of notes payable – related parties, net     826,957       93,000  
Current portion of notes payable, net     468,153       399,664  
Current portion of convertible notes payable, net     1,187,633       161,280  
Derivative liability     10,517,873       322,976  
    Preferred series A stock liability     —         144,352  
Total current liabilities     14,290,486       1,888,334  
                 
LONG-TERM LIABILITIES                
Notes payable – related parties, net of current portion and discounts     —         733,826  
Notes payable, net of current portion and discounts     —         126,707  
Convertible notes payable, net of current portion and discounts     —         392,534  
TOTAL LIABILITIES     14,290,486       3,141,401  
                 
MEZZANINE EQUITY                
Preferred stock series A, $0.001 par value; 1,000,000 authorized; 500,000 and 600,000 issued and outstanding at December 31, 2019 and December 31, 2018, respectively     60,398       —    
Preferred stock series B, $0.001 par value; 1,000,000 authorized; 1,000,000 and nil issued and outstanding at December 31, 2019 and December 31, 2018, respectively     158,247       —    
TOTAL MEZZANINE EQUITY     218,645       —    
                 
STOCKHOLDERS’ EQUITY (DEFICIT)                
                 
Preferred stock series C, $0.001 par value; 5,500,000 authorized; nil issued and outstanding at December 31, 2019 and December 31, 2018     —         —    
Common stock, $0.001 par value; 1,000,000,000 authorized; 498,880,300 and 44,559,238 issued and outstanding at December 31, 2019 and December 31, 2018, respectively     498,881       44,560  
Additional paid-in-capital     15,872,330       11,588,030  
Accumulated deficit     (26,505,567 )     (9,927,003 )
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)     (10,134,356 )     1,705,587  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)   $ 4,374,775     $ 4,846,988  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

  31  

 

PCT LTD

Consolidated Statements of Operations

  

    For the year ended December 31,
    2019   2018
REVENUES        
  Product   $ 301,162     $ 131,006  
  Licensing     111,000       39,000  
  Equipment leases     296,243       96,116  
  Total revenue     708,405       266,122  
                 
OPERATING EXPENSES                
  General and administrative     1,922,941       2,509,924  
  Research and development     6,149       14,000  
  Costs of product, licensing and equipment leases     123,223       73,433  
  Depreciation and amortization     338,028       336,708  
   Total operating expenses     2,390,341       2,934,065  
                 
Loss from operations     (1,681,936 )     (2,667,943 )
                 
OTHER INCOME (EXPENSE)                
Interest expense     (2,041,695 )     (207,212 )
Loss on change in fair value of derivative liability     (12,912,201 )     (222,976 )
Gain (loss) on change in fair value of preferred series A stock liability     72,473       (84,352 )
Gain on sale of intangible assets     52,498       —    
Loss on settlement of debt     (67,703 )     —    
Total other income (expense)     (14,896,628 )     (514,540 )
                 
Loss before income taxes     (16,578,564 )     (3,182,483 )
                 
Income taxes     —         —    
                 
NET LOSS   $ (16,578,564 )   $ (3,182,483 )
                 
Basic and diluted net loss per share   $ (0.09 )   $ (0.07 )
                 
Basic and diluted weighted average shares outstanding     189,765,526       43,513,512  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

  32  

 

PCT LTD

Consolidated Statements of Stockholders’ Equity (Deficit)

  

For the years ended December 31, 2019 and 2018
                 
    Common Stock   Additional Paid-in   Accumulated   Total Stockholders’ Equity
    Shares   Amount   Capital   Deficit   (Deficit)
Balance – December 31, 2017     41,179,238       41,180     $ 10,001,323     $ (6,744,520 )   $ 3,297,983  
Common stock issued for cash     230,000       230       114,770       —         115,000  
Common stock issued for services     3,150,000       3,150       1,396,850       —         1,400,000  
Beneficial conversion features     —         —         75,087       —         75,087  
Net loss     —         —         —         (3,182,483 )     (3,182,483 )
Balance – December 31, 2018     44,559,238     $ 44,560     $ 11,588,030     $ (9,927,003 )   $ 1,705,587  
Common stock issued for services     13,575,000       13,575       213,353       —         226,928  
Common stock issued in settlement of debt     5,383,810       5,384       800,012       —         805,396  
Common stock issued from exercise of warrants     24,928,288       24,928       258,678       —         283,606  
Common stock issued in conversion of convertible notes payable     410,433,964       410,434       3,012,257       —         3,422,691  
Net loss     —         —         —         (16,578,564 )     (16,578,564 )
Balance – December 31, 2019     498,880,300     $ 498,881     $ 15,872,330     $ (26,505,567 )     (10,134,356 )

 

The accompanying notes are an integral part of these consolidated financial statements.

 

  33  

 

PCT LTD

Consolidated Statements of Cash Flows

 

   

For the year ended

December 31,

    2019   2018
Cash Flows from Operating Activities                
Net loss   $ (16,578,564 )   $ (3,182,483 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     338,028       336,708  
Amortization of debt discount     752,231       62,681  
Amortization of right-of-use asset     43,330       —    
Bad debt expense     16,250       3,000  
Common stock issued for services     226,928       1,182,875  
Loss on change in fair value of derivative liability     12,912,201       222,976  
Gain on change in fair value of preferred series A stock liability     (72,473 )     84,352  
Series B preferred stock issued for services     158,247       —    
Loss on settlement of debt     67,703       —    
    Gain on sale of intangible assets     (52,498 )     —    
    Default penalties on convertible notes     660,485       —    
Impairment loss     —         26,550  
Changes in operating assets and liabilities:                
Accounts receivable     (161,385 )     (39,503 )
Inventory     26,510       15,220  
Prepaid expenses     175,394       5,841  
Operating lease liability     (43,330 )     —    
Accounts payable     22,148       215,980  
Accrued expenses – related party     30,505       183,724  
Accrued expenses     678,873       45,377  
Net cash used in operating activities     (799,417 )     (836,702 )
                 
Cash Flows from Investing Activities                
Proceeds from sale of intangible assets     111,323       —    
Purchase of property and equipment     (2,516 )     (181,443 )
Purchase of intangible assets     (5,000 )     (45,000 )
Net cash provided by (used in) investing activities     103,807       (226,443 )
                 
Cash Flows from Financing Activities                
Proceeds from notes payable – related parties     17,544       124,000  
Proceeds from notes payable     374,300       356,200  
Proceeds from convertible notes payable     577,750       510,000  
Proceeds from preferred stock subscriptions     —         60,000  
Proceeds from common stock issued     —         115,000  
Repayment of notes payable – related parties     (30,544 )     (17,000 )
Repayment of notes payable     (89,720 )     (20,000 )
Repayment of convertible notes payable     (91,000 )     (68,000 )
Net cash provided by financing activities     758,330       1,060,200  
                 
Net change in cash     62,720       (2,945 )
Cash and cash equivalents at beginning of period     4,893       7,838  
Cash and cash equivalents at end of period   $ 67,613     $ 4,893  
                 
Supplemental Cash Flow Information                
Cash paid for interest   $ 41,013     $ 55,608  
Cash paid for income taxes   $ —       $ —    
                 
Non-Cash Investing and Financing Activities:                
Original debt discount against notes payable   $ 86,016     $ 20,000  
Original debt discount against notes payable – related parties   $ —       $ 13,464  
Original debt discount against convertible notes   $ 616,125     $ 202,0870  
Modification of notes payable   $ 20,590     $ 245,000  
Modification of notes payable – related parties   $ —       $ 727,000  
Common stock issued in conversion of convertible notes payable   $ 3,706,298     $ —    
Accounts receivable netted against notes payable   $ 28,090     $ —    
Initial operating lease right-of-use asset and liability   $ 43,330     $ —    
Preferred series A stock reclassification from liability to mezzanine equity   $ 60,398     $ —    
Extinguishment of notes payable   $ 216,410     $ 250,000  
Common stock issued for prepaid expenses   $ —       $ 1,400,000  
Property plant and equipment transferred to inventory   $ 19,405     $ —    

 

The accompanying notes are an integral part of these consolidated financial statements.

 

  34  

 

 

PCT LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019 AND 2018

 

 

NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Operations

PCT LTD (formerly Bingham Canyon Corporation, (the “Company,” “PCT Ltd,” or “Bingham”), a Delaware corporation, was formed on February 27, 1986. The Company changed its domicile to Nevada on August 26, 1998. The Company acquires, develops and provides sustainable, environmentally safe disinfecting, cleaning and tracking technologies. The Company specializes in providing cleaning, sanitizing, and disinfectant fluid solutions and fluid-generating equipment that creates environmentally safe solutions for global sustainability.

 

On August 31, 2016, the Company entered into a Securities Exchange Agreement with Paradigm Convergence Technologies Corporation (“Paradigm”) to affect the acquisition of Paradigm as a wholly-owned subsidiary. Under the terms of the agreement, Bingham issued 16,790,625 restricted common shares of Bingham stock to the shareholders of Paradigm in exchange for all 22,387,500 outstanding common shares of Paradigm stock. In addition, Bingham issued options exercisable into 2,040,000 shares of the Bingham’s common stock (with exercise prices ranging between $0.133 and $0.333) in exchange for 2,720,000 outstanding Paradigm stock options (with exercise prices ranging between $0.10 and $0.25). These 2,040,000 options have been adjusted at the same exchange rate of 75% that the outstanding common shares were exchanged. As a result of this share exchange agreement, Paradigm, the operating company, is considered the accounting acquirer.

 

Paradigm is located in Little River, SC and was formed June 6, 2012 under the name of EUR-ECA, Ltd. On September 11, 2015, its Board of Directors authorized EUR-ECA Ltd to file with the Nevada Secretary of State to change its name to Paradigm Convergence Technologies Corp. Paradigm is a technology licensing company specializing in environmentally safe solutions for global sustainability. The company holds a patent, intellectual property and/or distribution rights to innovative products and technologies. Paradigm provides innovative products and technologies for eliminating biocidal contamination from water supplies, industrial fluids, hard surfaces, food processing equipment, and medical devices. Paradigm’s overall strategy is to market new products and technologies through the use of equipment leasing, joint ventures, licensing, distributor agreements and partnerships.

 

Effective on February 29, 2018, the Company changed its name from Bingham Canyon Corporation to PCT LTD to more accurately identify the Company’s direction and to develop the complimentary relationship and association with its wholly-owned operating company, Paradigm Convergence Technologies Corporation (“Paradigm” or “PCT Corp.”).

 

Principles of Consolidation

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 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.

 

  35  

 

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 $67,613 and $4,893 as of December 31, 2019 and December 31, 2018, respectively, represents cash on deposit in various bank accounts. There were no cash equivalents as of December 31, 2019 and December 31, 2018.

 

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 December 31, 2019, consisted of the following:

 

    Total fair value at
December 31, 2019
$
  Quoted prices in active markets
(Level 1)
$
  Significant other observable inputs
(Level 2)
$
  Significant unobservable inputs
(Level 3)
$
                 
Description:                                
Derivative liability (1)     10,517,873       —         —         10,517,873  
Total     10,517,873       —         —         10,517,873  

 

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.

 

  36  

 

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 December 31, 2019, and December 31, 2018, the Company had a $10,517,873 and $322,976 derivative liability, respectively and preferred series A stock liabilities of $0 and $144,352, respectively.

 

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. See Note 7 for additional information.

 

Sequencing Policy

Under ASC 815-40-35, the Company has adopted a sequencing policy whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuance of securities to the Company’s employees or directors are not subject to the sequencing policy.

 

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 $16,250 and $Nil at December 31, 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 December 31, 2019 and December 31, 2018, the inventory consisted of parts for equipment sold as replacement parts to existing customers or sold to new customers. The Company has recorded a reserve allowance of $0 and $0 as of December 31, 2019 and December 31, 2018, respectively. The Company has determined that some of the supplies inventory is necessary to be placed into service, after assembly into equipment to be used in product manufacturing and classified as Machinery and Equipment. The balance at December 31, 2019 and December 31, 2018 of such supplies and equipment not yet placed in service amounted to $321,565 and $369,754, respectively.

 

Property and Equipment

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.

  

  37  

 

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. An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the long-lived assets as determined by projected discounted net future cash flows. The recorded impairment expense was $Nil for the year ended December 31, 2019.

 

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.  

 

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 Customers” (Topic 606). The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principal is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services.

 

The Company recognizes revenue based on the five criteria for revenue recognition established under Topic 606: 1) identify the contract, 2) identify separate performance obligations, 3) determine the transaction price, 4) allocate the transaction price among the performance obligations, and 5) recognize revenue as the performance obligations are satisfied.

 

The Company has the following three revenue streams:

 

1) Product sales (equipment and/or fluid solutions): Contracts for product sales consist of invoices specify the transaction price. The only performance commitment is the provision of products and the transaction price is allocated to the products specified on the invoice. The Company recognizes revenue from the sale of products when the performance obligation is satisfied by transferring control of the product to a customer.

 

2) Licensing: The Company licenses a 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. The Contract specifies the term, fees and or royalty. Performance obligations include the provision of a sub registration to use the US EPA Product Registration and or the provision of a license to use the product for a period of time. The Company allocates the transaction price based on the relative standalone selling price of each performance 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.

 

3) Equipment leases: Contracts for equipment leases are 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 performance obligation consists of the provision of with leased equipment 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 has disclosed disaggregated revenue via revenue stream on the face of the statement of operations. The Company did not have any contract assets or liabilities at December 31, 2019.

 

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Stock-Based Compensation

The Company recognizes all share-based payments to employees and directors, including grants of stock options, warrants and common stock awards in the consolidated statement of operations and comprehensive loss as an operating expense based on their fair values as established at the grant date. Equity instruments issued to non-employees include common stock awards or warrants to purchase shares of our common stock. These common stock awards or warrants are either fully-vested and exercisable at the date of grant or vest over a certain period during which services are provided. The Company expenses the fair market value of fully vested awards at the time of grant, and of unvested awards over the period in which the related services are received. In accordance with Accounting Standards Update 2018-07, unvested awards are no longer remeasured to fair value until vesting and rather the fair value is established at the grant date consistent with the treatment of employee director awards.

 

The Company computes the estimated fair values of stock options and warrants using the Black-Scholes option pricing model or a Monte Carlo valuation model. Market price at the date of grant is used to calculate the fair value of restricted stock units and common stock awards.

 

Stock-based compensation expense is based on awards ultimately expected to vest and is reduced for estimated forfeitures except for market-based warrants which are expensed based on the grant date fair value regardless of whether the award vests. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 

Income Taxes

Deferred income taxes are provided on a liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences, which are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

Basic 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 December 31, 2019, there were outstanding common share equivalents (options, warrants, convertible debt and preferred series A stock) which amounted to 1,697,208,559 shares of common stock. These common share equivalents were not included in the computation of diluted loss per share as their effect would have been anti-dilutive.

 

Recent Accounting Pronouncements 

On January 1, 2019, the Company adopted the new accounting standard ASU 2016-02, “Leases” (“ASU 2016-02”), and associated ASUs related to ASU 842, Leases as discussed in the Leases accounting policy description.

On January 1, 2019, the Company adopted the new accounting standard ASU 2018-07, “Compensation - Stock Compensation” (Topic 718): Improvements to Nonemployees Share-Based Payment Accounting (“ASU 2018-07”) as discussed in the Stock-based compensation accounting policy description.

In August 2018, the FASB issued Accounting Standards Update No. 2018-13 (“ASU 2018-13”), Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements relating to fair value measurements as outlined in Topic 820, Fair Value Measurement. ASU 2018-13 is applicable to all entities that are required, under GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments outlined in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for any removed or modified disclosures upon issuance of ASU 2018-13. The Company does not expect the adoption of ASU 2018-13 to have a material effect on the consolidated financial statements.

 

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NOTE 2. GOING CONCERN

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has limited assets, has an accumulated deficit of $26,505,567 and has negative cash flows from operations. As of December 31, 2019, the Company had a working capital deficit of $14,065,748. The Company has relied on raising debt and equity capital in order to fund its ongoing day-to-day operations and its corporate overhead. The Company will require additional working capital from either cash flow from operations, from debt or equity financing, or from a combination of these sources. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

NOTE 3. PROPERTY AND EQUIPMENT

 

Property and equipment at December 31, 2019 and December 31, 2018 consisted of the following: 

 

    December 31, 2019   December 31, 2018
Machinery and leased equipment   $ 151,719     $ 138,209  
Machinery and equipment not yet in service     321,565       369,754  
Office equipment and furniture     20,064       20,064  
Website     2,760       2,760  
                 
Total property and equipment   $ 496,108     $ 530,787  
Less: Accumulated Depreciation     (55,999 )     (30,815 )
                 
Property and equipment, net   $ 440,109     $ 499,972  

 

Depreciation expense was $25,184 and $26,376 for the year ended December 31, 2019 and 2018, respectively. During the year ended December 31, 2018, the Company recognized an impairment charge of $26,550.

 

On July 30, 2019, the Company transferred $17,876 of equipment not yet in service and offset accounts receivable of $23,209 in exchange for $13,939 and the settlement of accounts payable and accrued liabilities of $43,767. As result the Company recorded a gain on the settlement of debt of $16,706.

 

NOTE 4. INTANGIBLE ASSETS

 

Intangible assets at December 31, 2019 and December 31, 2018 consisted of the following:

 

    December 31, 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     (1,001,060 )     (690,714 )
Net Carrying Amount   $ 3,704,429     $ 4,059,775  

 

Amortization expense was $312,844 for the year ended December 31, 2019, of which $18,693 relates to patents and $294,151 relates to technology rights. No impairment was recognized during the years ended December 31, 2019 and 2018.

 

Estimated Future Amortization Expense:

 

        $  
  For year ending December 31, 2020       303,578  
  For year ending December 31, 2021       302,003  
  For year ending December 31, 2022       302,003  
  For year ending December 31, 2023       302,003  
  For year ending December 31, 2024       302,003  
  Thereafter       2,192,839  
  Total     $ 3,704,429  

 

On May 10, 2019, the Company sold intangible assets with a carrying value of $47,502 for $111,323 of cash and the settlement of $33,677 of liabilities owed to the buyer.  The Company recorded a gain on sales of intangible assets of $52,498.

 

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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 $43,330 and $43,330, respectively, as of January 1, 2019. Leases with an initial term of 12 months or less are not recorded on the balance sheet. As of December 31, 2019, the Company did not have any leases with terms greater than 12 months.

 

The depreciable lives of operating lease assets and leasehold improvements are limited by the expected lease term. The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The Company used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date.

 

The Company’s lease expired during the year ended December 31, 2019 and the Company did not have any ROU assets or liabilities as of December 31, 2019. Expense related to leases is recorded on a straight-line basis over the lease term, including rent holidays. During the year ended December 31, 2019, the Company recognized operating lease expense of $52,800. Operating lease costs are included within selling, administrative and other expenses on the consolidated statements of operations.

 

Cash paid for amounts included in the measurement of operating lease liabilities were $52,800 for the year ended December 31, 2019. During the year ended December 31, 2019, the Company reduced its ROU liabilities by $43,330 from cash paid. The Company’s weighted average discount rate is 41%.

 

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NOTE 6. Notes Payable

 

The following tables summarize notes payable as of December 31, 2019 and December 31, 2018:

  

Type Original Amount

Origination

Date

Maturity

Date

Annual

Interest

Rate

Balance at

December 31,

2019

Balance at

December 31, 2018

Note Payable (aa) $ 150,000  5/18/2016 06/01/2019 19% $  - $ 150,000
Note Payable ** $  25,000  5/8/2017 06/30/2018 0% $ 27,500 $  27,500
Note Payable $  130,000  6/20/2018 01/02/2020 8% $ 130,000 $  130,000
Note Payable (a) $  126,964  6/20/2018 01/02/2020 6% $  - $  126,964
Note Payable (b) $ 26,500  6/26/2018 10/01/2019 10% $  - $  26,500
Note Payable (l) $  60,000  10/31/2018 12/30/2018 8% $  - $  60,000
Note Payable ** $ 8,700  11/15/2018 06/30/2019 10% $  8,700 $  8,700
Note Payable (c) $  52,063 04/08/2019 04/08/2020 40% $  - $  -
Note Payable (d) $ 40,000 06/20/2019 12/31/2019 8% $  - $   -
Note Payable (e) $  6,741 06/21/2019 04/08/2020 32% $  - $  -
Note Payable (d) $  90,596 09/15/2019 03/16/2020 8% $ 90,596 $  -
Note Payable (f) $  50,000 10/03/2019 04/03/2020 12% $  37,500 $  -
Note Payable (g) $ 17,500 11/12/2019 11/12/2020 8% $  17,500 $  -
Note Payable (h) $ 12,250 12/12/2019 12/05/2020 42% $  - $  -
Note Payable (i) $  83,400 12/20/2019 06/19/2020 150% $  80,192 $  -
Note Payable (j) $  148,362 12/20/2019 11/27/2020 80% $ 145,404 $  -
Subtotal           $ 537,392 $ 529,664
Debt discount           $ (69,239) $ (3,293)
Balance, net           $ 468,153 $  526,371
Less current portion           $ (468,153) $ (399,664)
Total long-term           $ - $ 126,707
                   
**  Currently in default        

 

a) On January 28, 2019, the Company agreed to convert $131,327 of principal and interest of its note payable with a non-related party into 987,421 shares of the Company’s common stock. The Company recorded a loss on settlement of debt of $38,319 equal to the difference between the fair value of the common shares of $177,736 and the carrying value of the note and interest.

 

b) On February 1, 2019, the Company modified note by extending the maturity date to October 1, 2019. Further, the Company and the lender agreed that the customer’s minimum monthly royalty payments of $1,500 would be applied to reduce the principal and interest of the note. Total accounts receivable from the noteholder of $28,090 was applied to the note during the year ended December 31, 2019.

 

c) On April 8, 2019, the Company entered into a promissory bank loan with a non-related party for $52,063 of which $9,563 was the loan fee or original issue discount resulting in cash proceeds to the Company of $42,500. The note is due on April 8, 2020 and results in an annual percentage rate of 40%. The note was repaid during the year ended December 31, 2019.

 

d) On June 20, 2019 the Company entered into a promissory note with a non-related party for $40,000. The note is due December 31, 2019, is unsecured and bears an interest rate of 8% per annum. On September 15, 2019, the Company received an additional $50,000 from the lender and issued a new promissory note for $90,596 which was equal to the original $40,000 note, $596 of accrued interest and the additional $50,000 advanced. The promissory note is due March 16, 2020, is unsecured and bears an interest rate of 8% per annum.

 

e) On June 21, 2019, the Company entered into a promissory bank loan with a non-related party for $6,741 of which $641 was the loan fee or original issue discount resulting in cash proceeds to the Company of $6,100. The note is due on April 8, 2020 and results in an annual percentage rate of 32%. The note was repaid during the year ended December 31, 2019.

 

f) On October 3, 2019, the Company entered into a promissory note with a non-related party for $50,000. The note is due on April 3, 2020 and bears interest at a rate of 12%. On October 9, 2019, the Company had repaid $12,500 of the loan.

 

g) On November 12, 2019, the Company entered into a promissory note with a non-related party for $17,500. The note is due November 12, 2020, is unsecured and bears an interest rate of 8% per annum.

 

h) On December 12, 2019, the Company entered into a loan with a non-related party for $12,250 of which $2,250 was the loan fee or original issue discount resulting in cash proceeds to the Company of $10,000. The note was repaid during the year ended December 31, 2019.

 

i) On December 20, 2019, the Company sold future receivables of $83,400 in consideration for $58,200. The advance is to be repaid through $3,208 weekly payments. In connection with the advance, the Company granted the lender a security interest in all accounts, equipment, intangibles and inventory.

 

j) On December 20, 2019, the Company sold future receivables of $148,362 in consideration for $100,000. The advance is to be repaid through $2,958 weekly payments.

 

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The following table summarizes notes payable, related parties as of December 31, 2019 and December 31, 2018:

 

Type Original Amount

Origination

Date

Maturity

Date

Annual

Interest

Rate

Balance at

December 31,

2019

Balance at

December 31, 2018

Note Payable, RP ** $ 30,000 04/10/2018 01/15/2019 3% $  30,000 $  30,000
Note Payable, RP $ 380,000 06/20/2018 01/02/2020 8% $  380,000 $  380,000
Note Payable, RP $ 350,000 06/20/2018 01/02/2020 5% $  325,000 $  350,000
Note Payable, RP $ 17,000 06/20/2018 01/02/2020 5% $ 17,000 $ 17,000
Note Payable, RP ** $ 50,000 07/27/2018 11/30/2018 8% $ 50,000 $ 50,000
Note Payable, RP $ 5,000 10/09/2018 Demand 0% $  5,000 $  5,000
Note Payable, RP $ 5,000 10/19/2018 Demand 0% $  5,000 $  5,000
Note Payable, RP $ 3,000 10/24/2018 Demand 0% $  - $  3,000
Note Payable, RP $ 2,544 01/03/2019 06/30/2019 3% $  - $  -
Note Payable, RP (k) $ 15,000 08/16/2019 02/16/2020 8% $  15,000 $  -
Subtotal           $ 827,000 $ 840,000
Debt discount           $ (43) $ (13,174)
Balance, net           $ 826,957 $ 826,826
Less current portion           $ (826,957) $  (93,000)
Total long-term           $   - $ 733,826
 
** Currently in default        

 

k) On August 16, 2019, the Company entered into a promissory note with a Director and former CEO of the Company for $15,000. The note is due February 16, 2020, is unsecured and bears an interest rate of 8% per annum.

 

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The following table summarizes convertible notes payable as of December 31, 2019 and December 31, 2018:

 

Type Original Amount

Origination

Date

Maturity

Date

Annual

Interest

Rate

Balance at

December 31,

2019

Balance at

December 31, 2018

Convertible Note Payable (l) $  450,000 03/28/2018 03/31/2021 8% $ - $ 450,000
Convertible Note Payable (m) $ 38,000 07/30/2018 07/25/2019 12% $ - $ 38,000
Convertible Note Payable (m) $  53,000 08/29/2018 08/27/2019 12% $ - $ 53,000
Convertible Note Payable (n) * ** $  50,000 12/06/2018 12/06/2019 12% $   22,777 $  50,000
Convertible Note Payable (o) * ** $  65,000 12/06/2018 12/06/2019 12% $  46 $   65,000
Convertible Note Payable (p) $  63,000 12/12/2018 12/05/2019 22% $ - $  63,000
Convertible Note Payable (l) $  539,936 01/15/2019 01/15/2022 8% $ - $ -
Convertible Note Payable (q) $  33,000 01/16/2019 01/15/2020 12% $ - $  -
Convertible Note Payable (r)  * ** $  100,000 01/18/2019 01/16/2020 8% $  95,492 $  -
Convertible Note Payable (s)  * ** $  60,000 01/29/2019 01/22/2020 8% $  266,050 $ -
Convertible Note Payable (t)  * ** $  50,000 02/01/2019 10/22/2019 24% $  154,330 $ -
Convertible Note Payable (u) * ** $  60,000 02/21/2019 02/14/2022 0% $  74,000 $  -
Convertible Note Payable (v) * ** $  55,125 02/21/2019 02/20/2020 12% $  42,125 $ -
Convertible Note Payable (w) $  53,000 02/26/2019 02/20/2020 12% $ - $  -
Convertible Note Payable (x) * ** $  5,000 03/18/2019 12/13/2019 24% $  232,814 $  -
Convertible Note Payable (y) $  38,000 05/02/2019 04/29/2020 12% $ - $ -
Convertible Note Payable (z) *  ** $  26,000 09/16/2019 09/11/2022 0% $  26,000 $ -
Convertible Note Payable (aa) $  175,814 09/27/2019 09/25/2020 8% $  175,814 $ -
Convertible Note Payable (bb) $  53,000 10/08/2019 10/07/2020 12% $  53,000 $ -
Convertible Note Payable (cc) $  50,000 10/31/2019 10/29/2020 12% $  50,000 $ -
Subtotal           $ 1,192,448 $ 719,000
Debt discount           $  (4,815) $ (165,186)
Balance, net           $ 1,187,633 $ 553,814
Less current portion           $ (1,187,633) $ (161,280)
Total long-term           $ - $ 392,534

* Embedded conversion feature accounted for as a derivative liability at period end

** Currently in default

 

       
l) On January 15, 2019, the Company executed a new, consolidated convertible note with a non-related party by extinguishing the March 28, 2018 convertible note in the amount of $450,000 with interest due of $28,898 and a $60,000 term note, dated October 31, 2018 with interest due of $1,038. The new convertible note is in the amount of $539,936, is due on or before January 15, 2022, has an 8% per annum interest rate and may be converted into shares of the Company’s common stock at $0.20 per share. The new note incorporates an anti-dilution feature if the Company issues more than 60,000,000 shares of its common stock. The embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature was $292,651. The Company recorded a loss on extinguishment of debt of $350,117 equal to the initial fair value of derivative liability on the new note and the previous unamortized debt discount balance of one the old notes.
     
    On March 27, 2019, the Company agreed to convert $548,686 of principal ($539,936) and interest ($8,750) of its convertible note payable into 3,597,989 shares of the Company’s common stock. The Company recorded a gain on settlement of debt of $359,857 equal to the difference between both the fair value of the common shares of $523,867 and the fair value of the conversion feature at conversion of $335,038 compared to the carrying value of the note and interest.

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m) During the period, this note was paid off, resulting a pre-payment penalty of 37%.

 

n) During the year ended December 31, 2019, the Company defaulted on the note, resulting in a default penalty of $15,000 added to the principal of the note. During the year ended December 31, 2019, $42,223 of principal and $2,500 of interest of the convertible note payable was converted into 76,154,631 shares of the Company’s common stock.

 

o) During the year ended December 31, 2019, principal of $64,954 and interest of $7,000 was converted into 78,030,000 shares of the Company’s common stock.

 

p) On June 10, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $142,265 and resulted in a discount to the note payable of $60,000 and an initial derivative expense of $82,265. On June 19, 2019, the Company defaulted on the note, resulting in a default penalty of $32,650 added to the principal of the note and the remaining discount was accelerated and recognized to interest expense. During the year ended December 31, 2019, principal of $95,650 and $3,780 of interest of the convertible note payable was converted into 31,174,816 shares of the Company’s common stock.

 

q) On January 16, 2019, the Company entered into a convertible promissory with a non-related party for $33,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $30,000. The note is due on January 15, 2020 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 12% to 37%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. On June 19, 2019, the Company defaulted on the note, resulting in the note becoming immediately convertible and a default penalty of $16,500 added to the principal of the note.
     
    On June 19, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $116,540 and resulted in a discount to the note payable of $30,000 and an initial derivative expense of $86,540. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the year ended December 31, 2019, $49,500 of principal and $1,980 of interest of the convertible note payable was converted into 32,622,223 shares of the Company’s common stock.

 

r) On January 18, 2019, the Company entered into a convertible promissory note with a non-related party for $100,000 of which $5,000 was an original issue discount and $5,000 was paid directly to third parties resulting in cash proceeds to the Company of $90,000. The note is due on January 16, 2020 and bears interest on the unpaid principal balance at a rate of 8% per annum. Stringent pre-payment terms apply (from 10% to 30%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 24% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 64% of the average 2 lowest trading prices during the 10-trading day period prior to the conversion date.
     
    On July 17, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $239,668 and resulted in a discount to the note payable of $90,000 and an initial derivative expense of $149,668. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the year ended December 31, 2019, $4,508 of principal and $179 of interest was converted into 5,207,600 shares of the Company’s common stock. There also was an unfulfilled conversion during the period due to lack of authorized shares, further triggering default and penalties were assessed in the amount of $65,500 recorded in accrued interest.

 

s) On January 29, 2019, the Company entered into a convertible promissory note with a non-related party for $60,000 of which $3,000 was an original issue discount and $8,000 was paid directly to third parties resulting in cash proceeds to the Company of $49,000. The note is due on January 22, 2020 and bears interest on the unpaid principal balance at a rate of 8% per annum. Stringent pre-payment terms apply (from 10% to 30%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 18% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to the lower of 64% of the average 2 lowest trading prices during the 10-trading day period prior to the conversion date or $0.12.
     
    On July 28, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $640,053 and resulted in a discount to the note payable of $49,000 and an initial derivative expense of $591,053. During the year ended December 31, 2019, the Company defaulted on the note, resulting in a default penalty of $214,690 added to the principal of the note. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the year ended December 31, 2019, $8,640 of the convertible note payable was converted into 7,500,000 shares of the Company’s common stock. There also was an unfulfilled conversion during the period due to lack of authorized shares, further triggering default and penalties were assessed in the amount of $294,000 recorded in accrued interest.

 

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t) On February 1, 2019, the Company entered into a convertible promissory note with a non-related party for $50,000 of which $5,000 was an original issue discount resulting in cash proceeds to the Company of $45,000. The note is due on October 22, 2019 and bears interest on the unpaid principal balance at a rate of 12% per annum and a default interest rate of 24% per annum. The Note may be converted by the Lender at any time after the date of issuance into shares of Company’s common stock at a conversion price equal 50% of the lowest trading price during the 20-trading day period prior to the conversion date. As the closing sales price fell below $0.03, an additional 15% discount was attributed to the conversion price. During the year ended December 31, 2019, the Company defaulted on the note, resulting in a default penalty of $106,526 added to the principal of the note.
     
    The embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $158,142 and resulted in a discount to the note payable of $50,000 and an initial derivative expense of $113,142. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the year ended December 31, 2019, $2,196 of the principal and $953 of interest was converted into 4,999,000 shares of the Company’s common stock. There also was an unfulfilled conversion during the period due to lack of authorized shares, further triggering default and penalties were assessed in the amount of $36,250 recorded in accrued interest.

 

u) On February 21, 2019, the Company entered into a convertible promissory note with a non-related party for $60,000 of which $5,000 was an original issue discount and $8,000 was paid directly to third parties resulting in cash proceeds to the Company of $47,000. The Company also issued a warrant with a term of five years to purchase up to 300,000 shares of common stock of the Company at an exercise price of $0.20 per share and subject to adjustment for dilutive issuances and cashless exercise. The note is due on February 14, 2022 and bears interest on the unpaid principal balance at a rate of 0% per annum. Stringent pre-payment terms apply (from 10% to 40%, dependent upon the timeframe of repayment during the note’s term) and in the event of default an additional 40% of the principal and interest balance shall be owed. The Note may be converted by the Lender at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to the lower of 60% of the lowest trading price during the 20-trading day period prior to the conversion date or $0.12. If at any time the closing sales price falls below $0.01, then an additional 10% discount will be attributed to the conversion price. During the year ended December 31, 2019, the Company defaulted on the note, resulting in a default penalty of $44,000 added to the principal of the note.
     
    The embedded conversion option and warrant qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature of $124,796 and the warrant of $51,856 resulted in a discount to the note payable of $60,000 and an initial derivative expense of $129,652. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the year ended December 31, 2019, $30,000 of principal was converted into 31,860,367 shares of the Company’s common stock.

 

v) On February 21, 2019, the Company entered into a convertible promissory note with a non-related party for $55,125 of which $2,500 was an original issue discount and $2,625 was paid directly to third parties resulting in cash proceeds to the Company of $50,000. The note is due on February 20, 2020 and bears interest on the unpaid principal balance at a rate of 8% per annum. Stringent pre-payment terms apply (from 10% to 30%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 24% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 64% of the average 2 lowest trading prices during the 10-trading day period prior to the conversion date.
     
    On August 20, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $172,120 and resulted in a discount to the note payable of $50,000 and an initial derivative expense of $122,120. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the year ended December 31, 2019, $13,000 of principal was converted into 3,054,511 shares of the Company’s common stock.

 

w) On February 26, 2019, the Company entered into a convertible promissory with a non-related for $53,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $50,000. The note is due on February 20, 2020 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 12% to 37%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. On June 19, 2019, the Company defaulted on the note, resulting in the note becoming immediately convertible and a default penalty of $26,500 added to the principal of the note.
     
    On June 19, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $187,924 and resulted in a discount to the note payable of $50,000 and an initial derivative expense of $137,924. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the year ended December 31, 2019, $79,500 of principal and $3,180 of interest was converted into 68,900,000 shares of the Company’s common stock.

 

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x) On March 18, 2019, the Company entered into a convertible promissory note with a non-related party for $75,000 of which $10,250 was an original issue discount resulting in cash proceeds to the Company of $64,750. The Company also issued a warrant with a term of five years to purchase up to 187,500 shares of common stock of the Company at an exercise price of $0.20 per share and subject to adjustment for dilutive issuances and cashless exercise. The note is due on December 13, 2019 and bears interest on the unpaid principal balance at a rate of 12% per annum and a default interest rate of 24% per annum. The Note may be converted by the Lender at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to 50% of the lowest trading price during the 25-trading day period prior to the conversion date. During the year ended December 31, 2019, the Company defaulted on the note, resulting in a default penalty of $185,618 added to the principal of the note.
     
    The embedded conversion option and warrant qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature of $139,196 and the warrant of $25,401 resulted in a discount to the note payable of $75,000 and an initial derivative expense of $99,847. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the year ended December 31, 2019, $27,804 of principal and $5,287 of interest was converted into 11,490,000 shares of the Company’s common stock.

 

y) On May 2, 2019, the Company entered into a convertible promissory with a non-related party for $38,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $35,000. The note is due on April 29, 2020 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 12% to 37%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. On June 19, 2019, the Company defaulted on the note, resulting in the note becoming immediately convertible and a default penalty of $19,000 added to the principal of the note.
     
    On June 19, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $135,455 and resulted in a discount to the note payable of $35,000 and an initial derivative expense of $100,455. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the year ended December 31, 2019, $57,000 of principal and $2,280 of interest was converted into 59,440,816 shares of the Company’s common stock.

 

z) On September 16, 2019, the Company entered into a convertible promissory note with a non-related party for $26,000 of which $6,000 was an original issue discount resulting in cash proceeds to the Company of $20,000. The note is due on September 11, 2022 and bears interest on the unpaid principal balance at a rate of 0% per annum and a default interest rate of 0% per annum. The Company also issued a warrant with a term of five years to purchase up to 300,000 shares of common stock of the Company at an exercise price of $0.10 per share and subject to adjustment for dilutive issuances and cashless exercise. The Note may be converted by the Lender at any time after the date of issuance into shares of Company’s common stock at a conversion price equal 60% of the lowest trading price during the 20-trading day period prior to the conversion date. As the closing sales price fell below $0.01, an additional 10% discount was attributed to the conversion price.
     
    The embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $58,453 and warrants $2,768 resulted in a discount to the note payable of $20,000 and an initial derivative expense of $41,221. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense.

 

aa) During the year ended December 31, 2019, the $150,000 note and $25,814 of accrued interest was repaid by a cosigner to the loan. On September 27, 2019, the Company entered into a convertible promissory note with the non-related party for $175,814 in consideration for repaying the note. The note is due on September 25, 2020 and bears interest on the unpaid principal balance at a rate of 8% per annum and a default interest rate of 8% per annum. The Note will be repaid in cash or by conversion to common shares at a mutually acceptable rate not less than the market price of the Company’s common stock.

 

bb) On October 8, 2019, the Company entered into a convertible promissory with a non-related party for $53,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $50,000. The note is due on October 7, 2020 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. As the note isn’t convertible until 180 days following issuance, no derivative liability was recognized as of December 31, 2019.

 

cc) On October 31, 2019, the Company entered into a convertible promissory with a non-related party for $50,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $47,000. The note is due on October 29, 2020 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. As the note isn’t convertible until 180 days following issuance, no derivative liability was recognized as of December 31, 2019.

 

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NOTE 7 – DERIVATIVE AND PREFERRED SERIES A STOCK LIABILITIES

 

The embedded conversion option of (1) the convertible debentures described in Note 6; (2) preferred series A stock liability; (3) warrants; contain conversion features that qualify for embedded derivative classification. The fair value of the liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.

 

Upon the issuance of the convertible notes payable described in Note 6, the Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible notes, warrants and options. The Company elected to reclassify contracts from equity with the earliest inception date first. As a result, none of the Company’s previously outstanding convertible instruments qualified for derivative reclassification, however, any convertible securities issued after the election, including the warrants described in Note 10, qualified for derivative classification. The Company reassesses the classification of the instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

 

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities.

 

   

December 31,

2019

 

December 31,

2018

         
Balance at the beginning of period   $ 322,976     $ —    
Original discount limited to proceeds of notes     540,750       100,000  
Fair value of derivative liabilities in excess of notes proceeds received     1,653,887       247,033  
Settlement of derivative instruments     (3,258,054 )     —    
Change in fair value of embedded conversion option     11,258,314       (24,057 )
Balance at the end of the period   $ 10,517,873     $ 322,976  

 

The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option and warrant liabilities as their fair values were determined by using the Binomial Model based on various assumptions. 

 

Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:

 

    Expected Volatility   Risk-free Interest Rate   Expected Dividend Yield   Expected Life (in years)
                 
At issuance   128-394%   1.60-2.51%     0 %   0.49-5.01
At December 31, 2019   180-360%   1.558-1.66%     0 %   0.40-4.20

 

On December 1, 2018, the Company’s Board of Director authorized an offering for 1,000,000 Preferred Series “A” stock at $0.10 per share and with 100%, regular or cashless exercise at $0.10 per share of common stock warrant coverage. At December 31, 2018, the Company received $60,000 of subscriptions for the issuance of 600,000 shares of Preferred Series “A” stock to three accredited investors who are related parties. On December 1, 2018, the Company issued 600,000 warrants subject to cashless exercise at $0.10 per share for 5 years.

 

The Company was unable to issue the subscriber the preferred shares until the Company filed a Certificate of Designation and the Preferred Series “A” stock had been duly validly authorized. As the Company had not filed the Certificate of Designation, and as the Company could not issue the preferred shares to settle the proceeds received, it was determined the subscriptions were settleable in cash. As a result, the Company classified the subscriptions received as a liability in accordance with ASC 480 “Distinguishing Liabilities from Equity”. The fair value of the liability of the preferred series A stock at December 31, 2018 was $144,352. The Company recorded a loss on initial fair value of $90,283 and a gain on the change in fair value of the preferred stock of $5,931.

 

On March 29, 2019, the Company executed a settlement agreement that included the settlement of 100,000 of the Series A Preferred Shares and 100,000 of the warrants subscribed for as part of the December 1, 2018 offering. The Company agreed to issue 164,000 shares of its common stock as payment in full $25,000 owed to the subscriber for services rendered; the Company agreed to accept conversion and exercise of the purchased 100,000 Preferred Series A shares into 100,000 shares of the Company’s common stock and the Company shall accept the cashless conversion of 100,000 warrant into 34,400 shares of the Company’s restricted common stock; and, as inducement for and consideration for the settlement of the Company’s debt, the Company agrees to grant 500,000 additional shares of the Company’s restricted stock. The Company recorded the fair value of the shares issued of $103,792 and recorded a loss on the settlement of the subscriptions and the amounts payable of $55,830.

 

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On April 12, 2019, the Company filed the Certificate of Designation for the Series A Convertible Preferred Stock. The fair value of the liability of the preferred series A stock on April 12, 2019 was $60,398. On April 12, 2019, the Company adjusted the fair value of the preferred series A stock to $60,398 and reclassified the fair value of the preferred series A stock to mezzanine equity.

 

The Company uses Level 3 inputs for its valuation methodology for the preferred series A stock liability as their fair values were determined by using the Binomial Model based on various assumptions. 

 

Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:

 

    Expected Volatility     Risk-free Interest Rate     Expected Dividend Yield     Expected Life (in years)  
                         
At April 12, 2019     170 %     2.36 %     0 %     3.00  

 

NOTE 8 - STOCKHOLDERS’ DEFICIT

 

Preferred Stock

 

Series A Preferred Shares

Effective March 23, 2018, the Company amended the articles of incorporation and authorized 10,000,000 shares of preferred stock with a par value of $0.001 per share; of which 1,000,000 shares were designated as Series A Convertible Preferred Stock as of December 31, 2019. The preferred stock may be issued from time to time by the board of directors as shares of one or more classes or series.

 

On December 1, 2018, the Company’s Board of Director authorized an offering for 1,000,000 Preferred Series “A” stock at $0.10 per share and with 100%, regular or cashless exercise at $0.10 per share of common stock warrant coverage. At December 31, 2018, the Company received $60,000 of subscriptions for the issuance of 600,000 shares of Preferred Series “A” stock to three accredited investors who are related parties. The Company was unable to issue the subscriber the preferred shares until the Company filed a Certificate of Designation and the Preferred Series “A” stock has been duly validly authorized. See Note 7 for liabilities related to the Company’s commitment to issue shares of Series A stock upon the designation.

 

On April 12, 2019, the Company filed a Certificate of Designation with the Nevada Secretary of State designating 1,000,000 shares of its authorized preferred stock as Series A Convertible Preferred Stock. The principal terms of the Series A Preferred Shares are as follows:

Issue Price

The stated price for the Series A Preferred shall be $0.10 per share.

Redemption

This Company may at any time following the first anniversary date of issuance (the “Redemption Date”), at the option of the Board of Directors, redeem in whole or in part the Shares by paying in cash in exchange for the Shares to be redeemed a price equal to the Original Series A Issue Price ($0.10) (the “Redemption Price”). Any redemption affected pursuant to this provision shall be made on a pro rata basis among the holders of the Shares in proportion to the number of Shares then held by them.

Dividends

None.

Preference of Liquidation

In the event of any liquidation, dissolution or winding up of the Company, the holders of Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets of this Company to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of (i) $0.10 for each outstanding Share (the “Original Series A Issue Price”) and (ii) an amount equal to 6% of the Original Series A Issue Price for each 12 months that has passed since the date of issuance of any Shares (such amount being referred to herein as the “Premium”).

For purposes of this provision, a liquidation, dissolution or winding up of this Company shall be deemed to be occasioned by, or to include, (A) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (B) a sale of all or substantially all of the assets of the Company; unless the Company’s stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity.

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If upon the occurrence of such liquidation, dissolution or winding up event, the assets and funds thus distributed among the holders of the Shares shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of series of preferred stock that may from time to time come into existence, the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the Shares in proportion to the preferential amount each such holder is otherwise entitled to receive.

In any of such liquidation, dissolution or winding up event, if the consideration received by the Company is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:

A. Securities not subject to investment letter or other similar restrictions on free marketability (covered by (B) below):
1) If traded on a securities exchange (NASDAQ, AMEX, NYSE, etc.), the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty day period ending three (3) days prior to the closing;
2) If traded on a quotation system, such as the OTC:QX, OTC:QB or OTC Pink Sheets, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty day period ending three (3) days prior to the closing; and
3) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding shares of Preferred Stock.
B. The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding shares of such Preferred Stock.

Voting

The holder of each Share shall not have any voting rights, except in the case of voting on a change in the preferences of Shares.

Conversion

Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.10 (1 Share converts into 1 share of Common Stock), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth day prior to the Redemption Date, if any, as may have been fixed in any Redemption Notice with respect to the Shares, at the office of this Company or any transfer agent for such stock. Each Share shall automatically be converted into shares of Common Stock on the first day of the thirty-sixth (36th) month following the original issue date of the Shares, at the Conversion Price per share.

 

The Company was unable to issue the subscribers the preferred shares until the Company filed a Certificate of Designation and the Preferred Series “A” stock had been duly validly authorized. As the Company had not filed the Certificate of Designation, and as the Company could not issue the preferred shares to settle the proceeds received, it was determined the subscriptions were settleable in cash. As a result, the Company classified the subscriptions received as a liability in accordance with ASC 480 Distinguishing Liabilities from Equity. The filing of the Certificate of Designation and issuance of the preferred shares resulted in the reclassification of the Series A Preferred Shares from a liability to temporary equity or “mezzanine” because the preferred shares include the liquidation preferences described above. The fair value of the preferred series A stock on April 12, 2019 was $60,398 and was valued by using the Binomial Model based on various assumptions.

As of December 31, 2019, there were 500,000 shares of Series A Convertible Preferred Stock issued and outstanding.

Series B Preferred Shares

Effective August 13, 2019, the Company filed a Certificate of Designation with the Nevada Secretary of State thereby designating 1,000,000 shares of its authorized preferred stock as Series B –Preferred Stock. The principal terms of the Series B Preferred Shares are as follows:

Voting Rights

Holders of the Series B Preferred Stock shall be entitled to cast five hundred (500) votes for each share held of the Series B Preferred Stock on all matters presented to the stockholders of the Corporation for stockholder vote which shall vote along with holders of the Corporation’s Common Stock on such matters.

Redemption Rights

The Series B Preferred Stock shall be redeemed by the Corporation upon the successful receipt by the Corporation of at least $1,000,000 in equity capital following the issuance of the Series B Preferred Stock.

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Conversion Rights

The Series B Preferred Stock is not convertible into shares of Common Stock of the Corporation.

Protective Provisions

So long as any shares of Series B Preferred Stock are outstanding, this Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the Holders of the Series B Preferred Stock which is entitled, other than solely by law, to vote with respect to the matter, and which Preferred Stock represents at least a majority of the voting power of the then outstanding shares of such Series B Preferred Stock:

a)     sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Corporation is disposed of; 

b)     alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock so as to affect adversely the shares;

c)     increase or decrease (other than by redemption or conversion) the total number of authorized shares of preferred stock;

d)     authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security (i) having a preference over, or being on a parity with, the Series B Preferred Stock with respect to dividends or upon liquidation, or (ii) having rights similar to any of the rights of the Series B Preferred Stock; or

e)     amend the Corporation’s Articles of Incorporation or bylaws

Dividends

None.

Preference of Liquidation

None

 

Upon designation, the Company issued 500,000 shares of the Series B preferred stock to each of its CEO and President (1,000,000 shares in total) pursuant to their employment agreements. As the Series B Preferred Shares represent share-based payments that are not classified as liabilities but that could require the employer to redeem the equity instruments for cash or other assets the Company classified the initial redemption amount of the shares of $158,247 as temporary equity or “mezzanine”.

As of December 31, 2019, there were 1,000,000 shares of Series B Preferred Stock issued and outstanding.

Series C Preferred Shares

Pursuant to the September 18, 2019 majority consent of stockholders in lieu of an annual meeting (including the consent of the Series A Convertible Preferred Stockholders), the Registrant filed a Certificate of Designation with the Nevada Secretary of State designating 5,500,000 shares of its authorized preferred stock as Series C Convertible Preferred Stock. The Registrant is awaiting the file stamped Certificate of Designation from the Nevada Secretary of State. The rights and preferences of such preferred stock are as follows:

The number of shares constituting the Series C Convertible Preferred Stock shall be 5,500,000. Such number of shares may be increased or decreased by resolution of the Board; provided, that no decrease shall reduce the number of shares of Series C Convertible Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series C Convertible Preferred Stock.

Conversion Rights

Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.01 (1 Share converts into 100 shares of Common Stock) (the “Conversion Price”), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth (5th) day prior to a redemption Date, if any, as may have been fixed in any redemption notice with respect to the Shares, at the office of this Company or any transfer agent for such stock.

Voting Rights

The holder of each Share shall not have any voting rights, except in the case of voting on a change in the preferences of Shares.

Protective Provisions

So long as any Shares are outstanding, this Company shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of Shares which is entitled, other than solely by law, to vote with respect to the matter, and which Shares represents at least a majority of the voting power of the then outstanding Shares:

 

a) sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company is disposed of;
b) alter or change the rights, preferences or privileges of the Shares so as to affect adversely the Shares;
c) increase or decrease (other than by redemption or conversion) the total number of authorized shares of preferred stock;
d) authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security (i) having a preference over, or being on a parity with, the Shares with respect to upon liquidation, or (ii) having rights similar to any of the rights of the Preferred Stock; or
e) amend the Company’s Articles of Incorporation or bylaws.

Other Rights

There are no other rights, privileges, or preferences attendant or relating to in any way the Shares, including by way of illustration but not limitation, those concerning dividend, ranking, other conversion, other redemption, participation, or anti-dilution rights or preferences.

At December 31, 2019, there were no Series C Preferred Shares issued or outstanding.

 

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Common Stock

 

Effective March 23, 2018, the Company amended the articles of incorporation and increased the authorized shares of common stock with a par value of $0.001 per share from 100,000,000 to 300,000,000 shares. Effective October 4, 2019, the Company amended the articles of incorporation and increased the authorized shares of common stock with a par value of $0.001 per share from 300,000,000 to 1,000,000,000 shares. The number of shares outstanding of the registrant’s common stock as of December 31, 2019 was 498,880,300.

 

On January 1, 2019, the Company entered into a four-year employment agreement with F. Jody Read in his role as Chief Executive Officer. The terms of the contract call for an annual salary of $90,000 for the first year, effective March 1, 2019 and increasing to $120,000 once the Company’s revenue exceeds monthly expenses, then incrementally over time and with certain operational results, up to $200,000/year. The salary may be paid, at the employee’s discretion, either in cash or in common stock. A $1,000 per month allowance will be granted to the executive for housing near the Company’s South Carolina facility. The employment agreement awards the CEO 1,500,000 restricted shares of the Company’s restricted stock, which shall vest in the following manner: 375,000 shares on March 1, 2019, 375,000 shares on March 1, 2020; 375,000 shares on March 1, 2021 and the final 375,000 shares on March 1, 2022. On January 1, 2019 the fair value of the restricted stock award totaled $240,000 which will be expensed over vesting period. As of December 31, 2019, 375,000 shares were issued and the Company had recognized $116,728 of expense.

 

On January 28, 2019, the Company agreed to convert $131,327 of principal and interest of the notes payable described in Note 6(a) into 987,421 shares of the Company’s common stock.

 

On March 25, 2019, the Company issued 200,000 shares of common stock to two employees of the Company as compensation in lieu of commission on sales of the Company’s products. The Company recorded the fair value of the common shares of $34,000 in consulting expense.

On March 29, 2019, the Company executed a settlement agreement with a contractual consultant, UCAP Partners, LLC for the settlement of $25,000 owed to the contractor for the provision of services as related to the March 15, 2018 agreement between UCAP and us. The settlement terms include acknowledgement that the Company owes UCAP $25,000 as payment for said services; that UCAP purchased and fully paid for Series A Preferred Stock and Warrants from the Company on December 3, 2018 (100,000 Preferred Series A Shares and 100,000 warrants to purchase common shares at $0.10/share); the settlement is outlined as follows: the Company shall issue 164,000 shares of its common stock as payment in full for the services rendered on the consulting contract; the Company shall accept UCAP’s conversion and exercise of the purchased 100,000 Preferred Series A shares into 100,000 shares of the Company’s common stock and the Company shall accept the cashless conversion of UCAP’s 100,000 warrant into 34,400 shares of the Company’s restricted common stock; and, as inducement for and consideration for the settlement of the Company’s debt to UCAP, the Company agrees to grant 500,000 additional shares of the Company’s restricted stock. As a result of this transaction, 798,400 shares of Company’s common stock were issued and a $55,830 loss on settlement of debt was recognized.

 

On March 27, 2019, the Company agreed to convert $548,686 of principal ($539,936) and interest ($8,750) of the convertible note payable described in Note 6(l) into 3,597,989 shares of the Company’s common stock. The Company recorded a gain on settlement of debt of $359,857 equal to the difference between both the fair value of the common shares of $523,867 and the fair value of the conversion feature at conversion of $335,038 compared to the carrying value of the note and interest.

 

During the year ended December 31, 2019, the Company issued a total of 76,154,631 shares of the Company’s common stock upon the conversion of $42,223 of principal and $2,500 of interest pursuant to the convertible note payable described in Note 6(n).

 

During the year ended December 31, 2019, the Company issued a total of 78,030,000 shares of the Company’s common stock upon the conversion of $64,954 of principal and $7,000 of interest pursuant to the convertible note payable described in Note 6(o).

 

During the year ended December 31, 2019, the Company issued a total of 31,174,816 shares of the Company’s common stock upon the conversion of $95,650 of principal and $3,780 of interest of the convertible note payable pursuant to the convertible note payable described in Note 6(p).

 

During the year ended December 31, 2019, the Company issued a total of 32,622,223 shares of the Company’s common stock upon the conversion of $49,500 of principal and $1,980 of interest of the convertible note payable and $179 of accrued interest pursuant to the convertible note payable described in Note 6(q).

 

During the year ended December 31, 2019, the Company issued a total of 5,207,600 shares of the Company’s common stock upon the conversion of $4,508 of principal and $179 of interest pursuant to the convertible note payable described in Note 6(r).

 

During the year ended December 31, 2019, the Company issued a total of 7,500,000 shares of the Company’s common stock upon the conversion of $8,640 pursuant to the convertible note payable described in Note 6(s).

 

During the year ended December 31, 2019, the Company issued a total of 4,999,000 shares of the Company’s common stock upon the conversion of $2,196 of principal and $953 of interest pursuant to the convertible note payable described in Note 6(t).

 

During the year ended December 31, 2019, the Company issued a total of 31,860,367 shares of the Company’s common stock upon the conversion of $30,000 of principal pursuant to the convertible note payable described in Note 6(u).

 

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During the year ended December 31, 2019, the Company issued a total of 3,054,511 shares of the Company’s common stock upon the conversion of $13,000 of principal pursuant to the convertible note payable described in Note 6(v).

 

During the year ended December 31, 2019, the Company issued a total of 68,900,000 shares of the Company’s common stock upon the conversion of $79,500 of principal and $3,180 pursuant to the convertible note payable described in Note 6(w).

 

During the year ended December 31, 2019, the Company issued a total of 11,490,000 shares of the Company’s common stock upon the conversion of $27,804 of principal and $5,287 of interest pursuant to the convertible note payable described in Note 6(x).

 

During the year ended December 31, 2019, the Company issued a total of 59,440,816 shares of the Company’s common stock upon the conversion of $57,000 of principal and $2,280 of interest pursuant to the convertible note payable described in Note 6(y).

 

During the year ended December 31, 2019, the Company issued 24,928,288 shares of common stock upon the cashless exercise of 18,585,714 warrants.

 

On August 1, 2019, the Company entered into a consulting agreement for investor relations services through December 31, 2019. The agreement called for 1,000,000 restricted shares of common stock to be issued to the consultant. As of December 31, 2019, the Company recorded the fair value of the shares of $15,000 for the consulting expense related to the consulting services provided.

 

On October 1, 2019, the Company entered into a consulting agreement for investor relations services through March 31, 2020. The agreement called for a cash payment of $25,000 and 12,000,000 restricted shares of common stock to be issued to the consultant. As of December 31, 2019, the Company recorded the fair value of the shares of $61,200 for the consulting expense related to the consulting services provided. At December 31, 2019, $30,600 was recorded as prepaid expenses.


On January 2, 2018, the Company sold 110,000 shares of common stock to an un-related party for $55,000.

 

On March 15, 2018, the Company entered into a 12-month service agreement, expiring on March 15, 2019, for strategic planning, financing, capital formation, up-listing and expansion of the Company’s shareholder base. Per the terms of the agreement, the consulting company received a non-refundable $5,000 initial fee, will receive $2,500 per month beginning in April 2018, and was issued 2,000,000 fully vested non-forfeitable shares of restricted common stock, valued at $1,000,000 ($0.50 per shares). The 2,000,000 common shares of the Company’s stock were issued on June 12, 2018. As of December 31, 2018 the Company recorded the fair value of the common shares of $1,000,000 in common stock and additional paid in capital and has recorded $797,260 for the consulting expense related to the portion of the 12-month service agreement that has been completed.

 

On April 10, 2018 the Company issued 120,000 shares of common stock at $0.50 per share to an employee and Director of the Company for cash proceeds of $60,000.

 

On June 12, 2018, the Company entered into a 6-month service agreement, expiring on December 12, 2018, for business development and the development of financial reports. Per the terms of the agreement, the consulting company was issued 50,000 shares of restricted stock on June 29, 2018. As of December 31, 2018, the Company recorded the fair value of the common shares of $28,000 in common stock and additional paid in capital and has recorded $28,000 for the consulting expense related to the portion of the 6-month service agreement that has been completed.

 

On July 2, 2018 the Company’s Board of Directors authorized the issuance of 1,000,000 restricted shares of common stock to Life Sciences Journeys, Inc., for six months of services outlined in the July 2, 2018 services agreement. The 1,000,000 restricted shares of common stock were issued to Life Sciences Journeys, Inc. on October 9, 2018. The Company placed a stop transfer order on the shares but has since rescinded the stop transfer order. The Company recorded the fair value of the common shares of $355,000 in common stock and additional paid in capital and has recorded $355,000 for the consulting services, during the year ended December 31, 2018.

 

On December 3, 2018, the Company engaged a consultant for services related to business development in the healthcare market. The contract is in place through June 3, 2019 and pursuant to the agreement the Company issued the consultant 100,000 common shares. As of December 31, 2018 the Company recorded the fair value of the common shares of $17,000 in common stock and additional paid in capital and has recorded $2,615 for the consulting expense related to the portion of the 6-month service agreement that has been completed.

 

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NOTE 9 – STOCK OPTIONS

 

The Company did not grant any stock options during the year ended December 31, 2018 or the year ended December 31, 2019. 

 

Below is a table summarizing the options issued and outstanding as of December 31, 2019:

 

    Number of
warrants
  Weighted average exercise price
$
         
  Balance, December 31, 2018       2,287,500       0.34  
  Granted       —         —    
  Expired       (2,087,500 )     0.18  
  Settled       —         —    
  Balance, December 31, 2019       200,000       2.00  

 

As at December 31, 2019, the following share stock options were outstanding:

 

Date   Number   Number   Exercise   Weighted Average Remaining Contractual   Expiration   Proceeds to Company if
Issued   Outstanding   Exercisable   Price $   Life (Years)   Date   Exercised
  01/26/2017       200,000       200,000       2.00       2.07       01/26/2022       400,000  
          200,000       200,000                             $ 400,000  

 

The weighted average exercise prices are $2.00 for the options outstanding and exercisable, respectively. The intrinsic value of stock options outstanding at December 31, 2019 was $Nil.

 

NOTE 10 – WARRANTS

 

As described in Note 6, from February 14 through September 11, 2019, the Company issued 487,500 warrants subject to an exercise price of $0.00035 per share for 5 years and 300,000 warrants subject to an exercise price of $0.0288 per share for 5 years. If the Company issues any common stock or common stock equivalents at an effective price per share less than the warrant’s exercise price the exercise price of the warrants will be reduced to the lower price. In addition, the number of common shares issuable upon conversion of the warrants is increased so that the number of shares issuable multiplied by the exercise price equals the aggregate exercise price of the warrants immediately prior to the exercise reduction. During period, convertible notes were exercised at a price less than the original exercise price of these warrants, resulting in an adjustment to the number of warrants and exercise price.

 

The Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible instruments. The initial fair value of the warrants issued during the period was calculated using the Binomial Model as described in Note 7.

 

The following table summarizes the continuity of share purchase warrants:

 

    Number of
warrants
  Weighted average exercise price
$
         
Balance, December 31, 2018     650,000       0.09233  
Adjustment to warrants outstanding     431,007,738       0.00041  
Granted     787,500       0.00131  
Settled     (18,628,986 )     0.00088  
Balance, December 31, 2019     413,816,252       0.00053  

 

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As at December 31, 2019, the following share purchase warrants were outstanding:

 

Date   Number   Number   Exercise   Weighted Average Remaining Contractual   Expiration   Proceeds to Company if
Issued   Outstanding   Exercisable   Price $   Life (Years)   Date   Exercised
  11/28/2018       142,857,143*       142,857,143*       0.00035 *     1.91       11/28/2021     $ 50,000
  12/3/2018       500,000       500,000       0.10       3.93       12/3/2023       50,000
  2/14/2019       152,899,585*       152,899,585*       0.00035 *     4.13       2/14/2024       53,515
  3/13/2019       107,142,857*       107,142,857*       0.00035 *     4.20       3/13/2024       37,500
  9/11/2019       10,416,667*       10,416,667*       0.00288 *     4.70       9/11/2024       30,000
          413,816,252       413,816,252                             $ 221,015

 

*The number of warrants outstanding and exercisable is variable based on adjustments to the exercise price of the warrant due to dilutive issuances.

 

The intrinsic value of warrants outstanding at December 31, 2019 was $2,556,872.

 

NOTE 11 – RELATED PARTY TRANSACTIONS

 

The Company has agreements with related parties for consulting services, accrued rent, accrued interest, notes payable and stock options. See Notes to Financial Statements numbers 6, 8, 9 and 12 for more details.

 

NOTE 12 – COMMITMENTS AND CONTINGENCIES

 

Consulting Agreements

On January 1, 2018, the Company entered into a contract for consulting services with a Florida-based agricultural advocacy group. The agreement included a $5,000 initial engagement fee and $1,250 per month through January 1, 2019.

 

On March 15, 2018, the Company entered into a 12-month service agreement, expiring on March 15, 2019, for strategic planning, financing, capital formation, up listing and expansion of the Company’s shareholder base. The consulting company received a $5,000 non-refundable initial fee and the agreement included $2,500 per month through March 14, 2019 and received 2,000,000 shares of the Company’s restricted common stock.

 

On July 2, 2018, the Company entered into a 6-month service contract for investor relations services through January 2, 2019. The agreement called for 1,000,000 restricted shares of common stock to be issued to Life Sciences Journeys, Inc. The shares were issued on October 9, 2018.

 

On November 28, 2018, the Company re-engaged the services of a prior contractor for finance assistance related to obtaining a line of credit based on the Company’s equipment and/or contracts, through November 27, 2019. If the Company obtains a line of credit based on the Company’s equipment and/or contracts the Company will incur a fee of 4% of financings from $1,000,000 to $5,000,000, 3% of financings from $5,000,001 to $10,000,000, and 0.25% of financings over $10,000,000.

 

On December 3, 2018, the Company engaged a consultant for services related to business development in the healthcare market. The contract was in place through June 3, 2019 and the consultant received 100,000 restricted shares of the Company’s common stock for the services.

 

On August 1, 2019, the Company entered into a consulting agreement for investor relations services through December 31, 2019. The agreement called for 1,000,000 restricted shares of common stock to be issued to the consultant. As of December 31, 2019, the Company recorded the fair value of the shares of $15,000 for the consulting expense related to the consulting services provided.

 

On October 1, 2019, the Company entered into a consulting agreement for investor relations services through March 31, 2020. The agreement called for a cash payment of $25,000 and 12,000,000 restricted shares of common stock to be issued to the consultant. As of December 31, 2019, the Company recorded the fair value of the shares of $61,200 for the consulting expense related to the consulting services provided. At December 31, 2019, $30,600 was recorded as prepaid expenses.

 

In addition to contracts for service, the Company also regularly uses the professional services of securities attorneys, a US EPA specialist, professional accountants and other public-company specialists.

 

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Employment Agreements –

On September 1, 2017, the Company entered into a five-year employment agreement with Marion E. Paris, Jr. to be the Vice President for Business Development and Director of Intellectual Properties for Paradigm. Under the terms of the employment agreement, Mr. Paris is to be paid an annual base salary of $90,000 and other benefits, including four weeks paid vacation. On July 30, 2019, the Company accepted the resignation of Marty Paris as part of a settlement agreement by which PCT Corp. settled an invoice payable to Annihilare (“AMS”).

 

On January 1, 2019, the Company entered into a four-year employment agreement with F. Jody Read in his role as Chief Executive Officer. The terms of the contract call for an annual salary of $90,000 for the first year, effective March 1, 2019 and increasing to $120,000 once the Company’s revenue exceeds monthly expenses, then incrementally over time and with certain operation results, up to $200,000/year. The salary may be paid, at the employee’s discretion, either in cash or in common stock. A $1,000 per month allowance will be granted to the executive for housing near the Company’s South Carolina facility. The employment agreement awards the CEO 1,500,000 restricted shares of the Company’s restricted stock, which shall vest in the following manner: 375,000 shares on March 1, 2019, 375,000 shares on March 1, 2020, 375,000 shares on March 1, 2021 and the final 375,000 shares on March 1, 2022. On August 12, 2019, the Company amended the Employment Contract with F. Jody Read, CEO, whereby 500,000 Preferred Series B shares were issued to Read. All other terms of the January 1, 2019 employment agreement remain in effect. On October 4, 2019, F. Jody Read resigned from the position of CEO and moved back into the role of COO.

 

On August 12, 2019, the Company entered into a four-year employment agreement with Gary J. Grieco, its President, whereby Mr. Grieco will continue to receive $24,000 per year for services to Company as its President and whereby 500,000 Preferred Series B shares were issued to Grieco. The employment agreement begins on August 12, 2019, is automatically renewable for two years unless terminated earlier as per the terms of the agreement. Gary Grieco entered the role of CEO of the Company upon F. Jody Read’s resignation on October 4, 2019 and entered into a four-year employment agreement with the Company on January 1, 2020. Mr. Grieco’s salary increased to $48,000 per year, beginning on April 1, 2020 and the Company issued 15,000,000 fully-paid an non-assessable shares of the Company’s common shares; upon obtaining profitability, the Company will issue and additional 10,000,000 restricted shares of its common stock, as fully paid and non-assessable, as bonus compensation in lieu of cash payment.

 

Other Obligations and Commitments

On April 12, 2018, the Company entered into a Purchase agreement with a third party to purchase its exclusive rights to US EPA Product Registration No. 83241-1 for a fixed fee. The Company paid $5,000 on execution of the agreement and has continued to make periodic installment payments for the purchase of this Registration, finalizing the transaction by executing the sale of the registration during 2019.

 

On March 27, 2019, the Company entered into a letter of intent (the “LOI”) with Magnolia Columbia Limited (“Magnolia”), a Canadian company traded on the TSXV under the symbol “MCO”. Pursuant to the terms of the LOI, the parties agreed to negotiate and enter into a definitive agreement on or before April 27, 2019. As of April 28, 2019, we had not entered into a definitive agreement with Magnolia or agreed to any extensions of the LOI, therefore the LOI terminated.

 

On July 12, 2019, the Company entered into a binding Letter of Intent (“LOI”) to negotiate in good faith a transaction with 2705908 Ontario Inc. for a definitive loan and option agreement to include the acquisition of at least 51% control of the Company, in addition to the other terms and commitments. On July 30, 2019, the LOI due diligence and negotiations were slated to terminate, but both parties agreed to extend the term of the LOI through August 19, 2019. On August 19, 2019 the Company and 2705908 Ontario Inc. allowed the LOI to expire.

 

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NOTE 13 INCOME TAXES

 

There was no provision for, or benefit from, income tax during the years ended December 31, 2019 and 2018 respectively.  The Company was subject to United States federal and state income taxes at an approximate rate of 21% for the year ended December 31, 2019.

 

The components of the net deferred tax asset as of December 31, 2019, and 2018:

 

   For the year ended December 31,   2019   2018
Net operating loss carry forwards   $ 6,089,157     $ 2,607,659  
Stock/options issued for services     (370,925 )     (323,275 )
Stock/option issued for acquisitions     (106,856 )     (106,856 )
Loss on settlement of debt     (14,220 )     —    
Contributed services     (77,997 )     (77,997 )
Depreciation and Amortization     (246,353 )     (175,363 )
Meals & Entertainment     (1,809 )     (1,809 )
Loss on change in fair value of conversion features     (2,758,381 )     (46,820 )
Accretion of discount on convertible note     (170,340 )     (12,640 )
Loss on preferred share liability     (2,490 )     (17,710 )
Valuation allowance   $ (2,339,786 )   $ (1,845,189 )
Net deferred tax asset   $ —       $ —    

 

Federal and state net operating loss carry forwards at December 31, 2019 were $8,897,092. The net operating loss carry forwards expire between 2033 and 2039.

 

The following is a reconciliation of the amount of benefit that would result from applying the federal statutory rate to pretax loss with the provision for income taxes for the years ended December 31, 2019 and 2018, respectively:

 

   For the Years Ended December 31,   2019   2018
Book income (loss) from operations   $ (3,481,498 )   $ (668,321 )
Stock/options issued for services     47,650       248,400  
Depreciation & Amortization     70,990       70,710  
Meals & Entertainment     —         1,550  
Loss on settlement of debt     14,220       —    
Loss on change in fair value of conversion feature     2,711,560       46,820  
Accretion of discount on convertible note     157,700       12,640  
Preferred share liability loss     (15,220 )     17,710  
Change in valuation allowance     494,598       270,491  
Provision for Income Taxes   $ —       $ —    

  

In June 2006, FASB issued FASB ASC 740-10-05-6. The Company adopted FASB ASC 740-10-05-6 on January 1, 2013. Under FASB ASC 740-10-05-6, tax benefits are recognized only for the tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the company's tax return that do not meet these recognition and measurement standards.

 

Upon the adoption of FASB ASC 740-10-05-6, the Company had no liabilities for unrecognized tax benefits and, as such, the adoption had no impact on its financial statements, and the Company has recorded no additional interest or penalties. The Adoption of FASB ASC 740-10-05-6 did not impact the Company's effective tax rates.

 

The Company's policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits with the income tax expense. For the years ended December 31, 2019, and 2018, the Company did not recognize any interest or penalties in its Statement of Operations, nor did it have any interest or penalties accrued in its Balance Sheet at December 31, 2019 and 2018 relating to unrecognized benefits.

 

The tax years 2019 and 2018 remain open to examination for federal income tax purposes and by other major taxing jurisdictions to which the Company is subject.

 

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NOTE 14. SUBSEQUENT EVENTS

 

On January 1, 2020, the Company entered into a four-year employment agreement with Gary J. Grieco, its President and CEO, whereby Mr. Grieco will receive $48,000 per year commencing April 1, 2020, and receive 15,000,000 shares of the Company’s common stock for services to the Company as its President and CEO. In addition, once monthly revenue exceeds monthly expenses the salary will be increased and Mr. Grieco will be issued an additional 10,000,000 shares of the Company’s common stock. The employment agreement begins on January 1, 2020, and is automatically renewable for two years unless terminated earlier as per the terms of the agreement.

 

On January 8, 2020, the Company sold future receivables of $87,540 in consideration for $60,000. The advance is to be repaid through $3,651 weekly payments. The Company paid $3,625 of finance fees and includes default fees of up to $2,500 and a default rate of interest of 9%. In connection with the advance, the Company granted the lender a security interest in all accounts, equipment, intangibles and inventory. As of the date of filing, the Company had received advances of $15,575.

From January 9, 2020 through January 13, 2020, the Company issued a total of 36,050,000 shares of common stock upon the conversion of $17,093 of principal, $3,507 of interest and of fees pursuant to the convertible notes payable described in Note 6(n).

On February 7, 2020, the Company agreed to settle $39,054 of principal and accrued interest outstanding on the note described in Note 6(f) through the issuance of 39,000 Shares of Series C Preferred Stock and the payment of $54.

On February 7, 2020, the Company entered into an agreement to settle the $175,814 convertible note payable described in Note 6(aa) and $5,279 of interest accrued on the note through the issuance of 181,000 Shares of Series C Preferred Stock and the payment of $93.

 

On February 11, 2020, the Company received a $1,500 advance from the President of the Company and a $2,000 advance from a Director of the Company. The advances are unsecured, non-interest bearing and due on demand.

 

On February 18, 2020, the Company sold future receivables of $32,978 in consideration for $22,000. The advance is to be repaid through daily payments of $660. The Company paid $794 of finance fees and the agreement includes default fees of up to $15,000. In connection with the advance, the Company granted the lender a security interest in all accounts, equipment, intangibles and inventory.

 

On February 18, 2020, the Company received an additional tranche of $8,888 pursuant to the convertible note described in Note 6(n). The additional tranche consisted of a $888 original issue discount resulting in cash proceeds to the Company of $8,000.

 

On March 5, 2020, the Company received an additional tranche of $30,000 pursuant to the convertible note described in Note 6(n). The additional tranche consisted of a $3,000 original issue discount resulting in cash proceeds to the Company of $27,000.

 

On March 20, 2020, the Company entered into a consulting agreement. Pursuant to the agreement the consultant will provide investor relations services for a period of six months. To date the Company had issued the consultant 150,000 shares of common stock for services received.

 

On March 9, 2020, the Company entered into a convertible promissory with a non-related party for $45,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $42,000. The note is due on March 2, 2021 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date.

 

On March 9, 2020, the Company entered into a promissory note with a non-related party for $20,000. The note is due May 28, 2020, is unsecured and bears an interest rate of 8% per annum.

 

From March 1, 2020 through March 30, 2020, the Company sold 270,000 Series C Convertible Preferred Shares for $270,000.

 

On April 1, 2020, the Company issued a promissory note for $100,000. The note bears interest at $2,500 per month is repayable in four monthly $27,500 payments commencing May 1, 2020. The Company issued the lender 250,000 shares of the Company’s common stock as consideration for the loan.

On April 2, 2020, the Company entered into a settlement agreement to settle the $60,000 and $26,000 convertible notes described in Notes 6(u) and (z). The Company agreed to pay $100,000 to settle the principal and accrued interest and penalties relating to the two convertible notes.

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On April 10, 2020, the Company entered into a convertible promissory note with a non-related party for $150,000 of which $18,000 was an original issue discount resulting in cash proceeds to the Company of $132,000. The note is due on April 9, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum and any part of the note which is not paid when due shall bear interest at the rate of 12% per annum from the due date until paid. The Note may be converted by the Lender at any time into shares of Company’s common stock at a conversion price equal to 65% of the lowest trading price during the 25-trading day period prior to the conversion date.

 

On April 16, 2020, the Company entered into a convertible promissory with a non-related party for $128,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $125,000. The note is due on March 2, 2021 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date.

 

On April 21, 2020, the Company issued 1,000,000 shares of common stock to an employee of the Company for cash proceeds of $10,000.

 

On April 24, 2020, the Company issued 2,750,000 shares of common stock for cash proceeds of $110,000.

 

On May 5, 2020, the Company consolidated this note with the two notes described in Notes 6(d) and (g) into a new note with a principal amount of $118,644 and a maturity date of May 5, 2021. The note beards interest at 8% per annum and in connection with the consolidation the Company issued the lender 15,000,000 shares of the Company’s common stock.

 

From April 1, 2020 through May 8, 2020, the Company issued 9,246,186 shares of common stock upon the cashless exercise of 9,280,742 warrants.

On May 11, 2020, the Company entered into a settlement agreement to settle the $60,000 convertible notes described in Note 6(s). The Company agreed to pay $100,000 to settle the principal and accrued interest and penalties relating the convertible note.

 

On May 12, 2020, the Company entered into a convertible promissory with a non-related party for $83,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $42,000. The note is due on November 8, 2021 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date.

 

On July 6, 2020, the Company entered into a consulting agreement. Pursuant to the agreement the consultant will provide investor relations services for a period of one year in consideration for $3,000 per month and the issuance of 1,000,000 common shares of the Company.

 

On July 7, 2020, the Company entered into a promissory note with a non-related party for $150,000. The note is due October 5, 2020, is unsecured and bears an interest rate of 10% per annum.

 

On July 15, 2020, the Company entered into a promissory note with a non-related party for $119,200. The note is repayable in $7,450 weekly payments.

 

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

As reported in our Schedule 14C filed March 26, 2019, PCT LTD (formerly known as Bingham Canyon Corporation) ratified the engagement of Sadler, Gibb & Associates, LLC, Certified Public Accountants, as our independent registered public accounting firm for the audit period ending on December 31, 2019.

 

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated to allow our management to make timely decisions regarding required disclosure. Our President, who serves as our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. The disclosure controls and procedures ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rule and forms; and (ii) accumulated and communicated to our President as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our President concluded that as of December 31, 2019, our disclosure controls and procedures were not effective due to the shortcomings described below.  

 

Notwithstanding this finding of ineffective disclosure controls and procedures, we concluded that the consolidated financial statements included in this Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States. 

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible to establish and maintain adequate internal control over financial reporting. Our principal executive officer is responsible to design or supervise a process that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The policies and procedures include:

 

  • maintenance of records in reasonable detail to accurately and fairly reflect the transactions and dispositions of assets,
  • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors, and
  • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

For the year ended December 31, 2019, management has relied on the Committee of Sponsoring Organizations of the Treadway Commission (COSO), “Internal Control - Integrated Framework (2013),” to evaluate the effectiveness of our internal control over financial reporting. Based upon that framework, our President has determined that our internal control over financial reporting for the year ended December 31, 2019, was not effective.

 

The material weaknesses relate to the limited number of persons responsible for the recording and reporting of financial information, the lack of separation of financial reporting duties, and the limited size of our management team in general. We are in the process of evaluating methods of improving our internal control over financial reporting, including the possible addition of financial reporting staff and the increased separation of financial reporting responsibility, and intend to implement such steps as are necessary and possible to correct these material weaknesses.

  

Our management determined that there were no changes made in our internal controls over financial reporting during the fourth quarter of 2019 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

  

 

ITEM 9B. OTHER INFORMATION

 

None.

 

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

  

Our executive officers and directors, the positions held by them, and their ages are as follows:

 

Name Age Position(s) Held Class of Director Director Term
Gary J. Grieco 78 Class I Director and CEO/President Class I Three Years (expiring at the 2020 annual meeting).
Gregory W. Albers 69 Class II Director and Secretary/Treasurer Class II Two Years (expiring at the 2021 annual meeting).
Paul Branagan 75 Class II Director Class II Two Years (expiring at the 2021 annual meeting).
Francis J. Read 53 Class III Director and COO Class III One Year (expiring at the 2020 annual meeting).
William E. Prince 68 Class III Director Class III One Year (expiring at the 2020 annual meeting).
Marion Sofield 59 CFO   N/A

 

 

Gary J. Grieco -- Mr. Grieco was appointed to serve as a Director and as President of PCTL on August 10, 2016 and currently serves as CEO/President. He currently serves as a Class I Director for PCTL and Paradigm and from June 2014 to the present he has served as the President of Paradigm and has served as Secretary of that company since June 2012. He also served as Paradigm’s Chief Financial Officer from June 2012 to June 2014. His responsibilities have included sales, marketing and testing of the Paradigm technologies and seeking additional technology for the company to license. He supervises four employees and two outside consultants. In addition, for the past 25 years he has served as President of 3GC, Ltd. He attended the University of Buffalo and studied securities analysis at the New York Institute of Finance and New York University.

 

Mr. Grieco’s experience as a director and officer of Paradigm and his knowledge and experience with the products and operations of Paradigm should assist our Board with future decisions regarding the development of the Paradigm subsidiary.

 

Gregory W. Albers -- Mr. Albers was appointed to fill a vacancy on our Board and to serve as Secretary/Treasurer on April 1, 2016. He is the President and Chief Executive Officer of Life Insurance Buyers, Inc., a life insurance brokerage. Since 1995 to the present, Mr. Albers has worked in the viatical and life settlement industry and, based on his experience, he has testified as an expert regarding that industry’s issues in Kansas legislative committees. Prior to 1995 he worked as an independent life broker and a New England Life Insurance Company insurance agent. He earned a Bachelor’s degree in Business from Kansas State University.

 

Mr. Albers experience owning and operating his insurance business may prove helpful in management of our subsidiary’s operations. Prior to his appointment, Mr. Albers has not had any related party transactions with the Company or its affiliates and he has no family relationship with any current executive officer or director of the Company.

 

Paul Branagan – was appointed as a director of the Company on March 23, 2018. From 1993 to the present Mr. Branagan has been the President and Senior Scientist of Branagan & Associates, Inc. Mr. Branagan is a physicist with over 40 years of experience in a variety of technical ventures ranging from nuclear weapons development, improving and monitoring civil structural and construction activities to enhanced energy development for the oil and gas industry. Most of his efforts involved large scale commercialization and Research & Development (R&D) in advanced technical projects. Mr. Branagan has authored and co-authored numerous papers, articles and presentations covering a broad range of technical accomplishments. Many involved topical oil and gas R&D activities and their ultimate commercialization. In addition to being a Distinguished Lecturer he has also served on a numerous symposium committees charged with reviewing, editing and selecting the most advanced and topical technical articles for presentation. Mr. Branagan graduated from the University of Las Vegas Nevada with a B.S. in physics.

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Francis J. Read – was appointed a director of the Company on March 23, 2018 and serves as chief operating officer of the Company. In 2017, Mr. Read recently returned to the role as the Chief Operations Officer for Paradigm Convergence Technologies Corp., the Company’s wholly-owned operating subsidiary. In 1998, Mr. Read founded and since 2016 has served as the CEO of CSA Service Solutions, a $44 million field support company specializing in providing support solutions for large equipment manufacturers. CSA has over 350 employees nationwide with over 270 engineers operating in the Healthcare, Clinical Education, Life Sciences, Security, and Power Industries. Mr. Read holds a MBA from Tulane University and a BS, electronic Engineering from DeVry Institute of Technology.

 

William E. Prince – was appointed a director of the Company on March 23, 2018. Since 2014, Mr. Prince has served as Sr. Vice President Sales & Marketing for Paradigm Convergence Technologies Corp., the Company’s wholly-owned operating subsidiary. For two years prior to joining Paradigm, Mr. Prince was an independent consultant in the electro-chemically activated solution industry. From 2003 through 2011, Mr. Prince was the President, CEO and Chairman of Integrated Environmental Technologies, Ltd, a publicly traded company with its common stock registered under the 34 Act.

 

Marion Sofield – was appointed as CFO of the Company on January 1, 2018. Prior to joining the Company, from 2013-2016, Marion was a licensed insurance professional for Farmers and Geico. Ms. Sofield has eight years of experience, from 1993-2002, in economic development management and has owned and operated two successful businesses of her own.  From 1983 through 1987, Ms. Sofield served as a Corporate Secretary/Treasurer for Lord-Wood, Larsen Associates, Inc., a civil engineering firm formerly located in West Hartford, Connecticut, where she was the recipient of Hartford’s “Business Woman of the Year” Award. Ms. Sofield, a 1983 graduate of Radford University, was honored in Washington, D.C. as the 2003 Business Person of the Year by the United States of America’s Business Advisory Council.

 

The Company’s Bylaws allow for the appointment of up to seven directors. The Board may appoint up to two additional Class III directors to fill such vacancies at any time prior to the next annual meeting or at any time there is a vacancy on the Board.

 

Limitation of Liability of Directors

 

Pursuant to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Director’s liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted in good faith and in a manner he believed to be in our best interests.

 

Election of Directors and Officers

 

We have three classes of Directors; Class I (three year term), Class II (two year term) and Class III (one year term). Directors, depending on term expiration, are elected to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve until the meeting of the board of directors following the next annual meeting of stockholders and until their successors have been elected and qualified.  

 

Involvement in Certain Legal Proceedings

 

During the past ten years none of our executive officers have been involved in any legal proceedings that are material to an evaluation of their ability or integrity; namely: (1) filed a petition under federal bankruptcy laws or any state insolvency laws, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; (2) been convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) been the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from or otherwise limiting his/her involvement in any type of business, securities or banking activities; or (4) been found by a court of competent jurisdiction in a civil action, by the SEC or the Commodity Futures Trading Commission to have violated any federal or state securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated.

 

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Compliance with Section 16(a) of the Exchange Act

 

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that as of the date of this information statement they were not current in their filings. 

 

Code of Ethics

 

Since we had only four persons serving as executive officers during 2019, we have not adopted a code of ethics for our principal executive and financial officers. Our board of directors intends to address this issue in the future and adopt a code of ethics as appropriate. In the meantime, our management intends to promote honest and ethical conduct, full and fair disclosure in our reports to the SEC, and comply with applicable governmental laws and regulations.

 

Corporate Governance

 

We are a smaller reporting company which had only five directors and four officers during 2019. As a result, we did not have a standing nominating committee for directors, nor did we have an audit committee with an audit committee financial expert serving on that committee. Our entire board of directors acted as our nominating and audit committee. Our newly appointed board of directors intends to address these issues in the future and enact committees as appropriate.

 

 

ITEM 11. EXECUTIVE COMPENSATION

 

In the past we have issued shares of our common and preferred stock to compensate our officers for services rendered on our behalf and intend to issue additional shares of common or preferred stock in the future as part of our compensation package for our officers and directors.

 

The following table sets forth summary compensation information for the years ended December 31, 2019 and 2018 for our chief executive officer, our chief operating officer, our chief financial officer and our secretary/treasurer. We did not have any other executive officers as of the end of fiscal 2019 whose total compensation exceeded $100,000. We refer to these persons as our named executive officers elsewhere in this report.

 

Summary Compensation Table

 

Name and Principal Position   Fiscal Year   Salary ($)(1)   Bonus ($)   Option Awards ($)   Restricted Stock Awards ($)  

All Other

Compensation ($)

  Total ($)
                                 
Gary J. Grieco     2018     $ 24,000   $ —       $ —       $ —       $ —       $ 24,000
President, Principal Executive Officer; Principal Financial Officer     2019     $ 24,000   $ —       $ —       $ 5,000(2)     $ —       $ 24,500
                                                       
F. Jody Read     2018     $ 24,000     $ —       $ —       $ —       $ —       $ 24,000
COO     2019     $ 90,000     $ —       $ —       $ 5,000(2)     $ —       $ 90,500
                                                       
Marion Sofield     2018     $ 33,000     $ —       $ —       $ —       $ —       $ 33,000
CFO     2019     $ 60,000     $ —       $ —       $ —       $ —       $ 60,000
                                                       
Gregory Albers     2018     $ —       $ —       $ —       $ —       $ —       $
Secretary/Treasurer     2019     $ —       $ —       $ —       $ —       $ —       $

 

(1)   Represents compensation paid by PCT Corp. for Mr. Grieco’s services.

(2)   Represents value of 500,000 shares of Series B Preferred Stock issued for services.

 

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Grieco Employment Agreement

 

On August 12, 2019, the Company executed a new Employment Contract with Gary J. Grieco, President/CEO. Mr. Grieco earned a base salary of $2,000 per month to serve as the president and CEO. His employment agreement provides for one week’s vacation and indemnification rights. He is subject to a non-compete provision during the term of his employment, please one year after termination. Per the terms of the employment agreement he is obligated to protect the Company’s information and any work product he creates shall belong to the Company. His employment may be terminated by him or the Company with or without cause. In addition, Mr. Grieco was issued 500,000 Preferred Series B shares of PCT LTD.

 

On January 1, 2020, the Company entered into a four-year employment agreement with Gary J. Grieco, its President and CEO, whereby Mr. Grieco will receive $48,000 per year commencing April 1, 2020, and receive 15,000,000 shares of the Company’s common stock for services to the Company as its President and CEO. In addition, once monthly revenue exceeds monthly expenses the salary will be increased and Mr. Grieco will be issued an additional 10,000,000 shares of the Company’s common stock, as a bonus in lieu of cash. 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.

 

Read Employment Agreement

 

On January 1, 2019, the Company entered into a four-year employment agreement with F. Jody Read in his role as Chief Executive Officer. The terms of the contract call for an annual salary of $90,000 for the first year, effective March 1, 2019 and increasing to $120,000 once the Company’s revenue exceeds monthly expenses, then incrementally over time and with certain operation results, up to $200,000/year. The salary may be paid, at the employee’s discretion, either in cash or in common stock. A $1,000 per month allowance will be granted to the executive for housing near the Company’s South Carolina facility. The employment agreement awards the CEO 1,500,000 restricted shares of the Company’s restricted stock, which shall vest in the following manner: 375,000 shares on March 1, 2019, 375,000 shares on March 1, 2020, 375,000 shares on March 1, 2021 and the final 375,000 shares on March 1, 2022. On August 12, 2019, the Company amended the Employment Contract with F. Jody Read, CEO, whereby 500,000 Preferred Series B shares were issued to Read. All other terms of the January 1, 2019 employment agreement remain in effect. On October 4, 2019, F. Jody Read resigned from the position of CEO and moved back into the role of COO. By executed addendum to the January 1, 2019 employment agreement between the parties, all terms within the reference employment agreement remained the same with the exception of the issuance of 500,000 fully-paid and non-assessable Series B Preferred Shares of the Company’s stock. 

  

Paris Employment Agreement

 

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. In addition, the Company paid Mr. Paris a signing bonus of $40,000. The Company accepted the resignation of Marty Paris, effective on July 31, 2019.

 

PCT LTD does not offer retirement benefit plans to our executive officers, nor have we entered into any contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to a named executive officer at, or in connection with, the resignation, retirement or other termination of a named executive officer, or a change in control of the company, or a change in the named executive officer’s responsibilities following a change in control.

 

Securities under Equity Compensation Plans

 

PCT LTD does not have securities authorized for issuance under any equity compensation plans approved by our shareholders as of December 31, 2019. 

 

Compensation of Directors

 

PCT LTD does not have any standard arrangement for compensation of our directors for any services provided as director, including services for committee participation or for special assignments.

  

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table presents information, to the best of the Company’s knowledge, about the beneficial ownership of its common stock as of July 27, 2020, held by those persons known to beneficially own more than 5% of its capital stock and by its directors and executive officers. The percentage of beneficial ownership for the following table is based on 579,701,486 shares of common stock outstanding.

 

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting or investment power. It also includes (unless footnoted) shares of common stock that the shareholder has a right to acquire within 60 days after July 27, 2020 through the exercise of any option, warrant or other right. The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares of our common stock.

 

 

Name of officer, director or beneficial owner (1)

Number of Shares

Percentage

of Outstanding Shares of Common Stock

Gary J. Grieco, CEO/President and Class I Director 18,350,000 (2)(3) 3.17%
Gregory W. Albers, Secretary/Treasurer and Class II Director 50,167 Less than 0.01%
Paul Branagan, Class II Director 1,500,000 0.26%
Francis J. Read, COO and Class III Director 3,286,666 (3) 0.57%
William E. Prince, Class III Director
Marion Sofield, CFO 1,000,000 0.17%
Directors and officers as a group 24,186,833 4.17%

 

(1)     As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). The address of each person is care of us at 4235 Commerce Street, Little River, SC  29566.

(2)     Does not include 10,000,000 shares of the Company’s common stock issuable to Mr. Grieco once monthly revenue exceeds monthly expenses.

(3)     Does not include 500,000 shares of Series B Preferred Stock, whereby each share is entitled to cast five hundred (500) votes for each share held of the Series B Preferred stock on all matters presented to the stockholders of the Company for stockholder vote.

   

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

The following information summarizes transactions we have either engaged in for the past two fiscal years or propose to engage in, involving our executive officers, directors, more than 5% stockholders, or immediate family members of these persons. These transactions were negotiated between related parties without “arm’s length” bargaining and, as a result, the terms of these transactions may be different than transactions negotiated between unrelated persons.

 

Other than as set forth below, we were not a party to any transactions or series of similar transactions that have occurred during fiscal 2019 in which:

 

   •  The amounts involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years ($26,136); and
   •  A director, executive officer, holder of more than 5% of our common stock or any member of their immediate family had or will have a direct or indirect material interest.

 

Transactions with Related Parties

 

On January 1, 2020, the Company entered into a four-year employment agreement with Gary, J. Grieco, its President and CEO, whereby Mr. Grieco will receive $48,000 per year commencing April 1, 2020, and receive 15,000,000 shares of the Company’s common stock for services to the Company as its President and CEO. In addition, once monthly revenue exceeds monthly expenses the salary will be increased and Mr. Grieco will be issued an additional 10,000,000 shares of the Company’s common stock. The employment agreement begins on January 1, 2020, and is automatically renewable for two years unless terminated earlier as per the terms of the agreement.

 

On February 11, 2020, the Company received a $1,500 advance from the President of the Company and a $2,000 advance from a Director of the Company. The advances are unsecured, non-interest bearing and due on demand.

 

The Company has agreements with related parties for consulting services, notes payable and stock options. See Notes to Financial Statements numbers 6, 7, 8 and 10 for more details.

 

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Director Independence

 

Two of the company’s directors are independent directors as defined by NASDAQ Stock Market Rule 5605(a)(2). This rule defines persons as “independent” who are neither officers nor employees of the company and have no relationships that, in the opinion of the board, would interfere with the exercise of independent judgment in carrying out their responsibilities as directors.

  

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Auditor Fees

 

The following table presents the aggregate fees paid in connection with the audit of our financial statements and other professional services for each of the last two fiscal years.

  

    2019   2018
Audit fees (1)   $ 82,500     $ 67,545  
Audit-related fees (2)     —         —    
Tax fees(3)     —         —    
All other fees     —         —    
Total fees paid or accrued to our principal accountant   $ 82,500     $ 67,545  

 

  (1) Audit fees represent fees for professional services rendered by our principal accountants for the audit of our annual financial statements and review of the financial statements included in our Forms 10-Q or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.

 

  (2) Audit-related fees represent professional services rendered for assurance and related services by the accounting firm that are reasonably related to the performance of the audit or review of our financial statements that are not reported under audit fees.

 

  (3) Tax fees represent professional services rendered by the accounting firm for tax compliance, tax advice, and tax planning.

 

All other fees represent fees billed for products and services provided by the accounting firm, other than the services reported for the other three categories.

 

Pre-approval Policies

 

PCT LTD does not have an audit committee currently serving and as a result our board of directors performs the duties of an audit committee. Our board of directors will evaluate and approve in advance the scope and cost of the engagement of an auditor. All services rendered by our principal accountant are performed pursuant to a written engagement letter between us and the principal accountant. We do not rely on pre-approval policies and procedures.

   

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PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE

 

The following information required under this item is filed as part of this report:

 

(a) 1. Financial Statements

 

    Page
Report of Independent Registered Public Accounting Firm   30
Balance Sheets   31
Statements of Operations   32
Statements of Stockholders’ (Deficit)   33
Statements of Cash Flows   34
Notes to Financial Statements   35

 

(b) 2. Financial Statement Schedules

 

None.

 

(c) 3. Exhibits Index

   

Exhibit No. Description
3(i) Amended and Restated Articles of Incorporation, as currently in effect (Incorporated by reference to Exhibit 3.1 of Form 8-K, filed April 13, 2018)
3.1 Amended Articles of Incorporation increasing authorized shares (Incorporated by reference to Exhibit 3.1 of Form 8-K, filed on October 25, 2019)
3(ii) Amended and Restated Bylaws, as currently in effect (Incorporated by reference to Exhibit 3.2 of Form 8-K, filed April 13, 2018)
4.1 Certificate of Designation of Series A Convertible Preferred Stock (Incorporated by reference to Exhibit 4.1 of Form 10-Q, filed on September 16, 2019)
4.2 Certificate of Designation of Series B – Super Voting Convertible Preferred Stock (Incorporated by reference to Exhibit 4.2 of Form 10-Q, filed on September 16, 2019)
4.3 Certificate of Designation of Series C Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 of Form 8-K, filed on October 25, 2019)
4.4 Power Up Note dated June 5, 2018 (Incorporated by reference to Exhibit 4.1 of Form 10-Q, filed August 20, 2018)
4.5 Second Power Up Note dated July 25, 2018 (Incorporated by reference to Exhibit 4.2 of Form 10-Q, filed August 20, 2018)
4.6 Third Power Up Note dated August 27, 2018 (Incorporated by reference to Exhibit 4.3 of Form 10-Q, filed November 21, 2019)
4.7 Fourth Power Up Note dated December 5, 2018 (Incorporated by reference to Exhibit 4.6 of Form 10-Q, filed on September 16, 2019)
4.8 Fifth Power Up Note dated January 15, 2019 (Incorporated by reference to Exhibit 4.7 of Form 10-Q, filed on September 16, 2019)
4.9 Sixth Power Up Note dated February 22, 2019 (Incorporated by reference to Exhibit 4.8 of Form 10-Q, filed on September 16, 2019)
4.10 GS Capital Note dated January 16, 2019 (Incorporated by reference to Exhibit 4.9 of Form 10-Q, filed on September 16, 2019)
4.11 JSJ Note dated January 22, 2019 (Incorporated by reference to Exhibit 4.10 of Form 10-Q, filed on September 16, 2019)
4.12 EMA Note dated January 22, 2019 (Incorporated by reference to Exhibit 4.11 of Form 10-Q, filed on September 16, 2019)
4.13 Adar Note dated February 20, 2019 (Incorporated by reference to Exhibit 4.12 of Form 10-Q, filed on September 16, 2019)
4.14 Peak One Note dated February 21, 2019 (Incorporated by reference to Exhibit 4.13 of Form 10-Q, filed on September 16, 2019)
4.15 Auctus Note dated March 13, 2019 (Incorporated by reference to Exhibit 4.14 of Form 10-Q, filed on September 16, 2019)
10.1 Agreement with Annihilyzer, Inc. dated November 29, 2016 (Incorporated by reference to Exhibit 10.1 of Form 8-K, filed April 20, 2017)
10.2 Amendment to Agreement with Annihilyzer, Inc. dated April 6, 2017 (Incorporated by reference to Exhibit 10.2 of Form 8-K, filed April 20, 2017)
10.3 Read Consolidated Promissory Note dated September 27, 2017 (Incorporated by reference to Exhibit 10.1 of Form 8-K, filed October 4, 2017)
10.4† Paris Employment Agreement (Incorporated by reference to Exhibit 10.5 of Form 10-Q, filed November 14, 2017)
10.5 Strategic Planning Services Agreement dated March 15, 2018
10.6 Power Up Agreement dated June 5, 2018 (Included in Exhibit 4.1, which is incorporated by reference to Exhibit 4.1 of Form 10-Q, filed August 20, 2018)
10.7 Second Power Up Agreement dated July 25, 2018 (Included in Exhibit 4.2, which is incorporated by reference to Exhibit 4.2 of Form 10-Q, filed August 20, 2018
10.8 Third Power Up Agreement dated August 27, 2018 (Included in Exhibit 4.3, which is incorporated by reference to Exhibit 4.3 of Form 10-Q, filed November 21, 2019)
10.9 Fourth Power Up Agreement dated December 15, 2018 (Incorporated by reference to Exhibit 10.9 of Form 10-Q, filed on September 16, 2019)
10.10 Fifth Power Up Agreement dated January 15, 2019 (Incorporated by reference to Exhibit 10.10 of Form 10-Q, filed on September 16, 2019)
10.11 Sixth Power Up Agreement dated February 22, 2019 (Incorporated by reference to Exhibit 10.11 of Form 10-Q, filed on September 16, 2019)
10.12 GS Capital Agreement dated January 16, 2019 (Incorporated by reference to Exhibit 10.12 of Form 10-Q, filed on September 16, 2019)
10.13 JSJ Agreement dated January 22, 2019 (Incorporated by reference to Exhibit 10.13 of Form 10-Q, filed on September 16, 2019)
10.14 EMA Agreement dated January 22, 2019 (Incorporated by reference to Exhibit 10.14 of Form 10-Q, filed on September 16, 2019)
10.15 Adar Agreement dated February 20, 2019 (Incorporated by reference to Exhibit 10.15 of Form 10-Q, filed on September 16, 2019)
10.16 Peak One Agreement dated February 21, 2019 (Incorporated by reference to Exhibit 10.16 of Form 10-Q, filed on September 16, 2019)
10.17 Auctus Agreement dated March 13, 2019 (Incorporated by reference to Exhibit 10.17 of Form 10-Q, filed on September 16, 2019)
10.18† Read Employment Agreement (Incorporated by reference to Exhibit 10.18 of Form 10-Q, filed on September 16, 2019)
10.19† Read Addendum to Employment Agreement (Incorporated by reference to Exhibit 10.19 of Form 10-Q, filed on September 16, 2019)
10.20† Grieco 2019 Employment Agreement (Incorporated by reference to Exhibit 10.20 of Form 10-Q, filed on September 16, 2019)
10.21† Grieco 2020 Employment Agreement Incorporated by reference to Exhibit 10.21 of Form 10-Q, filed on April 13, 2020)
21.1 List of Subsidiaries as of December 31, 2019
31.1 Principal Executive Officer Certification
31.2 Principal Financial Officer Certification
32.1 Section 1350 Certification
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Label Linkbase Document
101.PRE XBRL Taxonomy Presentation Linkbase Document

 

† Indicates management contract or compensatory plan or arrangement.

  

  67  

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  PCT LTD  
     
Date: July 31, 2020 By: /s/ Gary J. Grieco
    Gary J. Grieco
    CEO/President
     
       

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name   Title   Date
         
/s/ Gary J. Grieco        
Gary J. Grieco   President (Principal Executive Officer), (Principal Financial Officer), and Class I Director   July 31, 2020
         
/s/  Gregory W. Albers        
Gregory W. Albers   Secretary & Treasurer and Class II Director   July 31, 2020
         
/s/  Paul Branagan        
Paul Branagan   Class II Director   July 31, 2020
         
/s/ Francis J. Read        
Francis J. Read   Class III Director   July 31, 2020
         
/s/ William E. Prince        
William E. Prince   Class III Director   July 31, 2020

 

 

68

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