The unaudited interim condensed consolidated financial
statements of PCT LTD (the "Company") have been prepared in accordance with United States generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management,
are necessary for a fair presentation of our balance sheets, statements of operations, stockholders' equity (deficit), and cash
flows for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the interim
period are not necessarily indicative of the results to be expected for a full year.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America
have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's December 31, 2020 audited financial statements as reported in
its Form 10-K/A filed on September 10, 2021.
In December 2019 COVID-19 emerged in Wuhan, China.
While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to
almost all other countries, including the United States, and infections have been reported globally. Because COVID-19 infections have
been reported throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders,
proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives
may be issued in the future.
The ultimate impact of the COVID-19 pandemic on the
Company's operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with
confidence, including the duration of the COVID-19 outbreak. Any resulting financial impact cannot be reasonably estimated at this time
but may have a material impact on our business, financial condition and results of operations. The significance of the impact of the
COVID-19 outbreak on the Company's businesses and the duration for which it may have an impact cannot be determined at this time.
At a minimum, the COVID-19 pandemic caused the Company to restrict travel of its personnel and to initiate distributor installations
of certain of the Company's equipment, as possible. The Company adapted to the immediate need for its US EPA registered disinfectant
at the end of March and beginning of April, 2020, by installing greater storage reserves and by assembling more of it higher-volume equipment
to produce the hospital grade disinfectant known as Hydrolyte®. There were hard costs associated with these adaptations to the Little
River, SC facility, but the Company continues to benefit from its fluid production capacities over the longer term. As the Federal, state
and other restrictions associated with the pandemic have lessened, the Company is able to act more effectively in obtaining new contracts
for its healthcare equipment, the Annihilyzer® and other equipment.
PCT LTD (formerly Bingham Canyon Corporation, (the
"Company," "PCT Ltd," or "Bingham"), a Delaware corporation, was formed on February 27, 1986. The
Company changed its domicile to Nevada on August 26, 1998. The Company acquires, develops and provides sustainable, environmentally safe
disinfecting, cleaning and tracking technologies. The Company specializes in providing cleaning, sanitizing, and disinfectant fluid solutions
and fluid-generating equipment that creates environmentally safe solutions for global sustainability.
Paradigm is located in Little River, SC and was formed
June 6, 2012 under the name of EUR-ECA, Ltd. On September 11, 2015, its Board of Directors authorized EUR-ECA Ltd to file with the Nevada
Secretary of State to change its name to Paradigm Convergence Technologies Corp. Paradigm is a technology licensing company specializing
in environmentally safe solutions for global sustainability. The company holds a patent, intellectual property and/or distribution rights
to innovative products and technologies. Paradigm provides innovative products and technologies for eliminating biocidal contamination
from water supplies, industrial fluids, hard surfaces, food processing equipment, and medical devices. Paradigm's overall strategy
is to market new products and technologies through the use of equipment leasing, joint ventures, licensing, distributor agreements and
partnerships.
Effective on February 29, 2018, the Company changed
its name from Bingham Canyon Corporation to PCT LTD to more accurately identify the Company's direction and to develop the complimentary
relationship and association with its wholly-owned operating company, Paradigm Convergence Technologies Corporation ("Paradigm"
or "PCT Corp.").
There have been no changes to the significant accounting
policies of the Company from the information provided in Note 1 of the Notes to the Consolidated Financial Statements in the Company's
most recent Form 10-K.
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 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, 2020, consisted of the following:
(1) The Company has estimated
the fair value of these liabilities using the Binomial Model.
ASU 2019-12 amends the requirements related to the
accounting for "hybrid" tax regimes. Such regimes are tax jurisdictions that impose the greater of two taxes - one based on
income, or one based on items other than income. Although ASC 740 does not apply to taxes based on items other than income, ASC 740-10-15-4(a)
originally specified that if there is a tax based on income that is greater than a franchise tax based on capital, only that excess is
subject to the guidance in ASC 740. In feedback to the FASB, stakeholders indicated that the guidance on hybrid tax regimes increased
the cost and complexity of applying ASC 740, particularly when the tax amount deemed to be a non-income tax was insignificant. Further,
such guidance made it more difficult for entities to determine the appropriate tax rate to use when recording deferred taxes.
Accordingly, the FASB amended ASC 740-10-15-4(a) to
state that an entity should include the amount of tax based on income in the tax provision and should record any incremental amount recorded
as a tax not based on income. This amendment effectively reverses the order in which an entity determines the type of tax under current
U.S. GAAP. In addition, the ASU amends the illustrative examples referred to and included in ASC 740-10-55-26 and ASC 740-10-55-139 through
55-144. The FASB notes that such amendments are consistent with the accounting for other incremental taxes, such as the base erosion anti-abuse
tax. Moreover, in paragraph BC12 of the ASU, the FASB concluded that subjecting these taxes to the disclosure requirements in ASC 740
will result in greater transparency of franchise tax amounts.
In August 2020, the FASB issued ASU 2020-06, "Debt
- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-
40)" ("ASU 2020-06"). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities
and equity, including convertible instruments and contracts on an entity's own equity. The ASU is part of the FASB's simplification initiative,
which aims to reduce unnecessary complexity in U.S. GAAP. The ASU's amendments are effective for fiscal years beginning after December
15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU 2020-06 will have on its financial
statements.
The accompanying consolidated condensed financial
statements have been prepared assuming that the Company will continue as a going concern. The Company has an accumulated deficit of $27,380,040
and has negative cash flows from operations. As of September 30, 2021, the Company had a working capital deficit of $5,563,299. 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.
On August 26, 2020, the Company
signed a new one-year lease for the Company headquarters and operations located in Little River, South Carolina. The lease was effective
retroactively from July 1, 2020, ending on June 30, 2021, for $7,500 per month. The Company re-negotiated an annual lease on the Little
River, SC facility for $7,500 per month, retroactive to July 1, 2020, which is renewable for an additional four years (with a 2% increase
annually). The Company renewed the lease for another year, effective July 1, 2021, at $7,650 per month.
On October 19, 2020, the
Company entered into a building lease with a three-year term and an effective date of November 1, 2020. The lease requires the Company
to make payments of $4,500 per month. The Company recognized operating lease expense of $40,500 during the nine-month period ended September
30, 2021.
On March 15, 2021, the Company
entered into a building lease with a two-year term and an effective date of April 1, 2021. The lease requires the Company to make payments
of $2,750 per month. The Company recognized operating lease expense of $19,250 during the nine-month period ended September 30, 2021.
The Company terminated the lease effective October 14, 2021 and recognized an impairment of $39,030 during the nine-month period ended
September 30, 2021.
At September 30, 2021, the
weighted average remaining operating lease term was 2.07 years and the weighted average discount rate associated with operating leases
was 18.5%.
The following table provides supplemental
cashflow and other information related to leases for the nine-month period ended September 30, 2021 and 2020:
Supplemental balance sheet information related
to leases as of September 30, 2021 and 2020 are as below:
NOTE 6. NOTES PAYABLE
The following tables summarize notes payable as of
September 30, 2021 and December 31, 2020:
|
Type
|
|
Original Amount
|
|
Origination
Date
|
|
Maturity
Date
|
|
Effective Annual
Interest
Rate
|
|
Balance at
September 30, 2021
|
|
Balance at
December 31,
2020
|
|
Note Payable (a)**
|
|
$
|
25,000
|
|
|
05/08/2017
|
|
06/30/2018
|
|
|
0
|
%
|
|
$
|
22,500
|
|
|
$
|
27,500
|
|
|
Note Payable (b)
|
|
$
|
8,700
|
|
|
11/15/2018
|
|
06/30/2019
|
|
|
10
|
%
|
|
$
|
-
|
|
|
$
|
8,700
|
|
|
Note Payable **
|
|
$
|
118,644
|
|
|
05/05/2020
|
|
05/05/2021
|
|
|
8
|
%
|
|
$
|
110,644
|
|
|
$
|
110,644
|
|
|
Note Payable (c)
|
|
$
|
199,500
|
|
|
10/01/2020
|
|
09/28/2021
|
|
|
66
|
%
|
|
$
|
-
|
|
|
$
|
149,573
|
|
|
Note Payable (d)
|
|
$
|
126,000
|
|
|
11/03/2020
|
|
04/23/2021
|
|
|
166
|
%
|
|
$
|
-
|
|
|
$
|
85,050
|
|
|
Note Payable (e)
|
|
$
|
113,980
|
|
|
11/04/2020
|
|
03/15/2021
|
|
|
210
|
%
|
|
$
|
-
|
|
|
$
|
65,988
|
|
|
Note Payable (f)
|
|
$
|
177,800
|
|
|
01/02/2021
|
|
07/12/2021
|
|
|
116
|
%
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Note Payable (g)
|
|
$
|
111,920
|
|
|
03/09/2021
|
|
05/21/2021
|
|
|
220
|
%
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Note Payable (h)
|
|
$
|
29,686
|
|
|
03/09/2021
|
|
Demand
|
|
|
34
|
%
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Note Payable (i)
|
|
$
|
222,400
|
|
|
06/01/2021
|
|
Demand
|
|
|
181
|
%
|
|
$
|
76,985
|
|
|
$
|
-
|
|
|
Note Payable (j)
|
|
$
|
87,000
|
|
|
06/29/2021
|
|
Demand
|
|
|
211
|
%
|
|
$
|
31,320
|
|
|
$
|
-
|
|
|
Sub-total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
241,449
|
|
|
$
|
447,455
|
|
|
Debt discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(9,945
|
)
|
|
$
|
(63,075
|
)
|
|
Balance, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
231,504
|
|
|
$
|
384,380
|
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(231,504
|
)
|
|
$
|
(384,380
|
)
|
|
Total long-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** Currently in default
|
|
|
a)
|
On July 19, 2021, the Company repaid the principal amount of $5,000 leaving a note balance of $22,500.
|
|
|
b)
|
On July 19, 2021, the Company repaid the principal amount of $8,700 leaving a note balance of $0.
|
|
|
c)
|
On October 1, 2020, the Company sold future receivables with a non-related party for $199,500, of which $53,250 was loan fees and original issue discount resulting in cash proceeds to the Company of $146,250. The advance is to be repaid through weekly payments of $3,841. In connection with the advance, the Company granted the lender a security interest and all past, present and future assets of the Company. During the nine months ended September 30, 2021, $30,642 of the discount was amortized to expense, and the note was repaid leaving a note balance of $0.
|
|
|
d)
|
On November 3, 2020, the Company sold future receivables with a non-related party for $126,000, of which $39,650 was loan fees and original issue discount resulting in cash proceeds to the Company of $86,350. The advance is to be repaid through $1,050 daily payments. In connection with the advance, the Company granted the lender a security interest and all past, present and future assets of the Company. During the nine months ended September 30, 2021, $18,944 of the discount was amortized to expense, and the remaining $85,050 was repaid leaving a note balance of $0.
|
|
|
e)
|
On November 4, 2020, the Company sold future receivables with a non-related
party for $113,980,
of which $34,440
was loan fees and original issue discount resulting in cash proceeds to the Company of
$79,540.
The advance is to be repaid through $5,999
weekly payments. In connection with the advance, the Company granted the lender a security
interest and all past, present and future assets of the Company. During the nine months ended September 30, 2021, $13,489
of the discount was amortized to expense, and the remaining $65,988
was repaid leaving a note balance of $0.
|
|
|
f)
|
On January 2, 2021, the Company sold future receivables with a non-related party for $177,800, of which $39,795 was loan fees and original issue discount resulting, and $35,994 was paid to settle the loan described in Note (d) in cash proceeds to the Company of $102,011. The advance is to be repaid through $7,730 weekly payments. In connection with the advance, the Company granted the lender a security interest and all past, present and future assets of the Company. During the nine months ended September 30, 2021, $39,795 of the discount was amortized to expense, and the remaining $46,383 was settled through a payment of $43,600 resulting in a gain on settlement of debt of $2,783 and a note balance of $0.
|
|
|
g)
|
On March 9, 2021, the Company sold future receivables with a non-related party for $111,920, of which $35,120 was loan fees and original issue discount resulting in cash proceeds to the Company of $76,800. The advance is to be repaid through $1,399 weekly payments. In connection with the advance, the Company granted the lender a security interest and all past, present and future assets of the Company. During the nine months ended September 30, 2021, $35,120 of the discount was amortized to expense, and $111,920 was repaid leaving a note balance of $0.
|
|
h)
|
On March 9, 2021, the Company sold future receivables with a non-related party for $29,686, of which $10,120 was loan fees and original issue discount resulting in cash proceeds to the Company of $19,566. During the six months ended September 30, 2021, $10,120 of the discount was amortized to expense and $29,686 was repaid, leaving a note balance of $0.
|
|
i)
|
On June 1, 2021, the Company sold future receivables with a non-related party for $222,400, of which $8,000 was attributable to loan fees and $62,400 to original issue discount resulting in cash proceeds to the Company of $152,000. The advance is to be repaid through weekly payments of $8,554. In connection with the advance, the Company granted the lender a security interest and all past, present, and future assets of the Company. During the nine months ended September 30, 2021, $64,414 of the discount was amortized to expense, and $145,415 was repaid leaving a net note balance of $70,999 (discount balance of $5,986).
|
|
j)
|
On June 29, 2021, the Company sold future receivables with a non-related party for $87,000, of which $27,000 was loan fees and original issue discount resulting in cash proceeds to the Company of $60,000. During the nine months ended September 30, 2021, $23,041 of the discount was amortized to expense, and $55,680 was repaid leaving a net note balance of $27,361 (discount balance of $3,959).
|
The following table summarizes notes payable, related
parties as of September 30, 2021 and December 31, 2020:
|
Type
|
|
Original Amount
|
|
Origination
Date
|
|
Maturity
Date
|
|
Annual
Interest
Rate
|
|
Balance at
September 30,
2021
|
|
Balance at
December 31, 2020
|
|
Note Payable, RP (k)
|
|
$
|
30,000
|
|
|
04/10/2018
|
|
01/15/2019
|
|
|
3
|
%
|
|
$
|
-
|
|
|
$
|
30,000
|
|
|
Note Payable, RP (l)
|
|
$
|
380,000
|
|
|
06/20/2018
|
|
01/02/2020
|
|
|
8
|
%
|
|
$
|
-
|
|
|
$
|
380,000
|
|
|
Note Payable, RP (m)
|
|
$
|
350,000
|
|
|
06/20/2018
|
|
01/02/2020
|
|
|
5
|
%
|
|
$
|
-
|
|
|
$
|
285,214
|
|
|
Note Payable, RP (n)**
|
|
$
|
17,000
|
|
|
06/20/2018
|
|
01/02/2020
|
|
|
5
|
%
|
|
$
|
15,000
|
|
|
$
|
17,000
|
|
|
Note Payable, RP **
|
|
$
|
50,000
|
|
|
07/27/2018
|
|
11/30/2018
|
|
|
8
|
%
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
Note
Payable, RP (o)
|
|
$
|
5,000
|
|
|
10/09/2018
|
|
Demand
|
|
|
0
|
%
|
|
$
|
-
|
|
|
$
|
5,000
|
|
|
Note
Payable, RP (p)
|
|
$
|
5,000
|
|
|
10/19/2018
|
|
Demand
|
|
|
0
|
%
|
|
$
|
4,237
|
|
|
$
|
5,000
|
|
|
Note Payable, RP **
|
|
$
|
15,000
|
|
|
08/16/2019
|
|
02/16/2020
|
|
|
8
|
%
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
Note
Payable, RP (q)
|
|
$
|
2,000
|
|
|
02/11/2020
|
|
Demand
|
|
|
0
|
%
|
|
$
|
-
|
|
|
$
|
2,000
|
|
|
Note Payable, RP (m)
|
|
$
|
84,034
|
|
|
02/16/2021
|
|
Demand
|
|
|
5
|
%
|
|
$
|
70,034
|
|
|
$
|
-
|
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
154,271
|
|
|
$
|
789,214
|
|
|
Debt discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Balance, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
154,271
|
|
|
$
|
789,214
|
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(154,271
|
)
|
|
$
|
(789,214
|
)
|
|
Total long-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** Currently in default
|
|
|
k)
|
During the nine-months ended September 30, 2021, the Company made several payments to repay the principal amount of $30,000 leaving a note balance of $0.
|
|
|
l)
|
On February 16, 2021, the Company issued 2,663,299 shares of common stock to settle a June 20, 2018, note payable of $380,000 and accrued interest of $26,153 owed to the current COO and Director of the Company. The Company recognized the fair value of the shares issued of $74,572 and due to the related party nature of the transaction no gain was recognized for the difference between the fair value of the shares and the extinguished debt. The resulting difference was recorded as Additional Paid-in Capital in the amount of $328,919.
|
|
|
m)
|
On February 16, 2021, the Company issued 1,803,279 shares of common stock to settle $247,270 from a $275,000 note payable dated June 20, 2018, which has a balance of $331,304, including interest, to the current Chairman and CEO of the Company. The Company also agreed to issue a new note for the remaining balance owed to the Chairman and CEO of $84,034, dated February 16, 2021. The note will bear interest at 5% per annum and is due on June 30, 2021. The Company recognized the fair value of the shares issued of $50,492 and due to the related party nature of the transaction no gain was recognized for the difference between the fair value of the shares and the extinguished debt. The resulting difference was recorded as Additional Paid-in Capital in the amount of $194,861. On July 15, 2021, and September 23, 2021, the Company repaid the principal amount of $14,000 leaving a note balance of $70,034.
|
|
|
n)
|
On July 15, 2021, the Company repaid the principal amount of $2,000 leaving a note balance of $15,000.
|
|
|
o)
|
On September 23, 2021, the Company repaid the principal amount of $5,000 leaving a note balance of $0.
|
|
|
p)
|
On September 23, 2021, the Company repaid the principal amount of $763 leaving a note balance of $4,237.
|
|
|
q)
|
On September 23, 2021, the Company repaid the principal amount of $2,000 leaving a note balance of $0.
|
The following table summarizes convertible notes payable
as of September 30, 2021 and December 31, 2020:
|
Type
|
|
Original Amount
|
|
Origination
Date
|
|
Maturity
Date
|
|
Annual
Interest
Rate
|
|
Balance at
September 30,
2021
|
|
Balance at
December 31, 2020
|
|
Convertible Note Payable* **
|
|
$
|
65,000
|
|
|
12/06/2018
|
|
12/06/2019
|
|
|
12
|
%
|
|
$
|
46
|
|
|
$
|
46
|
|
|
Convertible Note Payable (r)
|
|
$
|
75,000
|
|
|
03/18/2019
|
|
12/13/2019
|
|
|
24
|
%
|
|
$
|
-
|
|
|
$
|
177,795
|
|
|
Convertible Note Payable (s)
|
|
$
|
30,000
|
|
|
03/06/2020
|
|
03/05/2021
|
|
|
12
|
%
|
|
$
|
-
|
|
|
$
|
21,662
|
|
|
Convertible Note Payable (t)* **
|
$
|
150,000
|
|
|
04/10/2020
|
|
04/09/2021
|
|
|
12
|
%
|
|
$
|
65,000
|
|
|
$
|
165,000
|
|
|
Convertible
Note Payable (u) **
|
|
$
|
300,000
|
|
|
08/27/2020
|
|
07/31/2021
|
|
|
12
|
%
|
|
$
|
270,000
|
|
|
$
|
300,000
|
|
|
Convertible Note Payable (v)
|
|
$
|
53,500
|
|
|
09/22/2020
|
|
03/21/2022
|
|
|
12
|
%
|
|
$
|
-
|
|
|
$
|
53,500
|
|
|
Convertible Note Payable (w)
|
|
$
|
87,500
|
|
|
09/24/2020
|
|
Demand
|
|
|
8
|
%
|
|
$
|
15,000
|
|
|
$
|
40,000
|
|
|
Convertible Note Payable (x)
|
|
$
|
200,000
|
|
|
10/07/2020
|
|
10/06/2021
|
|
|
5
|
%
|
|
$
|
200,000
|
|
|
$
|
200,000
|
|
|
Convertible Note Payable (y)
|
|
$
|
200,000
|
|
|
10/16/2020
|
|
10/15/2021
|
|
|
5
|
%
|
|
$
|
200,000
|
|
|
$
|
200,000
|
|
|
Convertible Note Payable (z)
|
|
$
|
300,000
|
|
|
11/11/2020
|
|
11/10/2021
|
|
|
5
|
%
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
|
Convertible Note Payable (aa)
|
|
$
|
150,000
|
|
|
12/29/2020
|
|
12/28/2021
|
|
|
5
|
%
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
|
Convertible Note Payable (bb)
|
|
$
|
150,000
|
|
|
01/27/2021
|
|
01/27/2022
|
|
|
5
|
%
|
|
$
|
150,000
|
|
|
$
|
-
|
|
|
Convertible Note Payable (cc)
|
|
$
|
128,000
|
|
|
02/22/2021
|
|
02/22/2022
|
|
|
12
|
%
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Convertible Note Payable (dd)
|
|
$
|
200,000
|
|
|
03/18/2021
|
|
03/18/2022
|
|
|
5
|
%
|
|
$
|
200,000
|
|
|
$
|
-
|
|
|
Convertible Note Payable (ee)
|
|
$
|
83,000
|
|
|
03/26/2021
|
|
03/26/2022
|
|
|
12
|
%
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Convertible Note Payable (ff)
|
|
$
|
43,000
|
|
|
04/05/2021
|
|
04/05/2022
|
|
|
12
|
%
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Convertible Note Payable (gg)
|
|
$
|
200,000
|
|
|
04/14/2021
|
|
04/14/2022
|
|
|
5
|
%
|
|
$
|
200,000
|
|
|
$
|
-
|
|
|
Convertible Note Payable (hh)
|
|
$
|
128,000
|
|
|
05/03/2021
|
|
05/03/2022
|
|
|
12
|
%
|
|
$
|
128,000
|
|
|
$
|
-
|
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,876,046
|
|
|
$
|
1,608,003
|
|
|
Debt discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,708
|
)
|
|
$
|
-
|
|
|
Balance, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,876,338
|
|
|
$
|
1,608,003
|
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,876,338
|
)
|
|
$
|
(1,554,503
|
)
|
|
Total long-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
53,500
|
|
* Embedded conversion feature accounted for as a derivative liability at period end
** Currently in default
|
|
|
r)
|
During the nine months ended September 30, 2021, the Company repaid $70,000 of the convertible note payable and settled the remaining outstanding debt of $107,795 and accrued interest of $76,569 through a cash payment of $40,000 and the issuance of 8,000,000 shares of common stock at a fair value of $124,000 resulting in a gain on settlement of debt of $20,364.
|
|
|
s)
|
On May 7, 2021, the Company deemed in the best interest to settle the convertible debt with a non-related party and allow for the cashless exercise to purchase 1,921,875 shares of the Company's common stock at the rate of $0.032 per share. In addition, the non-related party shall release 60,072,853 shares to the agreed upon payment terms of $36,994 cash. During the nine months ended September 30, 2021, the Company incurred additional default penalties of $15,174 on the convertible note and settled the outstanding debt of $36,836 and accrued interest of $3,657 through a cash payment of $36,994 and the cashless exercise to purchase 1,921,875 shares of the Company's common stock with a fair value of $34,594 resulting in a loss on settlement of debt of $31,095.
|
|
|
t)
|
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 12% per annum. 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. Further, if at any time the stock price is less than
$0.30, an additional 20% discount is applied and if at any time the conversion price is less than $0.01 an additional 10% is applied.
Further, an additional 15% is applied if the Company fails to comply with its reporting requirements. During the period, all these additional
discounts were triggered.
The embedded conversion option qualified for derivative
accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $507,847 and resulted in a discount
to the note payable of $132,000 and an initial derivative expense of $375,847. During the year ended December 31, 2020, the Company incurred
$15,000 of penalties which increased the principal amount of the note to $165,000. During the nine months ended September 30, 2021, the
Company repaid $100,000 of the note, leaving a note balance of $65,000.
|
|
|
u)
|
During the nine months ended September 30, 2021, the Company repaid $30,000 of the note, leaving a note balance of $270,000.
|
|
|
v)
|
On September 22, 2020, the Company entered into a convertible promissory note with a non-related party for $53,500, of which $3,500 was an original issue discount resulting in cash proceeds to the Company of $50,000. The note is due on March 21, 2022 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. During the nine months ended September 30, 2021 the Company repaid the $53,500 note as well as $25,882 of interest and prepayment penalties. As the note was repaid prior to becoming convertible no derivative liability was recognized.
|
|
|
w)
|
During the nine months ended September 30, 2021 the Company issued 25,000,000 common shares upon the conversion of $25,000 of the convertible note payable, leaving a note balance of $15,000. On October 11, 2021, the Company issued 15,000,000 common shares upon the
conversion of the remaining $15,000 of the convertible note payable. Refer to Note 12(a).
|
|
|
x)
|
On October 7, 2020, the Company entered into a convertible promissory note with a non-related party for $200,000. The note is due on October 6, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum. 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 of $0.20. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.
|
|
|
y)
|
On October 16, 2020, the Company entered into a convertible promissory note with a non-related party for $200,000. The note is due on October 15, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum. 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 of $0.20. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.
|
|
|
z)
|
On November 11, 2020, the Company entered into a convertible promissory note with a non-related party for $300,000. The note is due on November 10, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum. 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 of $0.15. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.
|
|
|
aa)
|
On December 29, 2020, the Company entered into a convertible promissory note with a non-related party for $150,000. The note is due on December 28, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum. 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 of $0.10. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.
|
|
|
bb)
|
On January 27, 2021, the Company entered into a convertible promissory note with a non-related party for $150,000. The note is due on January 26, 2022 and bears interest on the unpaid principal balance at a rate of 5% per annum. The note may be converted by the lender at any time before 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to $0.10. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.
|
|
|
cc)
|
On February 22, 2021, the Company entered into a convertible promissory note 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 February 22, 2022 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 stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. During the nine months ended September 30, 2021 the Company repaid the $128,000 note as well as $51,000 of interest and prepayment penalties. As the note was repaid prior to becoming convertible no derivative liability was recognized.
|
|
|
dd)
|
On March 18, 2021, the Company entered into a convertible promissory note with a non-related party for $200,000. The note is due on March 17, 2022 and bears interest on the unpaid principal balance at a rate of 5% per annum. The note may be converted by the lender at any time before 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to $0.10. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.
|
|
|
ee)
|
On March 26, 2021, the Company entered into a convertible promissory note 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 $80,000. The note is due on March 24, 2022 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 stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. During the nine months ended September 30, 2021 the Company repaid the $83,000 note as well as $39,694 of interest and prepayment penalties. As the note was repaid prior to becoming convertible no derivative liability was recognized.
|
|
|
ff)
|
On April 5, 2021, the Company entered into a convertible promissory note with a non-related party for $43,000, of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $40,000. The note is due on April 5, 2022 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 stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. During the nine months ended September 30, 2021 the Company repaid the $43,000 note as well as $12,270 of interest and prepayment penalties. As the note was repaid prior to becoming convertible no derivative liability was recognized.
|
|
|
gg)
|
On April 14, 2021, the Company entered into a convertible promissory note with a non-related party for $200,000. The note is due on April 14, 2022 and bears interest on the unpaid principal balance at a rate of 5% per annum. 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 of $0.10. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. As the note is not convertible until 180 days following issuance, no derivative liability was recognized as of September 30, 2021.
|
|
|
hh)
|
On May 3, 2021, the Company entered into a convertible promissory note 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 May 3, 2022 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 stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. As the note is not convertible until 180 days following issuance, no derivative liability was recognized as of September 30, 2021. On November 5, 2021, the Company repaid the $128,000 note as well as $61,952 of interest and prepayment penalties.
|
NOTE 7. DERIVATIVE LIABILITIES
The embedded conversion option of (1) the convertible
notes payable described in Note 5; (2) warrants; contain conversion features that qualify for embedded derivative classification. The
fair value of the liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in
the statement of operations as a gain or loss on derivative financial instruments.
Upon the issuance of the convertible notes payable
described in Note 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.
|
|
|
September 30,
2021
|
|
December 31,
2020
|
|
Balance at the beginning of period
|
|
$
|
7,102,801
|
|
|
$
|
10,517,873
|
|
|
Original discount limited to proceeds of notes
|
|
|
-
|
|
|
|
166,000
|
|
|
Settlement of derivative instruments
|
|
|
(3,792,104
|
)
|
|
|
(16,824,669
|
)
|
|
Change in fair value of embedded conversion option
|
|
|
(1,749,277
|
)
|
|
|
13,243,597
|
|
|
Balance at the end of the period
|
|
$
|
1,561,420
|
|
|
$
|
7,102,801
|
|
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 September 30, 2021
|
|
|
113 - 249
|
%
|
|
|
0.09-0.76
|
%
|
|
|
0
|
%
|
|
|
1.00-3.91
|
|
The Company uses Level 3 inputs for its valuation
methodology for the preferred series A stock liability as their fair values were determined by using the Binomial Model based on various
assumptions.
NOTE 8. STOCKHOLDERS' DEFICIT
Preferred Stock
Effective March 23, 2018, the Company amended the
articles of incorporation and authorized 10,000,000 shares of preferred stock with a par value of $0.001 per share. The preferred stock
may be issued from time to time by the Board of Directors as shares of one or more classes or series, as summarized below.
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 Directors
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. Resulting in a preferred stock liability 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 the shares then held by them.
Dividends
None.
Preference of Liquidation
In the event of any liquidation, dissolution
or winding up of the Company, the holders of Shares shall be entitled to receive, prior and in preference to any distribution of any of
the assets of this Company, to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum
of (i) $0.10 for each outstanding Share (the "Original Series A Issue Price") and (ii) an amount equal to 6% of the Original
Series A Issue Price for each 12 months that has passed since the date of issuance of any Shares (such amount being referred to herein
as the "Premium").
For purposes of this provision, a liquidation,
dissolution or winding up of this Company shall be deemed to be occasioned by, or to include, (A) the acquisition of the Company by another
entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation
but, excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (B) a sale of all or substantially
all of the assets of the Company; unless the Company's stockholders of record as constituted immediately prior to such acquisition or
sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company's acquisition or
sale or otherwise), hold at least 50% of the voting power of the surviving or acquiring entity.
If upon the occurrence of such liquidation,
dissolution or winding up event, the assets and funds thus distributed among the holders of the Shares shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of series of preferred stock that
may from time to time come into existence, the entire assets and funds of the Company legally available for distribution shall be distributed
ratably among the holders of the Shares in proportion to the preferential amount each such holder is otherwise entitled to receive.
In any of such liquidation, dissolution
or winding up event, if the consideration received by the Company is other than cash, its value will be deemed its fair market value.
Any securities shall be valued as follows:
|
|
A.
|
Securities not subject to investment letter or other similar restrictions on free marketability (covered by (B) below):
|
|
|
1)
|
If traded on a securities exchange (NASDAQ, AMEX, NYSE, etc.), the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty-day period ending three (3) days prior to the closing;
|
|
|
2)
|
If traded on a quotation system, such as the OTC:QX, OTC:QB or OTC Pink Sheets, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty-day period ending three (3) days prior to the closing; and
|
|
|
3)
|
If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding shares of Preferred Stock.
|
|
|
B.
|
The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding shares of such Preferred Stock:
|
Voting
The holder of each Share shall not
have any voting rights, except in the case of voting on a change in the preferences of Shares.
Conversion
Each Share shall be convertible into
shares of the Company's Common Stock at a price per share of $0.10 (1 Share converts into 1 share of Common Stock), at the option of the
holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth day prior to the Redemption Date,
if any, as may have been fixed in any Redemption Notice with respect to the Shares, at the office of this Company or any transfer agent
for such stock. Each Share shall automatically be converted into shares of Common Stock on the first day of the thirty-sixth (36th) month
following the original issue date of the shares at the Conversion Price per share.
The Company was unable to issue the subscribers
the preferred shares until the Company filed a Certificate of Designation and the Preferred Series "A" stock had been duly validly
authorized. As the Company had not filed the Certificate of Designation and as the Company could not issue the preferred shares to settle
the proceeds received, it was determined the subscriptions were settleable in cash. As a result, the Company classified the subscriptions
received as a liability in accordance with ASC 480 Distinguishing Liabilities from Equity. The filing of the Certificate of Designation
and issuance of the preferred shares resulted in the reclassification of the Series A Preferred Shares from a liability to temporary equity
or "mezzanine" because the preferred shares include the liquidation preferences described above. The fair value of the preferred
series A stock on April 12, 2019 was $60,398 and was valued by using the Binomial Model based on various assumptions and was reclassified
from a liability to mezzanine equity.
As of September 30, 2021, and December 31,
2020, there were 500,000 shares of Series A Convertible Preferred Stock issued and outstanding, respectively.
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. To date the Company has received $500,500 of equity capital, and upon the receipt of an additional $499,500
in equity capital the redemption right will be triggered.
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
shares of the Series B preferred stock to each of its current CEO/Chairman and COO/Director ( 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 September 30, 2021, and December 31, 2020, there
were 1,000,000
shares of Series B Preferred Stock issued and outstanding, respectively.
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 of Directors,
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 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.
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 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.
As conversion of the Series C Preferred Shares
is not within the control of the Company, and it is not certain that the Company could satisfy its obligation to deliver shares upon conversion,
the Series C Preferred Shares were classified in temporary equity or "mezzanine".
At December 31, 2020, there were 40,000 Series C Preferred Shares issued and outstanding, valued at $1 per share or $40,000.
On February 15, 2021, 40,000 shares of preferred
series C stock was converted into common stock (1 share converts into 100 shares of common stock), resulting in the issuance of 4,000,000
shares of common stock. At September 30, 2021, no Series C Preferred Shares were outstanding.
Common Stock
Effective March 23, 2018, the Company amended the
Articles of Incorporation and increased the authorized shares of common stock with a par value of $0.001 per share from 100,000,000 to
300,000,000 shares. Effective October 4, 2019, the Company amended the Articles of Incorporation and increased the authorized shares of
common stock with a par value of $0.001 per share from 300,000,000 to 1,000,000,000 shares. The number of shares outstanding of the registrant's
common stock as of September 30, 2021 and December 31, 2020 was 780,126,229 and 722,487,846, respectively.
On January 4,
2021, the Company issued 25,000,000 common shares to settle a convertible note described in Note 6(p), with a remaining balance of $40,000.
On February 15, 2021, 40,000 shares of preferred series C stock was converted
into common stock (1 share converts into 100 shares of common stock), resulting in the issuance of 4,000,000 shares of common stock.
On February 16, 2021, the Company issued 1,803,279
shares of common stock to settle $247,270 from a $275,000 note payable dated June 20, 2018, which has a balance of $331,304, including
interest, to the current Chairman and CEO of the Company.
On February 16, 2021, the Company issued 2,663,299
shares of common stock to settle a June 20, 2018 note payable of $380,000 and accrued interest of $26,153 owed to the current COO and
Director of the Company.
On March 1, 2021, the Company entered into a consulting
agreement. Pursuant to the agreement, the consultant will provide advisory services through May 31, 2021 in consideration
of 2,500,000 shares
of common stock. The fair value of the common stock was $62,750
which has been recognized in consulting expense during the six
months ended June 30, 2021.
On May 7, 2021, the Company issued 1,921,875 common
shares pursuant to a cashless exercise of warrants as described in Note 6(l).
On May 27, 2021, the Company issued 1,000,000 common
shares pursuant to an employment agreement dated May 5, 2021 with an officer of the Company. The fair value of the common stock was $18,990.
On June 2, 2021, the Company issued 3,750,000 common
shares for cash proceeds of $75,000.
On June 30, 2021, the Company issued 5,000,000 common
shares for cash proceeds of $100,000.
On September 1, 2021, the Company issued 8,000,000
common shares and paid $21,000 to settle the remaining outstanding principal on a convertible note payable of $88,795 and accrued interest
of $26,153 resulting in a gain on settlement of debt of $20,364.
On September 10, 2021, the Company issued 2,000,000
common shares pursuant to a general release agreement dated July 23, 2021 with a former employee of the Company. The fair value of the
common stock was $28,400.
NOTE 9. STOCK OPTIONS
Below is a table summarizing the options issued and
outstanding as of September 30, 2021:
|
|
|
Number of
options
|
|
Weighted average exercise price
$
|
|
|
Balance, December 31, 2020
|
|
|
|
200,000
|
|
|
|
2.00
|
|
|
|
Granted
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Expired
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Settled
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Balance, September 30, 2021
|
|
|
|
200,000
|
|
|
|
2.00
|
|
As at September 30, 2021, 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
|
|
|
|
0.32
|
|
|
|
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 September 30, 2021 was $nil.
NOTE 10. WARRANTS
The Company concluded that it only has sufficient
shares to satisfy the conversion of some but not all of the outstanding convertible instruments. The initial fair value of the warrants
issued during the period was calculated using the Binomial Model as described in Note 6.
The following table summarizes the continuity of share
purchase warrants:
|
|
|
Number of
warrants
|
|
Weighted average exercise price
$
|
|
|
Balance, December 31, 2020
|
|
|
|
260,500,000
|
|
|
|
0.00283
|
|
|
|
Settled
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Granted
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Exercised
|
|
|
|
(142,857,143
|
)
|
|
|
0.00035
|
|
|
|
Balance, September 30, 2021
|
|
|
|
117,642,857
|
|
|
|
0.00584
|
|
As at September 30, 2021, 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
|
|
|
12/3/2018
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
0.10
|
|
|
|
2.18
|
|
|
|
12/3/2023
|
|
|
|
50,000
|
|
|
|
3/31/2019
|
|
|
|
107,142,857
|
|
|
|
107,142,857
|
*
|
|
|
0.00035
|
*
|
|
|
2.45
|
|
|
|
03/13/2024
|
|
|
|
37,500
|
|
|
|
8/26/2020
|
|
|
|
10,000,000
|
*
|
|
|
10,000,000
|
*
|
|
|
0.06
|
*
|
|
|
3.91
|
|
|
|
8/26/2025
|
|
|
|
600,000
|
|
|
|
|
|
|
|
117,642,857
|
|
|
|
117,642,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
687,500
|
|
*The number of warrants outstanding and exercisable
is variable based on adjustments to the exercise price of the warrant due to dilutive issuances.
The intrinsic value of warrants outstanding at September
30, 2021 was $1,237,500.
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 11 for more details.
NOTE 12. COMMITMENTS AND CONTINGENCIES
Consulting Agreements -
On March 1, 2021, the Company entered into a consulting
agreement. Pursuant to the agreement, the consultant will provide consulting services to the Company in various marketing and management
matters for a period of three months. In consideration for the services performed by the consultant, the Company agreed to compensate
the consultant $5,000 per month.
The Company also uses the professional services
of securities attorneys, a US EPA specialist, professional accountants and other public-company specialists.
Employment Agreements -
On May 5, 2021, the Company entered into an employment
agreement with a recently appointed officer, for an initial term of three years. The terms of the contract call for an annual salary of
$70,000 and the issuance of 1,000,000 shares of common stock. The fair value of the common stock was $18,990. On July 16, 2021, the officer
resigned.
Other Obligations and Commitments -
The Company has a commitment to acquire inventory
for a total cost of $61,150, of which $30,575 was paid prior to September 30, 2021.
Other than the above, there are no new obligation
or commitments during the period ending September 30, 2021.
NOTE 13. SUBSEQUENT EVENTS
|
|
a)
|
On October 11, 2011, the Company issued 15,000,000 common shares upon
the conversion of the remaining $15,000 of the convertible note payable, leaving a note balance of $0. Refer to Note
6(w).
|
|
|
b)
|
Effective October 14, 2021, the Company terminated a building lease with
an original expiry date of March 31, 2023. Refer to Note 5.
|
|
|
3)
|
On November 5, 2021, the Company repaid a $128,000 convertible note as well
as $61,952 of interest and prepayment penalties. Refer to Note 6(hh).
|
FORWARD-LOOKING STATEMENTS
This document contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of
historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited
to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management
for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions
or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may
include the words "may," "could," "estimate," "intend," "continue," "believe,"
"expect" or "anticipate" or other similar words. These forward-looking statements present our estimates and assumptions
only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which
speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances
or events that arise after the dates they are made. You should, however, consult further disclosures we make in this Quarterly Report
on Form 10-Q, future Quarterly Reports on Form 10-Q, our Annual Report on Form 10-K and Current Reports on Form 8-K.
Although we believe that the expectations
reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed
in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements,
are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited
to:
|
•
|
our ability to efficiently manage and repay our debt obligations;
|
|
•
|
our inability to raise additional financing for working capital;
|
|
•
|
our ability to generate sufficient revenue in our targeted markets to support operations;
|
|
•
|
significant dilution resulting from our financing activities;
|
|
•
|
actions and initiatives taken by both current and potential competitors;
|
|
•
|
supply chain disruptions for components used in our products;
|
|
•
|
manufacturers inability to deliver components or products on time;
|
|
•
|
our ability to diversify our operations;
|
|
•
|
the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain;
|
|
•
|
adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
|
|
•
|
changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;
|
|
•
|
deterioration in general or global economic, market and political conditions;
|
|
•
|
inability to efficiently manage our operations;
|
|
•
|
inability to achieve future operating results;
|
|
•
|
the unavailability of funds for capital expenditures;
|
|
•
|
our ability to recruit, hire and retain key employees;
|
|
•
|
the global impact of COVID-19 on the United States economy and out operations;
|
|
•
|
the inability of management to effectively implement our strategies and business plans; and
|
|
•
|
the other risks and uncertainties detailed in this report.
|
In this form 10-Q references
to "PCT LTD", "the Company", "we," "us," "our" and similar terms refer to
PCT LTD and its wholly owned operating subsidiary, Paradigm Convergence Technologies Corporation ("Paradigm").
COVID-19
The current and potential effects of coronavirus
may impact our business, results of operations and financial condition.
Actual or threatened epidemics,
pandemics, outbreaks, or other public health crises could materially and adversely impact or disrupt our operations, adversely affect
the local economies where we operate and negatively impact our customers' spending in the impacted regions or depending upon the
severity, globally, which could materially and adversely impact our business, results of operations and financial condition. For example,
since December 2019, a strain of novel coronavirus (causing "COVD-19") surfaced in China and has spread into the United States,
Europe and most other countries of the world, resulting in certain supply chain disruptions, volatilities in the stock market, lower oil
and other commodity prices due to diminished demand, massive unemployment, and lockdown on international travels, all of which has had
an adverse impact on the global economy. There is significant uncertainty around the breadth and duration of the business disruptions
related to COVID-19, as well as its impact on the U.S. economy. Moreover, an epidemic, pandemic, outbreak or other public health crisis,
such as COVID-19, could adversely affect our ability to adequately staff and manage our business. The extent to which COVID-19 impacts
our business, results of operations and financial condition will depend on future developments, which are highly uncertain, rapidly changing
and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions taken to contain
it or treat its impact.