NOTE
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
unaudited interim condensed consolidated financial statements of PCT LTD (“the Company”) have been prepared in accordance
with United States generally accepted accounting principles for interim financial information and with the instructions to Form
10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of our balance sheet,
statements of operations, 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 financial
statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31,
2017 audited financial statements as reported in its Form 10-K, filed April 17, 2018.
Nature
of Operations
PCT
LTD (formerly Bingham Canyon Corporation), (the “Company,” “PCT Ltd,” or “Bingham”), a Delaware
corporation, was formed on August 27, 1986. The Company changed its domicile to Nevada on August 26, 1999.
On
August 31, 2016, the Company entered into a Securities Exchange Agreement with Paradigm Convergence Technologies Corporation (“Paradigm,”
“PCT Corp,” or PCT Corp., the wholly-owned operating subsidiary”) to affect the acquisition of Paradigm as a
wholly-owned subsidiary. Under the terms of the agreement, the Company issued 16,790,625 restricted common shares of Company stock
to all of the shareholders of Paradigm in exchange for all 22,387,500 outstanding Paradigm common stock. In addition, the Company
issued options exercisable into 2,040,000 shares of the Company’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 reverse recapitalization, PCT Corp, the operating company, is considered the accounting acquirer.
PCT
Corp. 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 names to Paradigm Convergence Technologies
Corp. PCT Corp. is a technology licensing, OEM and sales/leasing company specializing in environmentally-responsible solutions
for global sustainability. PCT LTD, the public company and “parent” of PCT Corp. holds a United States Patent No.
9,679,170 B2 with a recently granted Canadian Allowance, as well as owning future and pending international patent(s) (response
to examiners comments in process), intellectual property and/or distribution rights to innovative products and technologies. PCT
Corp. provides innovative products and technologies for eliminating bacterial contamination in healthcare facilities, the agricultural
market and in the oil & gas industry. PCT Corp.’s overall strategy is to design, assemble, market, sell and/or lease
equipment, fluids and proprietary “certifications” of its products and technologies. PCT Corp., utilizes equipment
leasing program (“System Service Agreements”), joint ventures, licensing, distributor agreements and partnerships.
Effective
on March 23, 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, PCT Corp.
Principles
of Consolidations
The
accompanying consolidated financial statements include the accounts of PCT LTD (“Parent”) and PCT Corp. All intercompany
accounts have been eliminated upon consolidation.
Use
of Estimates
The
preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements as
well as the reported amounts of revenues and expenses during the reporting periods. Estimates are based on historical experience
and on various other market-specific and other relevant assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results could differ materially from those estimates.
Cash
and Cash Equivalents
Cash
and cash equivalents are considered to be cash and a highly liquid security with original maturities of three months or less.
There was cash of $53 and $7,838 as of June 30, 2018 and December 31, 2017, respectively. There were no cash equivalents as of
June 30, 2018 and December 31, 2017.
Accounts
Receivable
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 are periodically evaluated for collectability based on past credit history
with customers and their current financial condition. That 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 allowance for doubtful accounts was $12,000 at June 30, 2018 and December 31, 2017.
Inventory
Inventories
are stated at the lower of cost or market. Cost is determined by using the first in, first out (FIFO) method. We record the value
of our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand, future pricing and market conditions. As of June 30, 2018
and December 31, 2017, 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 at June 30, 2018 and December 31, 2017.
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. Accumulated depreciation for period
ending June 30, 2018 and December 31, 2017 were $59,671 and $46,725, respectively.
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.
We do not have other financial assets or liabilities that are measured at fair value on a recurring basis as of June 30, 2018
and December 31, 2017.
Valuation
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 projected undiscounted
cash flows. Under similar analysis no impairment was recorded as of June 30, 2018 and December 31, 2017. Impairment tests are
conducted on an annual basis and, should they indicate a carrying value in excess of fair value, additional impairment changes
may be required.
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 estimated useful lives. The Company currently has the right to a U.S. patent (with international patents in process) and
proprietary property technology. Patents and technology are amortized from the date the Company acquires or is awarded the patent
or technology right, over their estimated useful lives, which range from 1 to 15 years. An impairment charge is recognized if
the carrying amount is not recoverable and the carrying These assets are stated at cost, net of accumulated amortization. An impairment
charge is recognized and the carrying amount exceeds the fair value of the intangible assets as determined by the projected discounted
net future cash flows. The recorded impairment expense of nil for the periods ending June 30, 2018 and December 31, 2017. Accumulated
amortization was $534,294 and $380,382 as of June 30, 2018 and December 31, 2017, respectively.
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 the process is completed and the process has been determined to be commercially viable.
Revenue
Recognition
In
May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customer (Topic 606)
. The new revenue recognition
standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principal is
that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflect
the consideration to which the entity expects to be entitled in exchange for those goods or services.
The
Company has structured its revenue as: 1) product (sales or equipment and/or fluid solutions); 2) licensing (contract-based use
of the Company’s US EPA Product Registration, returning revenue in licensing fees and/or royalties from minimum or actual
fluid sales); and 3) equipment leases (under systems service agreements, usually 3-year contract for the provision of the Company’s
equipment and service of such, under contract to customers, with renewable terms). Revenue from contracts to license technology
to others is immediately recognized since it is a non-refundable deposit.
Reclassifications
Certain
prior period amounts have been reclassified to conform to current presentation.
Basic
and Diluted Loss per Share
Basic
loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period.
Diluted loss per share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential
common shares outstanding during the period. As of June 30, 2018 there were outstanding common share equivalents (options and
convertible notes payable) which amounted to 1,874,746 shares of common stock. These common share equivalents were not included
in the computation of diluted loss per share as their effect would have been anti-dilutive.
Recent
Accounting Pronouncements
The
Company has reviewed all other FASB and ASU accounting pronouncements and interpretation thereof that have effective dates during
the period reported and in future periods. The company has carefully considered the new pronouncement that alter the previous
GAAP and do not believe than any new or modified principles will have a material impact on the Company’s reported financial
position or operations in the near term.
NOTE
2. GOING CONCERN
The
accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue
as a going concern. The Company has limited assets, has incurred losses since inception of $7,943,881 and has negative cash flows
from operations. As of June 30, 2018, the Company had working capital of $114,172. The Company has relied on raising debt and
equity capital in order to fund its ongoing day-to-day operations and its corporate overhead. The Company will require additional
working capital from either cash flow from operations, from debt or equity financing, or from a combination of these sources.
These factors raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year
from the issuance of these financial statements. The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
NOTE
3. PROPERTY AND EQUIPMENT
Depreciation
is computed using the straight-line method and is recognized over the estimated useful lives of the property and equipment, which
ranges from 3 to 7 years once placed into service. Depreciation expense does not begin until documentation or equipment placed
in service is provided. Machinery and leased equipment is not intended to be sold to the customer at the end of the lease term.
Depreciation expense was $12,946 and $8,289 for the six months and $7,294 and $4,239 for the three months ended June 30, 2018
and 2017, respectively.
Property
and Equipment consisted of the following as of June 30, 2018 and December 31, 2017:
|
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
Machinery and leased equipment
|
|
$
|
129,076
|
|
|
$
|
129,076
|
|
Machinery and equipment not yet in service
|
|
|
281,979
|
|
|
|
278,079
|
|
Office equipment and furniture
|
|
|
20,064
|
|
|
|
20,064
|
|
Website
|
|
|
2,760
|
|
|
|
2,760
|
|
Total, property and equipment
|
|
|
433,879
|
|
|
|
429,979
|
|
Less: Accumulated Depreciation
|
|
|
(59,671
|
)
|
|
|
(46,725
|
)
|
Property and Equipment, Net
|
|
$
|
374,208
|
|
|
$
|
383,254
|
|
NOTE
4. INTANGIBLE ASSETS
Amortization
is computed using the straight-line method and is recognized over the estimated useful lives of the intangible assets, which ranges
from 1 to 15 years. Amortization expense was $153,912 and $111,230 for the six months ended June 30, 2018 and 2017, respectively.
The
components of intangible assets at June 30, 2018 and December 31, 2017 were as follows:
|
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
Patents
|
|
$
|
4,510,489
|
|
|
$
|
4,505,489
|
|
Technology rights
|
|
|
200,000
|
|
|
|
200,000
|
|
Intangibles, at Cost
|
|
|
4,710,489
|
|
|
|
4,705,489
|
|
Less Accumulated Amortization
|
|
|
(534,294
|
)
|
|
|
(380,382
|
)
|
Net Carrying Amount
|
|
$
|
4,176,195
|
|
|
$
|
4,325,107
|
|
NOTE
5. Debt
The
following table summarizes notes payable as of June 30, 2018 and December 31, 2017:
Type
|
|
Amount
|
|
Origination
Date
|
|
Maturity
Date
|
|
Annual
Interest
Rate
|
|
Balance at
30-Jun-18
|
|
Balance at
31-Dec-17
|
Note Payable (c)
|
|
$
|
150,000
|
|
|
5/18/2016
|
|
6/1/2019
|
|
|
13.00%
|
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Note Payable (f) *
|
|
$
|
50,000
|
|
|
10/18/2016
|
|
8/18/2017
|
|
|
5.00%
|
|
|
$
|
—
|
|
|
$
|
50,000
|
|
Note Payable (f) *
|
|
$
|
25,000
|
|
|
4/12/2017
|
|
10/12/2017
|
|
|
5.00%
|
|
|
$
|
—
|
|
|
$
|
25,000
|
|
Note Payable (b)
|
|
$
|
25,000
|
|
|
5/8/2017
|
|
6/30/2018
|
|
|
0.00%
|
|
|
$
|
27,500
|
|
|
$
|
25,000
|
|
Note Payable (f) *
|
|
$
|
25,000
|
|
|
7/25/2017
|
|
9/25/2017
|
|
|
5.00%
|
|
|
$
|
—
|
|
|
$
|
25,000
|
|
Note Payable (e)
|
|
$
|
50,000
|
|
|
9/1/2017
|
|
12/31/2017
|
|
|
8.00%
|
|
|
$
|
—
|
|
|
$
|
50,000
|
|
Note Payable (e)
|
|
$
|
25,000
|
|
|
9/27/2017
|
|
12/31/2017
|
|
|
8.00%
|
|
|
$
|
—
|
|
|
$
|
25,000
|
|
Note Payable (e)
|
|
$
|
37,500
|
|
|
10/11/2017
|
|
10/11/2018
|
|
|
8.00%
|
|
|
$
|
—
|
|
|
$
|
37,500
|
|
Note Payable (f) *
|
|
$
|
20,000
|
|
|
10/24/2017
|
|
4/24/2018
|
|
|
5.00%
|
|
|
$
|
—
|
|
|
$
|
20,000
|
|
Note Payable **
|
|
$
|
56,000
|
|
|
12/1/2017
|
|
1/10/2018
|
|
|
8.00%
|
|
|
$
|
—
|
|
|
$
|
20,000
|
|
Note Payable (a)
|
|
$
|
150,000
|
|
|
1/5/2018
|
|
4/3/2018
|
|
|
8.00%
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Note Payable (e)
|
|
$
|
12,500
|
|
|
2/16/2018
|
|
4/15/2018
|
|
|
8.00%
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Note Payable (a)
|
|
$
|
250,000
|
|
|
2/27/2018
|
|
4/30/2018
|
|
|
8.00%
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Note Payable (e)
|
|
$
|
130,000
|
|
|
6/20/2018
|
|
1/2/2020
|
|
|
8.00%
|
|
|
$
|
130,000
|
|
|
$
|
—
|
|
Note Payable (f) *
|
|
$
|
126,964
|
|
|
6/20/2018
|
|
1/2/2020
|
|
|
6.00%
|
|
|
$
|
126,964
|
|
|
$
|
—
|
|
Note Payable (d)
|
|
$
|
26,500
|
|
|
6/26/2018
|
|
7/31/2018
|
|
|
10.00%
|
|
|
$
|
26,500
|
|
|
$
|
—
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
460,964
|
|
|
|
|
|
Debt Discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(13,115
|
)
|
|
|
|
|
Balance, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
447,849
|
|
|
|
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(202,532
|
)
|
|
|
|
|
Total long-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
245,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Indicates a re-classification from a related party to a non-related party note, as of January 1, 2018
|
** Paid off during the period
|
|
(a)
|
On
January 5, 2018, the Company entered into a promissory note with an unrelated party for
$150,000. The note is due April 3, 2018, is unsecured and bears an interest rate of 8.0%
per annum. Effective February 27, 2018 the Company extinguished its January 5, 2018 promissory
note of $150,000 with an unrelated party and consolidated this amount into a new promissory
note for $250,000 (an additional $100,000 received). The note is due on April 30, 2018,
is unsecured and bears an interest rate of 8.0% per annum. On March 28, 2018 the Company
extinguished its February 27, 2018 promissory note of $250,000 with an unrelated party
and consolidated this amount into a convertible note for $450,000 (receiving $100,000
in the first quarter of 2018 and the remaining $100,000 in the second quarter of 2018).
See under convertible notes table below for additional details of the convertible note.
|
|
(b)
|
On
May 29, 2018, the Company entered into a Guarantee Agreement with a non-related party.
The Company owed an unrelated party $27,500 that was due on October 10, 2017. In consideration
for increasing the principal amount of the loan to $30,000 and a personal guarantee by
the Company’s CEO, the lender agreed to extend the maturity date of the loan to
June 30, 2018. The Company evaluated the modification pursuant to ASC 470-60 Troubled
Debt Restructuring by Debtors, and ASC 470-50 Modification and Extinguishment. The Company
concluded that the Company is experiencing financial difficulty and that a concession
was not granted. As the creditors have not granted a concession the guidance contained
in ASC 470-60 does not apply. As the original and new debt instruments are not considered
substantially different, extinguishment accounting does not apply, and the Company accounted
for the revised note as a debt modification. The carrying amount of the payable was not
adjusted and the effects of the changes are reflected in future periods by computing
the constant effective interest rate and applying it to the carrying amount of the payable
each period until maturity.
|
|
(c)
|
On
June 1, 2018, the Company signed an agreement to extend its $150,000 note dated May 18,
2016 for one year, for a total extension fee of $7,500 ($6,000 broker fee and $1,500
lender fee). The Company paid one-half of the total fee ($3,750), recorded as interest
expense. The remainder of the extension fee, ($3,750), is past due and upon payment to
the non-related note-holder, the loan shall be extended through June 1, 2019. The terms
of the note remain the same, with interest set at 13.0%.
|
|
(d)
|
On
June 26, 2018, the Company entered into a promissory note with an unrelated party for
$26,500. The note is due July 31, 2018, is unsecured and bears an interest rate of 10%
per annum.
|
|
(e)
|
On June 20, 2018, the Company had the following notes, to a non-related party, outstanding:
|
|
•
|
$50,000
issued September 1, 2017
|
|
•
|
$25,000
issued September 27, 2017
|
|
•
|
$37,500
issued October 11, 2017
|
|
•
|
$12,500
issued February 16, 2018
|
|
|
On
June 20, 2018, the Company issued a new note that consolidated into one the notes above as well as any outstanding interest owed.
The new note has a principal of $130,000, bears interest at 8% per annum and is due on January 2, 2020. As the debt is being exchanged
with the lender, the Company evaluated the modification pursuant to ASC 470-60
Troubled Debt Restructuring by Debtors
,
and ASC 470-50
Modification and Extinguishment
.
|
|
|
|
|
|
The
indicators of financial difficulty contained in ASC 470-60 were reviewed and it was concluded that the Company is experiencing
financial difficulty. The Company then determined that a concession was granted. As the creditors have granted a concession the
troubled debt restructuring model contained in ASC 470-60 was applied. The carrying amount of the payable was not adjusted and
the effects of the changes are reflected in future periods by computing the constant effective interest rate and applying it to
the carrying amount of the payable each period until maturity.
|
|
(f)
|
On June 20, 2018, the Company had the following notes, to a non-related party, outstanding:
|
|
•
|
$50,000
issued October 18, 2016
|
|
•
|
$25,000
issued April 12, 2017
|
|
•
|
$25,000
Issued July 25, 2017
|
|
•
|
$20,000
issued October 24, 2017
|
|
|
On
June 20, 2018, the Company issued a new note that consolidated into one note the notes above as well as any outstanding interest
owed. The new note has a principal of $126,964, bears interest at 6% per annum. The Company must repay $66,964 of the note on
August 31, 2018, and the remaining $60,000 on January 2, 2020. If the Company fails to make the $66,664 on August 31, 2018 the
entire amount owed under the original notes becomes due immediately. As the debt is being exchanged with the lender, the Company
evaluated the modification pursuant to ASC 470-60 Troubled Debt Restructuring by Debtors, and ASC 470-50 Modification and Extinguishment.
|
|
|
|
|
|
The
indicators of financial difficulty contained in ASC 470-60 were reviewed and it was concluded that the Company is experiencing
financial difficulty as there is significant doubt that the Company is a going concern and that there is no assurance that the
Company will have sufficient cash flows to service the debt through its maturity. The Company then proceeded to assess whether
the creditors granted a concession. The Company determined that a concession was granted as the effective borrowing rate on the
restructured debt is lower than the effective borrowing rate of the old debt. As the creditors have granted a concession the troubled
debt restructuring model contained in ASC 470-60 was applied. The carrying amount of the payable was not adjusted and the effects
of the changes are reflected in future periods by computing the constant effective interest rate and applying it to the carrying
amount of the payable each period until maturity.
|
The
following table summarizes notes payable, related parties as of June 30, 2018 and December 31, 2017:
Type
|
|
Amount
|
|
Origination
Date
|
|
Maturity
Date
|
|
Annual
Interest
Rate
|
|
Balance at
30-Jun-18
|
|
Balance at
31-Dec-17
|
Note Payable, RP (j)
|
|
$
|
25,000
|
|
|
4/27/2017
|
|
4/27/2018
|
|
|
3.00%
|
|
|
$
|
—
|
|
|
$
|
17,500
|
|
Note Payable, RP (k)
|
|
$
|
15,000
|
|
|
5/15/2017
|
|
5/15/2018
|
|
|
5.00%
|
|
|
$
|
—
|
|
|
$
|
15,000
|
|
Note Payable, RP (j)
|
|
$
|
10,000
|
|
|
6/12/2017
|
|
6/12/2018
|
|
|
3.00%
|
|
|
$
|
—
|
|
|
$
|
10,000
|
|
Note Payable, RP (j)
|
|
$
|
5,500
|
|
|
7/3/2017
|
|
6/30/2018
|
|
|
3.00%
|
|
|
$
|
—
|
|
|
$
|
5,500
|
|
Note Payable, RP **
|
|
$
|
2,000
|
|
|
7/5/2017
|
|
6/30/2018
|
|
|
3.00%
|
|
|
$
|
—
|
|
|
$
|
2,000
|
|
Note Payable, RP **
|
|
$
|
3,000
|
|
|
7/6/2017
|
|
6/30/2018
|
|
|
3.00%
|
|
|
$
|
—
|
|
|
$
|
3,000
|
|
Note Payable, RP **
|
|
$
|
2,500
|
|
|
7/10/2017
|
|
6/30/2018
|
|
|
3.00%
|
|
|
$
|
—
|
|
|
$
|
2,500
|
|
Note Payable, RP **
|
|
$
|
2,500
|
|
|
7/12/2017
|
|
6/30/2018
|
|
|
3.00%
|
|
|
$
|
—
|
|
|
$
|
2,500
|
|
Note Payable, RP (j)
|
|
$
|
25,000
|
|
|
7/13/2017
|
|
6/30/2018
|
|
|
3.00%
|
|
|
$
|
—
|
|
|
$
|
25,000
|
|
Note Payable, RP (j)
|
|
$
|
5,000
|
|
|
8/14/2017
|
|
6/30/2018
|
|
|
3.00%
|
|
|
$
|
—
|
|
|
$
|
5,000
|
|
Note Payable, RP (i) *
|
|
$
|
275,000
|
|
|
9/27/2017
|
|
10/1/2018
|
|
|
7.50%
|
|
|
$
|
—
|
|
|
$
|
275,000
|
|
Note Payable, RP (j)
|
|
$
|
250,000
|
|
|
11/15/2017
|
|
12/15/2018
|
|
|
1.00%
|
|
|
$
|
—
|
|
|
$
|
250,000
|
|
Note Payable, RP (i)
|
|
$
|
100,000
|
|
|
11/15/2017
|
|
10/1/2018
|
|
|
7.50%
|
|
|
$
|
—
|
|
|
$
|
100,000
|
|
Note Payable, RP (g)
|
|
$
|
30,000
|
|
|
4/10/2018
|
|
1/15/2019
|
|
|
3.00%
|
|
|
$
|
30,000
|
|
|
$
|
—
|
|
Note Payable, RP (h) (j)
|
|
$
|
24,000
|
|
|
5/31/2018
|
|
6/30/2019
|
|
|
3.00%
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Note Payable, RP (i) *
|
|
$
|
380,000
|
|
|
6/20/2018
|
|
1/2/2020
|
|
|
8.00%
|
|
|
$
|
380,000
|
|
|
$
|
—
|
|
Note Payable, RP (j)
|
|
$
|
350,000
|
|
|
6/20/2018
|
|
1/2/2020
|
|
|
5.00%
|
|
|
$
|
350,000
|
|
|
$
|
—
|
|
Note Payable, RP (k)
|
|
$
|
17,000
|
|
|
6/20/2018
|
|
1/2/2020
|
|
|
5.00%
|
|
|
$
|
17,000
|
|
|
$
|
—
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
777,000
|
|
|
|
|
|
Debt Discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(19,650
|
)
|
|
|
|
|
Balance, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
757,350
|
|
|
|
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(30,000
|
)
|
|
|
|
|
Total long-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
727,350
|
|
|
|
|
|
|
|
* Indicates a note that is collateralized by a patent (Note 4)
|
** Paid off during the period
|
|
(g)
|
On
April 10, 2018 the Company entered into a promissory note with an entity owned by the
CEO of the Company for $30,000. The note is due January 15, 2019, is unsecured and bears
an interest rate of 3.0% per annum.
|
|
(h)
|
On
May 31, 2018 the Company entered into a promissory note with the Chairman and CEO of
the Company for $24,000. The note is due June 30, 2019, is unsecured and bears an interest
rate of 3.0% per annum
|
|
(i)
|
On
June 20, 2018, the Company had the following notes to an employee and Director of the
Company outstanding:
|
|
•
|
$275,000
issued September 27, 2017
|
|
•
|
$100,000
issued November 15, 2017
|
|
|
On
June 20, 2018, the Company issued a new note that consolidated into one note the notes above as well as any outstanding interest
owed. The new note has a principal of $380,000, bears interest at 8% per annum and is due on January 2, 2020. As the debt is being
exchanged with the lender, the Company evaluated the modification pursuant to ASC 470-60 Troubled Debt Restructuring by Debtors,
and ASC 470-50 Modification and Extinguishment.
|
|
|
|
|
|
The
indicators of financial difficulty contained in ASC 470-60 were reviewed and it was concluded that the Company is experiencing
financial difficulty and that a concession was granted. As the creditor granted a concession the troubled debt restructuring model
contained in ASC 470-60 was applied. The carrying amount of the payable was not adjusted and the effects of the changes are reflected
in future periods by computing the constant effective interest rate and applying it to the carrying amount of the payable each
period until maturity.
|
|
(j)
|
On
June 20, 2018, the Company had the following notes to the Chairman and CEO of the Company
outstanding:
|
|
•
|
$17,500
issued April 27, 2017
|
|
•
|
$10,000
issued June 12, 2017
|
|
•
|
$5,500
Issued July 3, 2017
|
|
•
|
$25,000
issued July 13, 2017
|
|
•
|
$5,000
issued August 14, 2017
|
|
•
|
$250,000
issued November 15, 2017
|
|
•
|
$24,000
issued May 31, 2018
|
|
|
On
June 20, 2018, the Company issued a new note that consolidated into one note the notes above as well as any outstanding interest
owed. The new note has a principal of $350,000, bears interest at 5% per annum and is due on January 2, 2020. The Company evaluated
the transaction under the guidance found in ASC 470-50 Modification and Extinguishment.
|
|
|
|
|
|
The
Company concluded that the Company is experiencing financial difficulty and that a concession was not granted. As the creditor
has not granted a concession, the guidance contained in ASC 470-60 was applied. The Company accounted for the new note as a debt
modification. The carrying amount of the payable was not adjusted and a new effective interest rate was determined on the modification
date that equates the revised cash flows to the carrying amount of the original debt.
|
|
(k)
|
On
June 20, 2018, the Company had a $15,000 note to the CEO of the Company’s spouse
outstanding. On June 20, 2018, the Company issued a new note that consolidated the note
above as well as any outstanding interest owed. The new note has a principal of $17,000,
bears interest at 5% per annum and is due on January 2, 2020. The Company evaluated the
transaction under the guidance found in ASC 470-50 Modification and Extinguishment.
|
|
|
The
Company concluded that the Company is experiencing financial difficulty and that a concession was not granted. As the creditor
has not granted a concession, the guidance contained in ASC 470-60 was applied. The Company accounted for the new note as a debt
modification. The carrying amount of the payable was not adjusted and a new effective interest rate was determined on the modification
date that equates the revised cash flows to the carrying amount of the original debt.
|
The
following table summarizes convertible notes payable as of June 30, 2018 and December 31, 2017:
Type
|
|
Amount
|
|
Origination
Date
|
|
Maturity
Date
|
|
Annual
Interest
Rate
|
|
Balance at
30-Jun-18
|
|
Balance at
31-Dec-17
|
Convertible Note Payable (l)
|
|
$
|
450,000
|
|
|
3/28/2018
|
|
3/31/2021
|
|
|
8.00%
|
|
|
$
|
450,000
|
|
|
$
|
—
|
|
Convertible Note Payable (m)
|
|
$
|
68,000
|
|
|
6/5/2018
|
|
6/5/2019
|
|
|
12.00%
|
|
|
$
|
68,000
|
|
|
$
|
—
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
518,000
|
|
|
|
|
|
Debt Discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(72,100
|
)
|
|
|
|
|
Balance, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
445,900
|
|
|
|
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(65,202
|
)
|
|
|
|
|
Total long-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
380,698
|
|
|
|
|
|
|
(l)
|
On
March 28, 2018 the Company extinguished its February 27, 2018 promissory note of $250,000
with an unrelated party and consolidated this amount into a convertible note for $450,000
(receiving $100,000 in the first quarter of 2018 and the remaining $100,000 in the second
quarter of 2018). The note is due on March 31, 2021 and is convertible into common stock
at a conversion price of $0.4285 and bears interest of 8.0% per annum. This note also
contains an anti-dilution clause, which becomes effective in the event the Company 60,000,000
issued shares of its stock. Due to the fact that the trading price of the Company’s
common stock was greater than the stated conversion rate of this note on the date of
issuance, a total discount of $78,087 for the beneficial conversion was recorded against
the note and will be amortized against interest expense through the life of the note.
As of June 30, 2018, interest expense of $5,785 was recorded as part of the amortization
of the beneficial conversion feature of this note. As of June 30, 2018, the note had
a principal balance of $450,000.
|
|
(m)
|
On
June 5, 2018, the Company entered into a convertible promissory with an unrelated party
for $68,000. The note is due on June 5, 2019 and bears interest on the unpaid principal
balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 12% to 17%
to 22% to 27% to 32% to 37%, dependent upon the timeframe of repayment during the note’s
term) and any part of the notice which is not paid when due shall bear interest at the
rate of 22.0% per annum from the due date until paid. The Company must, at all times,
reserve six times that number of shares that would be issuable upon full conversion of
the note, with an initial reserved share amount of 1,592,506 shares. 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 average 3 lowest
trading prices during the 15 trading day period prior to the conversion date. Due to
this provision, the Company considered whether the embedded conversion option qualifies
for derivative accounting under ASC 815-15 Derivatives and Hedging. As the note isn’t
convertible until 180 days following issuance, no derivative liability was recognized
as of June 30, 2018
|
NOTE
6. RELATED PARTY TRANSACTIONS
The
Company has agreements with related parties for consulting services, notes payable and stock options. See Notes to Financial Statements
numbers 5 and 7.
NOTE
7. 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. As of June 30, 2018 there were -0- shares of preferred stock issued.
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. As of June 30, 2018 and December 31, 2017 there were 43,459,238 and
41,179,238 shares of common stock issued respectively.
On
January 2, 2018, the Company sold 110,000 shares of common stock 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 June 30, 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 $293,151 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 June 30, 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 $2,754 for the consulting expense related to the portion of the 12-month service
agreement that has been completed.
Stock
Options
Below
is a table summarizing the options issued and outstanding as of June 30, 2018:
Date
|
|
Number
|
|
Number
|
|
Exercise
|
|
Weighted
Average Remaining Contractual
|
|
Expiration
|
|
Proceeds
to Company if
|
Issued
|
|
Outstanding
|
|
Exercisable
|
|
Price
$
|
|
Life
(Years)
|
|
Date
|
|
Exercised
|
|
05/21/2014
|
|
|
|
1,875,000
|
|
|
|
1,875,000
|
|
|
|
0.13
|
|
|
|
0.89
|
|
|
|
05/20/2019
|
|
|
$
|
250,000
|
|
|
01/01/2016
|
|
|
|
90,000
|
|
|
|
90,000
|
|
|
|
0.33
|
|
|
|
1.50
|
|
|
|
12/31/2019
|
|
|
|
30,000
|
|
|
01/01/2016
|
|
|
|
75,000
|
|
|
|
75,000
|
|
|
|
0.33
|
|
|
|
1.50
|
|
|
|
12/31/2019
|
|
|
|
25,000
|
|
|
09/15/2016
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
1.00
|
|
|
|
1.50
|
|
|
|
12/31/2019
|
|
|
|
10,000
|
|
|
10/01/2016
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
1.00
|
|
|
|
1.50
|
|
|
|
12/31/2019
|
|
|
|
7,500
|
|
|
01/01/2017
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
2.00
|
|
|
|
0.51
|
|
|
|
01/01/2019
|
|
|
|
60,000
|
|
|
01/26/2017
|
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
2.00
|
|
|
|
3.58
|
|
|
|
01/26/2022
|
|
|
|
400,000
|
|
|
|
|
|
|
2,287,500
|
|
|
|
2,287,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
782,500
|
|
The
weighted average exercise prices is $0.34 for the options outstanding and exercisable.
NOTE
8. COMMITMENTS AND CONTINGENCIES
On
November 21, 2016, the Company signed a lease for approximately 12,000 square feet of office, research & development, warehouse,
and production space in Little River, South Carolina. The lease was effective December 1, 2016 at a rate of $4,800 per month for
a period of three years. The Company has an option to extend the lease for two periods of three years each. The option to extend
the first three-year period is at a rate of $5,100 per month. The option to extend the second three-year period is at a rate of
$5,400 per month.
NOTE
9. SUBSEQUENT EVENTS
On
July 13, 2018, the Company entered into a short-term promissory note with the Chairman and CEO of the Company, for $5,000 to be
used in operations. The note is unsecured, is due on June 30, 2019, and bears an interest rate of 3% per annum.
On
July 25, 2018, the Company entered into a convertible promissory with an unrelated party for $38,000. The note is due on July
25, 2019 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from
12% to 17% to 22% to 27% to 32% to 37%, dependent upon the timeframe of repayment during the note’s term) and any part of
the notice which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The conversion
rights of the note do not apply until 180 days for the note’s inception and a notice of conversion must occur. The Company
must, at all times, reserve six times that number of shares that would be issuable upon full conversion of the note, with an initial
reserved share amount of 1,038,251 shares.
On
July 27, 2018, the Company entered into a short-term promissory note with an employee and Director of the Company, for $50,000
to be used in operations. The note is unsecured, incorporates the purchase of a piece of SurvivaLyte® equipment at cost and
grants a three-year (from installation of equipment), non-exclusive US EPA sub-registration for markets (with specific exceptions)
in a specific geographical location with a per gallon royalty feature as added benefits, is due on November 15, 2018, and bears
an interest rate of 8% per annum.
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, our Annual Report on Form 10-K, Current Reports
on Form 8-K and other reports we file under the Exchange Act.
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;
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•
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manufacturers inability
to deliver components or products on time;
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•
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our ability to diversify
our operations;
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•
|
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;
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•
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adverse state or
federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect
to existing operations;
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•
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changes in U.S.
GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;
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•
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deterioration in
general or global economic, market and political conditions;
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•
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inability to efficiently
manage our operations;
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•
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inability to achieve
future operating results;
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•
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the unavailability
of funds for capital expenditures;
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•
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our ability to recruit,
hire and retain key employees;
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•
|
the inability of
management to effectively implement our strategies and business plans; and
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•
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the
other risks and uncertainties detailed in this report.
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In
this Form 10-Q references to “PCT LTD, “Bingham Canyon,” “Bingham,” “the Company,” “we,”
“us,” “our” and similar terms refer to PCT LTD (formerly Bingham Canyon Corporation) and its wholly owned
operating subsidiary, Paradigm Convergence Technologies Corporation (“Paradigm,” “PCT Corp.”).