UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 

FORM 10-Q/A

(Amendment No. 1)

 

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

 

For the quarterly period ended March 31, 2021

or 

 

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

 

Commission file number: 000-31549

 

PCT LTD

(Exact name of registrant as specified in its charter)

 

Nevada 90-0578516
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   

4235 Commerce Street

Little River, South Carolina

 

29566

(Address of principal executive offices) (Zip Code)

 

(843) 390-7900

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
None N/A N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

 

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

 

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

Large accelerated filer ☐

Non-accelerated filer ☑

Accelerated filer ☐

Smaller reporting company ☑

Emerging growth company ☐

 

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

 

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

 

The number of shares outstanding of the registrant’s common stock as of June 21, 2021 was 765,501,229 which does not include common stock reserved against default on convertible debt.

     

 

 

EXPLANATORY NOTE

 

Overview

Amendment No. 1 to Form 10-Q/A (this “Form 10-Q/A") amends and restates certain items noted below in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as originally filed with the Securities and Exchange Commission on June 25, 2021 (the “Original Filing”). This Form 10-Q/A amends the Original Filing to reflect the correction of an error in the previously reported financial statements related to the accounting for the settlement of certain derivative warrants. See Note 14 to the Condensed Consolidated Financial Statements included in Item 1 for additional information and a reconciliation of the previously reported amounts to the restated amounts.

 

For the convenience of the reader, this Form 10-Q/A sets forth the Original Filing, as amended, in its entirety; however, this Form 10-Q/A amends and restates only the following financial statements and disclosures that were impacted from the correction of the error:

• Part I, Item 1 – Financial Statements

• Part I, Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

• Part I, Item 4 – Controls and Procedures

 

Except as described above, no other changes have been made to the Original Filing. This Form 10-Q/A speaks as of the date of the Original Filing and does not reflect events that may have occurred after the date of the Original Filing, or modify or update any disclosures that may have been affected by subsequent events.

 

The Company has also filed an amended Annual Report for the fiscal year ended December 31, 2020 and an amended Quarterly Report for each of the quarterly periods ended June 30, 2020 and September 30, 2020 to restate the previously issued annual and interim financial statements due to the accounting error described above.

 

 

     

 

TABLE OF CONTENTS

 

Page
Explanatory Note  
   
Part I – Financial Information  
     
Item 1. Condensed Consolidated Financial Statements (Unaudited, Restated) 4
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29
     
Item 3.  Quantitative and Qualitative Disclosures About Market Risk  32
     
Item 4. Controls and Procedures 32
     
Part II – Other Information  
     
Item 1.  Legal Proceedings  33
     
Item 1A.  Risk Factors  33
     
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds  33
     
Item 3.   Defaults Upon Senior Securities  34
   
Item 4.  Mine Safety Disclosures  34
     
Item 5. Other Information 34
     
Item 6. Exhibits 35
     
  Signatures 36

  

     

 

 

PART I – FINANCIAL INFORMATION

 

 

 

ITEM 1. FINANCIAL STATEMENTS

 

The financial information set forth below with respect to our statements of operations, stockholders’ equity (deficit), and cash flows for the three-month periods ended March 31, 2021, and 2020 is unaudited. This financial information, in the opinion of management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the three-month periods ended March 31, 2021 and 2020 are not necessarily indicative of results to be expected for any subsequent period.

 

  4  

 

PCT LTD

Condensed Consolidated Balance Sheets

(Unaudited)

 

   

March 31,

2021

  December 31,
2020
      (Unaudited)       (Restated - see  
      (Restated - see note 14)       note 14)  
ASSETS                
CURRENT ASSETS                
Cash and cash equivalents   $ 53,853     $ 115,196  
Accounts receivable, net     198,443       349,526  
Inventory     7,029       6,188  
Prepaid expenses     192,333       274,736  
Other current assets     —         2,110  
Total current assets     451,658       747,756  
                 
PROPERTY AND EQUIPMENT                
Property and equipment, net     346,716       358,719  
                 
OTHER ASSETS                
Intangible assets, net     3,323,902       3,400,024  
Operating lease, right of use asset     110,236       118,385  
Deposits     15,226       9,726  
Total other assets     3,449,364       3,528,135  
                 
TOTAL ASSETS   $ 4,247,738     $ 4,634,610  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
CURRENT LIABILITIES                
Accounts payable   $ 231,439     $ 272,978  
Accrued expenses – related parties     80,951       139,280  
Accrued expenses     611,155       622,040  
Deferred revenue     1,075       1,075  
Operating lease liability     36,607       34,965  
Notes payable – related parties, net     183,034       789,214  
Notes payable, net     413,130       384,380  
Convertible notes payable, net     1,935,017       1,554,503  
Derivative liability     7,044,319       7,102,801  
Total current liabilities     10,536,727       10,901,236  
                 
     Convertible notes payable, net of current portion and discount     —         53,500  
     Operating lease liability, net of current portion     77,499       83,420  
TOTAL LIABILITIES     10,614,226       11,038,156  
                 
MEZZANINE EQUITY                
Preferred series A stock, $0.001 par value; 1,000,000 authorized; 500,000 and 500,000 issued and outstanding at March 31, 2021 and December 31, 2020, respectively     60,398       60,398  
Preferred series B stock, $0.001 par value; 1,000,000 authorized; 1,000,000 and 1,000,000 issued and outstanding at March 31, 2021 and December 31, 2020, respectively     158,247       158,247  
Preferred series C stock, $0.001 par value; 5,500,000 authorized; nil and 490,000 issued and outstanding at March 31, 2021 and December 31, 2020, respectively     —         40,000  
TOTAL MEZZANINE EQUITY     218,645       258,645  
                 
STOCKHOLDERS’ DEFICIT                
Common stock, $0.001 par value; 1,000,000,000 authorized; 758,454,354 and 722,487,846 issued and outstanding at March 31, 2021 and December 31, 2020, respectively     758,454       722,488  
Additional paid-in-capital     23,962,053       23,202,933  
Accumulated deficit     (31,305,640 )     (30,587,612 )
TOTAL STOCKHOLDERS’ DEFICIT     (6,585,133 )     (6,662,191 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT   $ 4,247,738     $ 4,634,610  

 

 

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

 

  5  

 

PCT LTD

Condensed Consolidated Statements of Operations

(Unaudited)

 

   

For the Three Months Ended

March 31,

    2021   2020
    (Restated - see note 14)    
REVENUES        
Product   $ 89,263     $ 162,648  
Licensing     31,750       7,000  
    Equipment leases     274,506       102,534  
Total Revenues     395,519       272,182  
                 
OPERATING EXPENSES                
General and administrative     893,451       548,786  
Research and development     9,199       —    
Costs of product, licensing and equipment leases     52,901       148,850  
Depreciation and amortization     88,122       83,021  
Total operating expenses     1,043,673       780,657  
                 
Loss from operations     (648,154 )     (508,475 )
                 
OTHER INCOME (EXPENSE)                
Gain/(Loss) on change in fair value of derivative liability     (257,919 )     (9,294,762 )
Gain/(Loss) on settlement of debt     316,401       (44,000 )
Interest expense     (178,356 )     (434,411 )
Misc. income     50,000          
Total other income (expense)     (69,874 )     (9,773,173 )
                 
Loss before income taxes     (718,028 )     (10,281,648 )
                 
Income taxes     —         —    
                 
NET LOSS   $ (718,028 )   $ (10,281,648 )
Preferred series C stock deemed dividends     —       (270,000 )
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS’   $ (718,028 )   $ (10,551,648 )
                 
Basic and diluted net loss per share   $ (0.00 )   $ (0.02 )
                 
Basic and diluted weighted average shares outstanding     751,832,583       545,843,212  

 

 

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

  

  6  

 

 PCT LTD

Consolidated Statements of Stockholders’ Equity (Deficit)
For the Three-Months Ended March 31, 2021 and 2020
(Unaudited)
     
                  Total
    Common Stock   Additional Paid-in   Accumulated   Stockholders’ Equity
    Shares   Amount   Capital   Deficit   (Deficit)
Balance – December 31, 2019     498,880,300     $ 498,881     $ 15,872,330     $ (26,505,567 )   $ (10,134,356 )
Common stock issued for services     15,525,000       15,525       103,538       —         119,063  
Common stock issued in settlement of debt     250,000       250       7,975       —         8,225  
Common stock issued in conversion of convertible notes payable     36,050,000       36,050       360,660       —         396,710  
Beneficial conversion feature on preferred series C stock     —         —         270,000       (270,000 )     —    
Net loss for the three-months ended March 31, 2020     —         —         —         (10,281,648 )     (10,281,648 )
Balance – March 31, 2020     550,705,300     $ 550,706     $ 16,614,503     $ (37,057,215 )   $ (19,892,006 )
                                         
Balance – December 31, 2020 (restated - see note 14)     722,487,846     $ 722,488     $ 23,202,933     $ (30,587,612 )   $ (6,662,191 )
Common stock issued for services     2,500,000       2,500       74,276       —         76,776  
Common stock issued in settlement of debt, related parties     4,466,508       4,466       648,844       —         653,310  
Common stock issued in conversion of convertible notes payable     25,000,000       25,000       —         —         25,000  
Conversion of preferred series C stock     4,000,000       4,000       36,000       —         40,000  
Net loss for the three-months ended March 31, 2021     —         —         —         (718,028 )     (718,028 )
Balance – March 31, 2021 (restated - see note 14)     758,454,354     $ 758,454     $ 23,962,053     $ (31,305,640 )   $ (6,585,133 )

 

  

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

 

  7  

 

PCT LTD

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   

For the Three-Months Ended

March 31,

    2021   2020
    (Restated - see note 14)    
Cash Flows from Operating Activities                
Net loss   $ (718,028 )   $ (10,281,648 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     88,122       83,021  
Amortization of debt discount     78,804       73,588  
Common stock issued for services     14,027       119,063  
Loss on change in fair value of derivative liability     257,919       9,294,762  
Amortization of right of use asset     8,149       —    
Amortization of prepaid expense     146,465       —    
Loss on settlement of debt     (316,401 )     44,000  
Default penalties on convertible notes     15,172       13,762  
Changes in operating assets and liabilities:                
Accounts receivable     151,083       (15,745 )
Inventory     (841 )     26,669  
Prepaid expenses     —         33,024  
Deposits     (5,500 )     (12,027 )
Operating lease liability     (4,279 )     —    
Accrued expenses     (10,885 )     377,306  
Accrued expenses – related party     13,900       5,430  
Accounts payable     (41,639 )     44,573  
Net cash used in operating activities     (323,932 )     (194,222 )
                 
Cash Flows from Financing Activities                
Proceeds from notes payable     207,575       155,525  
Proceeds from notes payable – related parties             3,500  
Proceeds from convertible notes payable     555,000       76,000  
Proceeds from preferred series C stock subscriptions             270,000  
Repayment of convertible notes payable     (218,500 )     (8,888 )
Repayment of notes payable     (256,486 )     (102,414 )
Repayment of notes payable – related parties     (25,000 )     (12,286 )
Net cash provided by financing activities     262,589       381,437  
                 
Net change in cash     (61,343 )     187,215  
Cash and cash equivalents at beginning of period     115,196       67,613  
Cash and cash equivalents at end of period   $ 53,853     $ 254,828  
                 
Supplemental Cash Flow Information                
Cash paid for interest   $ 43,339     $ 147  
Cash paid for income taxes   $ —       $ —    
                 
Non-cash investing and financing activities:                
Preferred series C stock deemed dividend   $ —       $ 270,000  
Original debt discount against convertible notes   $ —       $ 41,888  
Original debt discount against notes payable   $ —       $ 25,068  
Common stock issued in conversion of convertible notes payable   $ 25,000     $ 396,710  
                 
Common stock issued in settlement of debt   $ —       $ 8,225  
Property and equipment transferred to inventory   $ —       $ 26,669  
Common stock issued for prepaid expenses   $ 62,750     $ —    
Preferred series C converted to common stock   $ 40,000     $ —    
Common stock issued in settlement of notes payable to related parties   $ 653,309     $ —    
Common stock issued in conversion of preferred series C stock   $ 77,998     $ —    

 

 

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

 

  8  

 

PCT LTD

Notes to the Unaudited

Condensed Consolidated Financial Statements

March 31, 2021

 

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

 

The unaudited interim condensed consolidated financial statements of PCT LTD (the “Company”) have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of our balance sheet, statements of operations, stockholders’ equity (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, filed on April 13, 2021.

 

COVID-19

 

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, but 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 associates 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®.

 

Nature of Operations

 

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

 

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.”).

 

Significant Accounting Policies

 

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.

 

  9  

 

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 March 31, 2021, there were outstanding common share equivalents (options, warrants, convertible debt, and preferred series A stock which amounted to 359,763,629 (restated) 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 

 

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.

 

 

NOTE 2. GOING CONCERN

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has limited assets, has an accumulated deficit of $31,305,640 (restated) and has negative cash flows from operations. As of March 31, 2021, the Company had a working capital deficit of $10,085,069 (restated). 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.

 

  10  

 

NOTE 3. PROPERTY AND EQUIPMENT

 

Property and equipment at March 31, 2021 and December 31, 2020 consisted of the following: 

 

    March 31, 2021   December 31, 2020
Leasehold improvements     18,840       18,840  
Machinery and leased equipment   $ 365,483     $ 365,483  
Machinery and equipment not yet in service     32,580       32,580  
Office equipment and furniture     39,356       39,357  
Website     2,760       2,760  
                 
Total property and equipment   $ 459,020     $ 459,020  
Less: Accumulated Depreciation     (112,304 )     (100,301 )
                 
Property and equipment, net     346,716       358,719  

 

Depreciation expense was $12,000 and $6,153 for the three-months ended March 31, 2021 and 2020, respectively.

 

 

NOTE 4. INTANGIBLE ASSETS

 

Intangible assets at March 31, 2021 and December 31, 2020 consisted of the following:

 

    March 31, 2021   December 31, 2020
Patents   $ 4,505,489     $ 4,505,489  
Technology rights     200,000       200,000  
Intangible, at cost     4,705,489       4,705,489  
Less: Accumulated amortization     (1,381,587 )     (1,305,465 )
Net Carrying Amount   $ 3,323,902     $ 3,400,024  

 

Amortization expense was $76,122 and $76,868 for the three-months ended March 31, 2021 and 2020, respectively.

 

Estimated Future Amortization Expense:

 

    $
  For year ending December 31, 2021       228,366  
  For year ending December 31, 2022       304,488  
  For year ending December 31, 2023       304,488  
  For year ending December 31, 2024       304,488  
  For year ending December 31, 2025       304,488  
  Thereafter       1,877,584  
  Total       3,323,902  

 

  11  

 

NOTE 5. LEASES

 

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/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 $13,500 during the period ended March 31, 2021.

 

At March 31, 2021, the weighted average remaining operating lease term was 2.58 years and the weighted average discount rate associated with operating leases was 18.5%.

 

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 Components of lease expenses were as follows:

 

    2021
$
 

2020

$

         
Total operating lease cost     13,500       —    

  

The following table provides supplemental cashflow and other information related to leases for the period ended March 31, 2021 and 2020:

 

    2021
$
 

2020

$

         
Lease payments     38,750       17,940    

Supplemental balance sheet information related to leases as of March 31, 2021 and 2020 are as below:

 

    2021
$
 

2020

$

         
Cost     123,614       —    
Accumulated amortization     (13,378 )     —    
Net carrying value     110,236       —    

 

Future minimum lease payments related to lease obligations are as follows as of March 31, 2021:

 

    $
2021     40,500  
2022     54,000  
2023     45,000  
         
Total minimum lease payments     139,500  
         
Less: amount of lease payments representing effects of discounting     (25,394 )
         
Present value of future minimum lease payments     114,106  
         
Less: current obligations under leases     (36,607 )
         
Lease liabilities, net of current portion     77,499  

  12  

 

 

NOTE 6. Notes Payable

 

The following table summarizes notes payable as of March 31, 2021 and December 31, 2020:

  

Type   Original Amount  

Origination

Date

 

Maturity

Date

 

Effective Annual

Interest

Rate

 

Balance at

March 31,

2021

 

Balance at

December 31, 2020

Note Payable **   $ 25,000     05/08/2017   06/30/2018     0 %   $ 27,500     $ 27,500  
Note Payable **   $ 8,700     11/15/2018   06/30/2019     10 %   $ 8,700     $ 8,700  
Note Payable   $ 118,644     05/05/2020   05/05/2021     8 %   $ 110,644     $ 110,644  
Note Payable (a)   $ 199,500     10/01/2020   09/28/2021     66 %   $ 95,805     $ 149,573  
Note Payable (b)   $ 126,000     11/03/2020   04/23/2021     168 %   $ 21,000     $ 85,050  
Note Payable (c)   $ 113,980     11/04/2020   03/15/2021     210 %   $ —       $ 65,988  
Note Payable (d)   $ 177,800     01/02/2021   07/12/2021     116 %   $ 115,957     $ —    
Note Payable (e)   $ 111,920     03/03/2021   05/21/2021     220 %   $ 90,935     $ —    
Subtotal                           $ 470,542     $ 447,455  
Debt discount                           $ (57,412 )   $ (63,075 )
Balance, net                           $ 413,130     $ 384,380  
Less current portion                           $ (413,130 )   $ (384,380 )
Total long-term                           $ —       $ —    
                                         
** Currently in default                                        

 

a) 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 three months ended March 31, 2021, $14,625 of the discount was amortized to expense, leaving a net note balance of $79,789 (discount balance of $16,017).

 

b) 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 three months ended March 31, 2021, $17,969 of the discount was amortized to expense, leaving a net note balance of $20,025 (discount balance of $975).

 

c) 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 three months ended March 31, 2021, $13,489 of the discount was amortized to expense, and the remaining $65,988 was repaid leaving a note balance of $0.

 

d) On February 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 three months ended March 31, 2021, $21,522 of the discount was amortized to expense, leaving a net note balance of $97,684 (discount balance of $18,273).

 

e) 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 three months ended March 31, 2021, $12,975 of the discount was amortized to expense, leaving a net note balance of $68,790 (discount balance of $22,145).

 

f) 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 three months ended March 31, 2021, $10,120 of the discount was amortized to expense and $29,686 was repaid, leaving a net note balance of $0.

 

  13  

 

The following table summarizes notes payable as of March 31, 2021 and December 31, 2020:

 

Type   Original Amount  

Origination

Date

 

Maturity

Date

 

Annual

Interest

Rate

 

Balance at

March 31,

2021

 

Balance at

December 31, 2020

Note Payable, RP **   $ 30,000     04/10/2018   01/15/2019     3 %   $ 5,000     $ 30,000  
Note Payable, RP **(g)   $ 380,000     06/20/2018   01/02/2020     8 %   $ —       $ 380,000  
Note Payable, RP **(h)   $ 350,000     06/20/2018   01/02/2020     5 %   $ —       $ 285,214  
Note Payable, RP **   $ 17,000     06/20/2018   01/02/2020     5 %   $ 17,000     $ 17,000  
Note Payable, RP **   $ 50,000     07/27/2018   11/30/2018     8 %   $ 50,000     $ 50,000  
Note Payable, RP   $ 5,000     10/09/2018   Demand     0 %   $ 5,000     $ 5,000  
Note Payable, RP   $ 5,000     10/19/2018   Demand     0 %   $ 5,000     $ 5,000  
Note Payable, RP **   $ 15,000     08/16/2019   02/16/2020     8 %   $ 15,000     $ 15,000  
Note Payable, RP   $ 2,000     02/11/2020   Demand     0 %   $ 2,000     $ 2,000  
Note Payable, RP (h)   $ 84,034     02/16/2021   Demand     5 %   $ 84,034     $ —    
Subtotal                           $ 183,034     $ 789,214  
Debt discount                           $ —       $ —    
Balance, net                           $ 183,034     $ 789,214  
Less current portion                           $ (183,034 )   $ (789,214 )
Total long-term                           $ —       $ —    
                                         
** Currently in default                                        

 

g) 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.

 

h) On February 16, 2021, the Company issued 1,803,279 shares of common stock to settle $247,156 from a $275,000 note payable dated June 20, 2018, which has a balance of $331,190, 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.

 

  14  

 

The following table summarizes convertible notes payable as of March 31, 2021 and December 31, 2020:

 

Type   Original Amount  

Origination

Date

 

Maturity

Date

 

Annual

Interest

Rate

 

Balance at

March 31,

2021

 

Balance at

December 31,

2020

Convertible Note Payable * **   $ 65,000     12/06/2018   12/06/2019     12 %   $ 46     $ 46  
Convertible Note Payable * **(i)   $ 75,000     03/18/2019   12/13/2019     24 %   $ 107,795     $ 177,795  
Convertible Note Payable * ** (j)   $ 30,000     03/06/2020   03/05/2021     12 %   $ 36,834     $ 21,662  
Convertible Note Payable (k) * **   $ 150,000     04/10/2020   04/09/2021     12 %   $ 90,000     $ 165,000  
Convertible Note Payable ** (l)   $ 300,000     08/27/2020   07/31/2021     12 %   $ 280,000     $ 300,000  
Convertible Note Payable (m)   $ 53,500     09/22/2020   03/21/2022     12 %   $ —       $ 53,500  
Convertible Note Payable (n)   $ 87,500     09/24/2020   Demand     8 %   $ 15,000     $ 40,000  
Convertible Note Payable  (o)   $ 200,000     10/07/2020   10/06/2021     5 %   $ 200,000     $ 200,000  
Convertible Note Payable (p)   $ 200,000     10/16/2020   10/15/2021     5 %   $ 200,000     $ 200,000  
Convertible Note Payable  (q)   $ 300,000     11/11/2020   11/10/2021     5 %   $ 300,000     $ 300,000  
Convertible Note Payable (r)   $ 150,000     12/29/2020   12/28/2021     5 %   $ 150,000     $ 150,000  
Convertible Note Payable (s)   $ 150,000     01/27/2021   01/27/2022     5 %   $ 150,000     $ —    
Convertible Note Payable (t)   $ 128,000     02/22/2021   02/22/2022     12 %   $ 128,000     $ —    
Convertible Note Payable (u)   $ 200,000     03/18/2021   03/18/2022     5 %   $ 200,000     $ —    
Convertible Note Payable (v)   $ 83,000     03/26/2021   03/26/2022     12 %   $ 83,000     $ —    
Subtotal                           $ 1,940,675     $ 1,608,003  
Debt discount                           $ (5,658 )   $ —    
Balance, net                           $ 1,935,017     $ 1,608,003  
 Less current portion                           $ (1,935,017 )   $ (1,554,503 )
Total long-term                           $ —       $ 53,500  

 

i) During the three months ended March 31, 2021 the Company repaid $70,000 of the convertible note payable.

 

j) During the three months ended March 31, 2021 the Company incurred additional default penalties of $15,174 on the convertible note.

 

k)

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 three months ended March 31, 2021, the Company repaid $75,000 of the note.

 

l) During the three months ended March 31, 2021, the Company repaid $20,000 of the note.

 

m) 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 three months ended March 31, 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.

 

n) During the three months ended March 31, 2021 the Company issued 25,000,000 common shares upon the conversion of $25,000 of the convertible note payable.

 

o) 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 6-months of the date of issuance into shares of Company’s common stock at a conversion price of $0.20.

 

p) 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 6-months of the date of issuance into shares of Company’s common stock at a conversion price of $0.20.

 

q) 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 6-months of the date of issuance into shares of Company’s common stock at a conversion price of $0.15.

 

r) 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 6-months of the date of issuance into shares of Company’s common stock at a conversion price of $0.10.

 

s) 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 within 6-months of the date of issuance into shares of Company’s common stock at a conversion price equal to $0.10.

 

t) On February 23, 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 note is not convertible until 180 days following issuance, no derivative liability was recognized as of March 31, 2021.

 

u) 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 within 6-months of the date of issuance into shares of Company’s common stock at a conversion price equal to $0.10.

 

v) 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 note is not convertible until 180 days following issuance, no derivative liability was recognized as of March 31, 2021.

 

  15  

 

NOTE 7 – DERIVATIVE LIABILITIES

 

The embedded conversion option of (1) the convertible debentures described in Note 6 and (2) warrants, containing 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.

 

   

March 31,

2021

  December 31,
2020
    (restated)   (restated)
Balance at the beginning of period   $ 7,102,801     $ 10,517,873  
Original discount limited to proceeds of convertible notes     —         166,000  
Fair value of derivative liabilities in excess of notes proceeds received     —         1,128,966  
Settlement of derivative instruments     (316,401 )     (16,824,669 )
Change in fair value of embedded conversion option     257,919       12,114,631  
Balance at the end of the period   $ 7,044,319     $ 7,102,801  

 

The Company uses Level 3 inputs for its valuation methodology for the embedded conversion features 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 March 31, 2021     116 - 262 %     0.07-0.92 %     0 %     0.66-4.41  

 

  16  

 

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:

  1. 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.
  1. 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 March 31, 2021, and December 31, 2020, there were 500,000 shares of Series A Convertible Preferred Stock issued and outstanding, respectively.

  17  

 

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

 

As of March 31, 2021, and December 31, 2020, there were 1,000,000 shares of Series B Preferred Stock issued and outstanding, respectively.

  18  

 

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 March 31, 2021, no Series C Preferred Shares were outstanding

 

  19  

 

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 March 31, 2021 and December 31, 2020 was 758,454,354 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(o), 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, of which $20,917 was recognized in consulting expenses for the period ended March 31, 2021 and $41,833 was recorded as prepaid expenses.

 

 

NOTE 9. STOCK OPTIONS

 

Below is a table summarizing the options issued and outstanding as of March 31, 2021:

 

    Number of options   Weighted average exercise price
$
  Balance, December 31, 2020       200,000       2.00  
  Granted       —         —    
  Expired       —         —    
  Settled       —         —    
  Balance, March 31, 2021       200,000       2.00  

 

As at March 31, 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       0.82       01/26/2022       400,000  
          200,000       200,000                             $ 400,000  

 

The weighted average exercise prices are $2.00 for the options outstanding and exercisable, respectively. The intrinsic value of stock options outstanding at March 31, 2021 was $nil.

 

  20  

 

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
$
    (restated)    
Balance, December 31, 2020     260,500,000       0.00283  
Adjustment to warrants outstanding     —         —    
Granted     —         —    
Settled     —         —    
Balance, March 31, 2021     260,500,000       0.00283  

 

As at March 31, 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
    (restated)   (restated)               (restated)
  11/28/2018       142,857,143 *     142,857,143 *     0.00035 *     0.66       11/28/2021     $ 50,000  
  12/3/2018       500,000       500,000       0.10       2.68       12/3/2023       50,000  
  3/13/2019       107,142,857 *     107,142,857 *     0.00035 *     2.95       3/13/2024       37,500  
  8/26/2020       10,000,000       10,000,000       0.06000       4.41       8/26/2025       600,000  
          260,500,000       260,500,000                             $ 737,500  

 

*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 March 31, 2021 was $5,912,500 (restated).

 

 

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.

 

  21  

 

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. Additionally, the Company agreed to sell to the consultant, and the consultant has the option to purchase from the Company, two and one-half million (2,500,000) shares of the Company’s Common Stock at the price of $0.0001. This option to purchase is valid for one year.

 

The Company also uses the professional services of securities attorneys, a US EPA specialist, professional accountants, and other public-company specialists.

 

Employment Agreements –

 

No new agreements during the period ending March 31, 2021.

 

Other Obligations and Commitments 

 

No new obligation or commitments during the period ending March 31, 2021.

 

 

NOTE 13. SUBSEQUENT EVENTS

 

On April 2, 2021 and April 16, 2021, the Company paid $35,000 and $19,000 respectively to a non-related party towards a $75,000 Convertible Note dated March 18, 2019.

 

On April 5, 2021, the Company entered into a convertible promissory note with a non-related party for $43,000. The Note is due on April 5, 2022 and bears interest on the unpaid principal balance at the rate of 12% per annum. The Note may be converted by the lender at any time before 6-months of the date of issuance into shares of Company’s common stock at the conversion price equal to 61% multiplied by the Market Price.

 

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 the rate of 5% per annum. The Note may not be converted by the lender before 6 months of the issuance date into shares of Company’s common stock at a conversion price equal to $0.10.

 

On May 3, 2021, the Company entered into a convertible promissory note with a non-related party for $128,000. The Note is due on May 3, 2022 and bears interest on the unpaid principal balance at the rate of 12% per annum. The Note may be converted by the lender at any time before 6-months of the date of issuance into shares of Company’s common stock at the conversion price equal to 61% multiplied by the Market Price.

 

On May 5, 2021, the Company entered into an employment agreement with a recently appointed officer, whereby it authorized the issuance of 1,000,000 shares of common stock to such officer (see 8-K issued May 21, 2021)

 

On May 6, 2021, the Company accepted the resignation of Gregory W. Albers from the position of Secretary/Treasurer of PCT LTD. Mr. Albers will continue to serve as a member of the Board as a Director (see 8-K issued May 21, 2021)

 

  22  

 

On May 7, 2021, the Company deemed in the best interest to settle any and all of the Company’s prior convertible debt with Crown Bridge Partners and allow for the cashless exercise to purchase 1,921,875 shares of PCT LTD’s common stock (par value $0.001/share) at the rate of $0.032/share, thereby reducing PCT LTD’s prior debt to Crown Bridge Partners to $0.00. In addition, Crown Bridge Partners shall release 60,072,853 shares to the agreed upon payment terms of $36,994 cash.

 

On May 19, 2021, the company received acknowledgement from a non-related, convertible note holder, with which the Company had previously settled its debt, that 4,623,093 warrants were extinguished at the time of the settlement (May 8, 2020); thereby returning 4,623,093 warrants to the Company’s treasury.

 

On June 2, 2021, the Company sold future receivables to 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 in all past, present and future assets of the Company.

 

On June 2, 2021, the Company paid $25,000 to a non-related party toward a $150,000 Convertible Note dated April 9, 2020.

 

On June 2, 2021, the Company entered into a subscription and purchase agreement with a non-related party consisting of 3,750,000 restricted shares of common stock (aggregate) at a price per share of $0.02 for $75,000 cash.

 

On June 4, 2021, the Company paid $43,600 to a non-related party to extinguish any and all debt owed on a February 1, 2021 future receivables transaction.

 

On July 1, 2021, the Company renewed its annual lease on the Little River, SC facility for $7,650 per month, which is renewable for an additional three years (with a 2% increase annually).

 

NOTE 14. RESTATEMENT

 

As previously disclosed, the Company determined that previously issued warrants to a debt holder should have been accounted for as cancelled along with the settlement of all outstanding debt with such holder in May 2020. In May 2020, the Company entered into a debt settlement agreement with one of its debt holders which settled all debt and warrants held by such holder. However, due to a misunderstanding of the facts and circumstances related to the settlement agreement, the Company did not reflect the warrants as settled at that time. Due to the provisions of the warrants, these were accounted for as derivative liabilities. The Company concluded that the impact of recognizing the cancellation of the warrants was materially different from its previously reported results. As a result, the Company is restating its unaudited condensed consolidated financial statements for the periods impacted. The following financial tables reconcile the previously reported amounts to the restated amounts for each unaudited condensed consolidated financial statement. 

 

  23  

 

The table below sets forth changes to the unaudited consolidated balance sheet:

 

    March 31, 2021
    As Previously Reported   Adjustments   As Restated
             
ASSETS                        
Total current assets   $ 451,658     $ —       $ 451,658  
                         
Total property and equipment, net     346,716       —         346,716  
Total other assets     3,449,364       —         3,449,364  
                         
TOTAL ASSETS     4,247,738       —         4,247,738  
                         
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY                        
CURRENT LIABILITIES                        
Accounts payable     231,439       —         231,439  
Accrued expenses – related parties     80,951       —         80,951  
Accrued expenses     611,155       —         611,155  
Deferred revenue     1,075               1,075  
Operating lease liability     36,607               36,607  
Notes payable – related parties     183,034       —         183,034  
Notes payable, net     413,130       —         413,130  
Convertible notes payable, net     1,935,017       —         1,935,017  
Derivative liability     11,763,555       (4,719,236 )     7,044,319  
Total current liabilities     15,255,963       (4,719,236 )     10,536,727  
                         
Operating lease liability, net of current portion     77,499       —         77,499  
TOTAL LIABILITIES     15,333,462       (4,719,236 )     10,614,226  
                         
TOTAL MEZZANINE EQUITY     218,645       —         218,645  
                         
STOCKHOLDERS’ DEFICIT                        
Common stock     758,454       —         758,454  
Additional paid-in capital     23,962,053       —         23,962,053  
Accumulated deficit     (36,024,876 )     4,719,236       (31,305,640 )
      (11,304,369 )     4,719,236       (6,585,133 )
                         
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY   $ 4,247,738     $ —       $ 4,247,738  

 

 

  24  

 

The table below sets forth changes to the consolidated balance sheet:

 

    December 31, 2020
    As Previously Reported   Adjustments   As Restated
             
ASSETS                        
Total current assets   $ 747,756       —       $ 747,756  
                         
Total property and equipment, net     358,719       —         358,719  
Total other assets     3,528,135       —         3,528,135  
                         
TOTAL ASSETS     4,634,610       —         4,634,610  
                         
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY                        
CURRENT LIABILITIES                        
Accounts payable     272,978       —         272,978  
Accrued expenses – related parties     139,280       —         139,280  
Accrued expenses     622,040       —         622,040  
Deferred revenue     1,075       —         1,075  
Operating lease liability     34,965       —         34,965  
Notes payable – related parties     789,214       —         789,214  
Notes payable, net     384,380       —         384,380  
Convertible notes payable, net     1,554,503       —         1,554,503  
Derivative liability     11,429,043       (4,326,242 )     7,102,801  
Total current liabilities     15,227,478       (4,326,242 )     10,901,236  
                         
Convertible notes payable, net of current portions and discounts     53,500       —         53,500  
Operating lease liability, net of current portion     83,420       —         83,420  
TOTAL LIABILITIES     15,364,398       (4,326,242 )     11,038,156  
                         
TOTAL MEZZANINE EQUITY     258,645       —         258,645  
                         
STOCKHOLDERS’ DEFICIT                        
Common stock     722,488       —         722,488  
Additional paid-in capital     23,202,933       —         23,202,933  
Accumulated deficit     (34,913,854 )     4,326,242       (30,587,612 )
      (10,988,433 )     4,326,242       (6,662,191 )
                         
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY   $ 4,634,610       —       $ 4,634,610  

  

  25  

 

The table below sets forth changes to the unaudited condensed consolidated statements of operations for the three months ended March 31, 2021:

 

    For the three months ended March 31, 2021
    As Previously Reported   Adjustments   As Restated
             
REVENUES                        
Total revenues   $ 395,519     $ —       $ 395,519  
                         
OPERATING EXPENSES                        
Total operating expenses     1,043,673       —         1,043,673  
                         
INCOME (LOSS) FROM OPERATIONS     (648,154 )     —         (648,154 )
                         
OTHER INCOME (EXPENSE)                        
Loss on change in fair value of derivative liability     (650,913 )     392,994       (257,919 )
Misc. income     50,000       —         50,000  
Gain (loss) on settlement of debt     316,401       —         316,401  
Interest expense     (178,356 )     —         (178,356 )
Total other income (expense)     (462,868 )     392,994     (69,874 )
                         
Income (loss) before income taxes     (1,111,022 )     392,994     (718,028 )
                         
Income taxes     —         —         —    
                         
NET INCOME (LOSS)     (1,111,022 )     392,994     (718,028 )
Preferred series C stock deemed dividends     —         —         —    
                         
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS’   $ (1,111,022 )   $ 392,994   $ (718,028 )
                         
Basic and diluted net income (loss) per share   $ (0.00 )   $ (0.00 )   $ (0.00 )
                         
Basic and diluted weighted average shares outstanding     751,832,583               751,832,583  

 

 

  26  

 

The table below sets forth changes to the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2021:

 

    For the three months ended March 31, 2021
    As Previously Reported   Adjustments   As Restated
             
Cash Flows from Operating Activities                        
Net loss   $ (1,111,022 )   $ 392,994     $ (718,028 )
Adjustments to reconcile net loss to net cash used in operating activities:                        
Depreciation and amortization     88,122       —         88,122  
Amortization of debt discounts     78,804       —         78,804  
Common stock issued for services     14,027       —         14,027  
Loss on change in fair value of derivative liability     650,913       (392,994 )     257,919  
Amortization of right-of-use asset     8,149       —         8,149  
Amortization of prepaid expense     146,465       —         146,465  
Loss on settlement of debt     (316,401 )     —         (316,401 )
Default penalties on convertible notes payable     15,172       —         15,172  
Change in operating assets and liabilities                        
Accounts receivable     151,083       —         151,083  
Inventory     (841 )     —         (841 )
Deposits     (5,500 )     —         (5,500 )
Operating lease liability     (4,279 )     —         (4,279 )
Accrued expenses     (10,885 )     —         (10,885 )
Accrued expenses – related party     13,900       —         13,900  
Accounts payable     (41,639 )     —         (41,639 )
Net cash used in operating activities     (323,932 )     —         (323,932 )
                         
Net cash provided by investing activities     —         —         —    
                         
Net cash provided by financing activities     262,589       —         262,589  
                         
Net change in cash     (61,343 )     —         (61,343 )
Cash and cash equivalents at beginning of period     115,196       —         115,196  
Cash and cash equivalents at end of period   $ 53,853     $ —       $ 53,853  

 

  27  

 

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.

 

  28  

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Executive Overview

 

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

 

PCT LTD had not recorded revenues for the two fiscal years prior to its acquisition of Paradigm and was dependent upon financing to continue basic operations. Paradigm has recorded revenue since it initiated operations in 2012; however, those revenues have not been sufficient to finance operations. The Company recorded a net loss of $1,111,022 for the three-months ended March 31, 2021 and accumulated losses of $36,024,876 from inception through March 31, 2021.

 

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

  

The expected costs for the next twelve months include:

 

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

 

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

 

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

 

  acquiring available complementary technology rights;

 

  payment of short-term debt;

 

  hiring of additional personnel in 2021; and

 

  general and administrative operating costs.

 

Management projects these costs to total approximately $2,400,000. To minimize these costs, the Company intends to maintain its practice of controlling operating overheads with efficient facilities commitments, generally below market salaries and consulting fees, and rigorous prioritization of expenditure requirements. Based on its understanding of the commercial readiness of its products and technologies, the capabilities of its personnel (current and being hired), established business relationships and the general market conditions, management believes that the Company expects to be covering its fixed operating expenses (“burn rate”) by the end of the fourth quarter of 2021.

 

  29  

 

Liquidity and Capital Resources

 

A critical component of our operating plan impacting our continued existence is the ability to obtain additional capital through additional equity and/or debt financing. We do not anticipate generating sufficient positive internal operating cash flow until such time as we can deliver our products to market and generate substantial revenues, which may take the next full year to fully realize, if ever. In the event we cannot obtain the necessary capital to pursue our strategic plan, we may have to significantly curtail our operations. This would materially impact our ability to continue operations.

 

SUMMARY OF BALANCE SHEET   March 31,
2021
  December 31,
2020
Cash and cash equivalents   $ 53,853     $ 115,196  
Total current assets     451,658       747,756  
Total assets     4,247,738       4,634,610  
Total liabilities     15,333,462       15,364,398  
Accumulated deficit     (36,024,876 )     (34,913,854 )
Total stockholders’ deficit   $ (11,304,369 )   $ (10,988,433 )

 

At March 31, 2021, the Company recorded a net loss of $1,111,022 and a working capital deficit of $14,804,305. While we have recently recorded an increase in the amount of revenues from operations, since inception and we had not established an ongoing source of revenue sufficient to cover our operating costs. During the three-months ended March 31, 2021 and 2020 we primarily relied upon advances and loans from stockholders and third parties to fund our operations. The Company has relied on raising debt and equity capital in order to fund its ongoing day-to-day operations and its corporate overhead. We had $53,853 in cash at March 31, 2021, compared to $115,196 in cash at December 31, 2020. We had total liabilities of $15,333,462 at March 31, 2021 compared to $15,364,398 at December 31, 2020.

 

Our current cash flow is not sufficient to meet our monthly expenses of approximately $200,000 and to fund future research and development adequately. We intend to rely on additional debt financing, loans from existing stockholders and private placements of common stock for additional funding in addition to the increasing our recognized revenue from the leasing and/or sale of products; however, there is no assurance that additional funding will be available. We do not have material commitments for future capital expenditures. However, we cannot assure you that we will be able to obtain short-term financing, or that sources of such financing, if any, will continue to be available, and if available, that they will be on favorable terms.

  

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

  

Commitments and Obligations

 

At March 31, 2021 the Company recorded notes payable totaling approximately $2,531,181 (related, non-related and convertible, net of debt discount) compared to notes payable totaling $2,781,597 (related, non-related and convertible, net of debt discount) at December 31, 2020. These notes payable represent cash advances received and expenses paid from third parties and related parties. All of the notes payable carry effective interest from 0% to 220% and are due ranging from on demand to March 26, 2022.

 

The Company headquarters and operations is located in Little River, South Carolina. 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) and added a three-year lease for 9,600 sf. of warehouse space in Fort Wayne, Indiana on November 1, 2020, for $4,500/month. The Company also began leasing additional office space in Little River, SC, for $2,750 a month, on an annual lease, effective March 15, 2021.

  

  30  

 

Results of Operations

 

SUMMARY OF OPERATIONS   Three-month period ended
March 31,
    (Unaudited)
    2021   2020
Revenues   $ 395,519     $ 272,182  
Total operating expenses     1,043,673       780,657  
Total other expenses     462,868       9,773,173  
Net loss     (1,111,022 )     (10,281,648 )
Preferred series C stock deemed dividends     —         270,000  
Net loss attributable to common stockholders’     (1,111,022 )     (10,551,648 )
Basic and diluted loss per share   $ (0.00 )   $ (0.02 )

 

Revenues increased to $395,519, for the three-months ended March 31, 2021 (the “2021 first quarter”) compared to $272,182 for the three-months ended March 31, 2020 (the “2020 first quarter”). The revenue increase for the period was due to the increased volume of fluids sold and the additional revenue from recurring leased-equipment income.

 

Total operating expenses increased to $1,043,673 during the 2021 first quarter compared to $780,657 during the 2020 first quarter. The increase during the first quarter of 2021 was primarily due to an increase in salaries and wages, legal, consulting fees and rent.

 

General and administrative expenses increased to $893,451 for the 2021 first quarter compared to $548,786 during the 2020 first quarter. The increase during the first quarter of 2021 was primarily due to an increase in salaries and wages, legal, consulting fees and rent.

 

Depreciation and amortization expenses increased slightly to $88,122 during the 2021 first quarter compared to $83,021 during the 2020 first quarter. Depreciation and amortization was comparable between the two periods.

 

Total other expenses decreased to $462,868 for the 2021 first quarter compared to $9,773,173 during the 2020 first quarter. The overall decrease in other expenses was primarily due to the $9.2M loss in derivatives incurred during 2020 which did not occur in 2021. There was also a gain on the settlement of debt of $316,401 in 2021 vs. a $44,000 loss on the settlement of debt in 2020.

 

As a result of the changes described above, net loss from operations after income taxes decreased to $1,111,022 during the 2021 first quarter compared to $10,281,648 during the 2020 first quarter.

   

Off-Balance Sheet Arrangements

 

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

 

Critical Accounting Policies

 

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

 

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

 

  31  

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to smaller reporting companies.

 

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated to allow our management to make timely decisions regarding required disclosure. Gary J. Grieco, our President and principal executive officer, and Arthur Abraham, our Chief Financial Officer and principal financial officer, , evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. The disclosure controls and procedures ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rule and forms; and (ii) accumulated and communicated to our principal executive officer as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive officer and principal financial officer concluded that as of March 31, 2021, our disclosure controls and procedures were not effective for the reasons discussed in our 10-K filing.  

 

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

 

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

For the prior ended March 31, 2021, management has relied on the Committee of Sponsoring Organizations of the Treadway Commission (COSO), “Internal Control - Integrated Framework (2013),” to evaluate the effectiveness of our internal control over financial reporting. Based upon that framework, our President has determined that our internal control over financial reporting for the period ended March 31, 2020, was not effective.

 

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

  

Our management determined that there were no changes made in our internal controls over financial reporting during the first quarter of 2021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

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

 

During the quarter ended March 31, 2021, internal financial controls were not sufficient to detect material events, such as the settled debt and cancelled warrants which occurred in the 2nd Quarter 2020 which resulted in a $7 million liability reduction on the Balance Sheet, whereby creating the restatement of the 10-Q for Quarters 2 and 3 in 2020 and Quarter 1 in 2021, along with the 2020 10-K. The Company has since implemented controls around its financial reporting process that will help prevent future financial oversights from occurring again.

 

Changes in Internal Control Over Financial Reporting

 

During the quarter ended March 31, 2021, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).

   

  32  

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

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

 

Annihilare Litigation

 

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

 

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

 

These claims arose from several consulting agreements and an acquisition agreement between the Company and the Defendants surrounding the purchase of Annihilyzer® Intellectual property by the Company and subsequent infringement of the intellectual properties. The case settled in the quarter ended March 31, 2021.

 

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item. However, we detailed significant business risks in Item 1A to our Form 10-K for the year ended December 31, 2020.

 

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On January 4, 2021, the Company issued 25,000,000 common shares to settle a convertible note described in Note 6(bb), with a remaining balance of $40,000.

 

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.

 

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 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 March 1, 2021, the Company released an additional vested 375,000 shares of common stock to its current COO and Director, as per the Company employment agreement with the executive. 

 

On March 1, 2021, the Company entered into a consulting agreement. Pursuant to the agreement, the consultant will provide advisory services for a period of three months in consideration of $5,000 per month and an option to purchase 2,500,000 shares of common stock at $0.0001 for one year, exercisable on issuance.

  33  

 

Subsequent Issuances After Quarter-End

On April 5, 2021, the Company entered into a convertible promissory note with a non-related party for $43,000. The Note is due on April 5, 2022 and bears interest on the unpaid principal balance at the rate of 12% per annum. The Note may be converted by the lender at any time before 6-months of the date of issuance into shares of Company’s common stock at the conversion price equal to 61% multiplied by the Market Price.

 

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 the rate of 5% per annum. The Note may not be converted by the lender before 6 months of the issuance date into shares of Company’s common stock at a conversion price equal to $0.10.

 

On May 3, 2021, the Company entered into a convertible promissory note with a non-related party for $128,000. The Note is due on May 3, 2022 and bears interest on the unpaid principal balance at the rate of 12% per annum. The Note may be converted by the lender at any time before 6-months of the date of issuance into shares of Company’s common stock at the conversion price equal to 61% multiplied by the Market Price.

 

On May 5, 2021, the Company entered into an employment agreement with a recently appointed officer, whereby it authorized the issuance of 1,000,000 shares of common stock to such officer (see 8-K issued May 21, 2021)

 

On May 7, 2021, the Company deemed in the best interest to settle any and all of the Company’s prior convertible debt with Crown Bridge Partners and allow for the cashless exercise to purchase 1,921,875 shares of PCT LTD’s common stock (par value $0.001/share) at the rate of $0.032/share, thereby reducing PCT LTD’s prior debt to Crown Bridge Partners to $0.00. In addition, Crown Bridge Partners shall release 60,072,853 shares to the agreed upon payment terms of $36,994 cash.

 

On June 2, 2021, the Company paid $25,000 to a non-related party toward a $150,000 Convertible Note dated April 9, 2020.

 

One June 2, 2021, the Company entered into a subscription and purchase agreement with a non-related party consisting of 3,750,000 restricted shares of common stock (aggregate) at a price per share of $0.02 for $75,000 cash.

 

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

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our equity securities during the quarter ended March 31, 2021.

 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

We have entered into a number of promissory notes, some of which are in default as of March 31, 2021, or went into default before the filing of this Quarterly Report (See Note 6 to the financial statements).

 

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

 

As of March 31, 2021, had cash and cash equivalents of $53,853. Management’s plan is to raise additional funds in the form of debt or equity in order to continue to fund losses until such time as revenues are able to sustain the Company. To date, the main source of funding has been through the issuance of convertible notes with provisions that allow the holder to convert the debt and accrued and unpaid interest at substantial discounts to the trading price of our common stock. The effect of the conversions in the year ended December 31, 2020 for the convertible notes has been to substantially dilute existing holders of common stock of our Company. However, there is no assurance that management will be successful in being able to continue to obtain additional funding or defend potential litigation by note holders.

 

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

 

ITEM 5. OTHER INFORMATION

 

Not applicable.

 

  34  

 

ITEM 6. EXHIBITS

 

Exhibit No. Description
3(i) Amended and Restated Articles of Incorporation, as currently in effect (Incorporated by reference to Exhibit 3.1 of Form 8-K, filed April 13, 2018)
3.1 Amended Articles of Incorporation increasing authorized shares (Incorporated by reference to Exhibit 3.1 of Form 8-K, filed on October 25, 2019)
3(ii) Amended and Restated Bylaws, as currently in effect (Incorporated by reference to Exhibit 3.2 of Form 8-K, filed April 13, 2018)
4.1 Certificate of Designation of Series A Convertible Preferred Stock (Incorporated by reference to Exhibit 4.1 of Form 10-Q, filed on September 16, 2019)
4.2 Certificate of Designation of Series B – Super Voting Convertible Preferred Stock (Incorporated by reference to Exhibit 4.2 of Form 10-Q, filed on September 16, 2019)
4.3 Certificate of Designation of Series C Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 of Form 8-K, filed on October 25, 2019)
4.4 Peak One Opportunity Fund Note dated September 16, 2019 (Incorporated by reference to Exhibit 4.16 of Form 10-Q, filed on August 14, 2020)
4.5 Power-Up #8 Note dated October 8, 2019 (Incorporated by reference to Exhibit 4.17 of Form 10-Q, filed on August 14, 2020)
4.6 Power-Up #9 Note dated October 31, 2019 (Incorporated by reference to Exhibit 4.18 of Form 10-Q, filed on August 14, 2020)
4.7 Power-Up #10 Note dated March 2, 2020 (Incorporated by reference to Exhibit 4.19 of Form 10-Q, filed on August 14, 2020)
4.8 TFK Investments Note dated April 10, 2020 (Incorporated by reference to Exhibit 4.20 of Form 10-Q, filed on August 14, 2020)
4.9 Power-Up #11 Note dated April 16, 2020 (Incorporated by reference to Exhibit 4.21 of Form 10-Q, filed on August 14, 2020)
4.10 Herschbach 2005 Trust Consolidated Note dated May 5, 2020 (Incorporated by reference to Exhibit 4.22 of Form 10-Q, filed on August 14, 2020)
4.11 Power-Up #12 Note dated May 12, 2020 (Incorporated by reference to Exhibit 4.23 of Form 10-Q, filed on August 14, 2020)
4.12 Digital Ally Note dated July 7, 2020 (Incorporated by reference to Exhibit 4.24 of Form 10-Q, filed on August 14, 2020)
4.13 Reserve Capital Management Note dated July 15, 2020 (Incorporated by reference to Exhibit 4.25 of Form 10-Q, filed on November 16, 2020)
4.14 Digital Ally Note #2 dated July 28, 2020
4.15 Signature Note dated October 1, 2020 (Incorporated by reference to Exhibit 4.27 of Form 10-Q, filed on November 16, 2020)
10.1 Agreement with Annihilyzer, Inc. dated November 29, 2016 (Incorporated by reference to Exhibit 10.1 of Form 8-K, filed April 20, 2017)
10.2 Amendment to Agreement with Annihilyzer, Inc. dated April 6, 2017 (Incorporated by reference to Exhibit 10.2 of Form 8-K, filed April 20, 2017)
10.3 Read Consolidated Promissory Note dated September 27, 2017 (Incorporated by reference to Exhibit 10.1 of Form 8-K, filed October 4, 2017)
10.4† Read Employment Agreement (Incorporated by reference to Exhibit 10.18 of Form 10-Q, filed on September 16, 2019)
10.5† Read Addendum to Employment Agreement (Incorporated by reference to Exhibit 10.19 of Form 10-Q, filed on September 16, 2019)
10.6† Grieco 2019 Employment Agreement (Incorporated by reference to Exhibit 10.20 of Form 10-Q, filed on September 16, 2019)
10.7† Grieco 2020 Employment Agreement (Incorporated by reference to Exhibit 10.21 of Form 10-Q, filed on April 13, 2020)
10.8 Peak One Opportunity Fund Agreement dated September 16, 2019 (Incorporated by reference to Exhibit 10.22 of Form 10-Q, filed on August 14, 2020)
10.9 Power-Up #8 Agreement dated October 8, 2019 (Incorporated by reference to Exhibit 10.23 of Form 10-Q, filed on August 14, 2020)
10.10 Power-Up #9 Agreement dated October 31, 2019 (Incorporated by reference to Exhibit 10.24 of Form 10-Q, filed on August 14, 2020)
10.11 Power-Up #10 Agreement dated March 2, 2020 (Incorporated by reference to Exhibit 10.25 of Form 10-Q, filed on August 14, 2020)
10.12 TFK Investments Agreement dated April 10, 2020 (Incorporated by reference to Exhibit 10.26 of Form 10-Q, filed on August 14, 2020)
10.13 Power-Up #11 Agreement dated April 16, 2020 (Incorporated by reference to Exhibit 10.27 of Form 10-Q, filed on August 14, 2020)
10.14 Herschbach 2005 Trust Agreement dated May 12, 2020 (Incorporated by reference to Exhibit 10.28 of Form 10-Q, filed on August 14, 2020)
10.15 RB Capital $200,000 Note dated October 7, 2020 (Incorporated by reference to Exhibit 10.29 of Form 10-Q, filed on November 16, 2020)
10.16 RB Capital $200,000 Note dated October 16, 2020 (Incorporated by reference to Exhibit 10.30 of Form 10-Q, filed on November 16, 2020)
10.17 October 1, 2020 $199,500 Future Receivables Note (Incorporated by reference to Exhibit 10.17 of Form 10-K, filed on April 13, 2021)
10.18 November 3, 2020 $126,000 Future Receivables Note(Incorporated by reference to Exhibit 10.18 of Form 10-K, filed on April 13, 2021)
10.19 November 4, 2020 $113,980 Future Receivables Note (Incorporated by reference to Exhibit 10.19 of Form 10-K, filed on April 13, 2021)
10.20 RB Capital $300,000 Note dated November 11, 2020 (Incorporated by reference to Exhibit 10.20 of Form 10-K, filed on April 13, 2021)
10.21 RB Capital $150,000 Note dated December 29, 2020 (Incorporated by reference to Exhibit 10.21 of Form 10-K, filed on April 13, 2021)
10.22 RB Capital $150,000 Note dated January 26, 2021 (Incorporated by reference to Exhibit 10.22 of Form 10-K, filed on April 13, 2021)
10.23 February 2, 2021 $177,800 Future Receivables Note (Incorporated by reference to Exhibit 10.23 of Form 10-K, filed on April 13, 2021)
10.24 February 22, 2021 $128,000 Convertible Promissory Note (Incorporated by reference to Exhibit 10.24 of Form 10-K, filed on April 13, 2021)
10.25 March 5, 2021 $522,640 Future Receivables Note (Incorporated by reference to Exhibit 10.25 of Form 10-K, filed on April 13, 2021)
10.26 March 9, 2021 $111,920 Future Receivables Note (Incorporated by reference to Exhibit 10.26 of Form 10-K, filed on April 13, 2021)
10.27 March 18, 2021 $200,000 Convertible Promissory Note (Incorporated by reference to Exhibit 10.27 of Form 10-K, filed on April 13, 2021)
10.28 March 23, 2021 Amended Convertible Note (Incorporated by reference to Exhibit 10.28 of Form 10-K, filed on April 13, 2021)
31.1 Principal Executive Officer Certification
31.2 Principal Financial Officer Certification
32.1 PEO Section 1350 Certification
32.2 PFO Section 1350 Certification
99.15 New Website and Investor Relations Press Release dated January 26, 2021 (Incorporated by reference to Exhibit 99.8 of Form 10-K, filed on April 13, 2021)
99.2 UK Updated Press Release dated January 28, 2021 (Incorporated by reference to Exhibit 99.9 of Form 10-K, filed on April 13, 2021)
99.3 Litigation Settlement Press Release dated March 4, 2021 (Incorporated by reference to Exhibit 99.10 of Form 10-K, filed on April 13, 2021)
99.4 Fiscal 2020 Results Press Release dated April 15, 2021
99.5 Oilfield Testing Press Release dated April 30, 2021
99.6 Current Status of OTC QB Uplisting Press Release dated May 4, 2021
99.7 New Financial Officer Press Release dated May 14, 2021
99.8 ProtectX Joint Business Venture Press Release dated May 27, 2021
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Label Linkbase Document
101.PRE XBRL Taxonomy Presentation Linkbase Document

 

 

† Indicates management contract or compensatory plan or arrangement.

 

  35  

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    PCT LTD
     
     
Date: September 13, 2021 By:   /s/ Gary Grieco                    
    Gary Grieco, Chief Executive Officer and Chairman
   

 

 

/s/ Arthur Abraham               

Arthur Abraham, Chief Financial Officer

 

 

36

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