0001119897 false true FY 2021 12/31 true
29,598,993 4,466,166 0001119897 2021-01-01 2021-12-31 0001119897
2021-06-30 0001119897 2022-03-24 0001119897 2021-12-31 0001119897
2020-12-31 0001119897 us-gaap:SeriesAPreferredStockMember
2021-12-31 0001119897 us-gaap:SeriesAPreferredStockMember
2020-12-31 0001119897 us-gaap:SeriesBPreferredStockMember
2021-12-31 0001119897 us-gaap:SeriesBPreferredStockMember
2020-12-31 0001119897 us-gaap:SeriesCPreferredStockMember
2021-12-31 0001119897 us-gaap:SeriesCPreferredStockMember
2020-12-31 0001119897 2020-01-01 2020-12-31 0001119897
us-gaap:CommonStockMember 2019-12-31 0001119897
us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001119897
us-gaap:RetainedEarningsMember 2019-12-31 0001119897 2019-12-31
0001119897 us-gaap:CommonStockMember 2020-01-01 2020-12-31
0001119897 us-gaap:AdditionalPaidInCapitalMember 2020-01-01
2020-12-31 0001119897 us-gaap:RetainedEarningsMember 2020-01-01
2020-12-31 0001119897 us-gaap:CommonStockMember 2021-01-01
2021-12-31 0001119897 us-gaap:AdditionalPaidInCapitalMember
2021-01-01 2021-12-31 0001119897 us-gaap:RetainedEarningsMember
2021-01-01 2021-12-31 0001119897 us-gaap:CommonStockMember
2020-12-31 0001119897 us-gaap:AdditionalPaidInCapitalMember
2020-12-31 0001119897 us-gaap:RetainedEarningsMember 2020-12-31
0001119897 us-gaap:CommonStockMember 2021-12-31 0001119897
us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001119897
us-gaap:RetainedEarningsMember 2021-12-31 0001119897
us-gaap:FairValueInputsLevel1Member 2021-12-31 0001119897
us-gaap:FairValueInputsLevel2Member 2021-12-31 0001119897
us-gaap:FairValueInputsLevel3Member 2021-12-31 0001119897
us-gaap:FairValueInputsLevel1Member 2020-12-31 0001119897
us-gaap:FairValueInputsLevel2Member 2020-12-31 0001119897
us-gaap:FairValueInputsLevel3Member 2020-12-31 0001119897
PCTL:IntangibleAssetsPatentsMember 2021-01-01 2021-12-31 0001119897
PCTL:IntangibleAssetsTechnologyRightsMember 2021-01-01 2021-12-31
0001119897 PCTL:IntangibleAssetsPatentsMember 2020-01-01 2020-12-31
0001119897 PCTL:IntangibleAssetsTechnologyRightsMember 2020-01-01
2020-12-31 0001119897 PCTL:Lease1Member 2020-07-01 2021-06-30
0001119897 PCTL:Lease1Member 2021-07-01 2021-12-31 0001119897
PCTL:Lease2Member 2020-11-01 2021-12-31 0001119897
PCTL:Lease2Member 2021-01-01 2021-12-31 0001119897
PCTL:Lease3Member 2021-04-01 2021-12-31 0001119897
PCTL:Lease3Member 2021-01-01 2021-12-31 0001119897
PCTL:NotesPayable1Member 2021-12-31 0001119897
PCTL:NotesPayable1Member 2021-01-01 2021-12-31 0001119897
PCTL:NotesPayable1Member 2020-12-31 0001119897
PCTL:NotesPayable2Member 2021-12-31 0001119897
PCTL:NotesPayable2Member 2021-01-01 2021-12-31 0001119897
PCTL:NotesPayable2Member 2020-12-31 0001119897
PCTL:NotesPayable3Member 2021-12-31 0001119897
PCTL:NotesPayable3Member 2021-01-01 2021-12-31 0001119897
PCTL:NotesPayable3Member 2020-12-31 0001119897
PCTL:NotesPayable4Member 2021-12-31 0001119897
PCTL:NotesPayable4Member 2021-01-01 2021-12-31 0001119897
PCTL:NotesPayable4Member 2020-12-31 0001119897
PCTL:NotesPayable5Member 2021-12-31 0001119897
PCTL:NotesPayable5Member 2021-01-01 2021-12-31 0001119897
PCTL:NotesPayable5Member 2020-12-31 0001119897
PCTL:NotesPayable6Member 2021-12-31 0001119897
PCTL:NotesPayable6Member 2021-01-01 2021-12-31 0001119897
PCTL:NotesPayable6Member 2020-12-31 0001119897
PCTL:NotesPayable7Member 2021-12-31 0001119897
PCTL:NotesPayable7Member 2021-01-01 2021-12-31 0001119897
PCTL:NotesPayable7Member 2020-12-31 0001119897
PCTL:NotesPayable8Member 2021-12-31 0001119897
PCTL:NotesPayable8Member 2021-01-01 2021-12-31 0001119897
PCTL:NotesPayable8Member 2020-12-31 0001119897
PCTL:NotesPayable9Member 2021-12-31 0001119897
PCTL:NotesPayable9Member 2021-01-01 2021-12-31 0001119897
PCTL:NotesPayable9Member 2020-12-31 0001119897
PCTL:NotesPayable10Member 2021-12-31 0001119897
PCTL:NotesPayable10Member 2021-01-01 2021-12-31 0001119897
PCTL:NotesPayable10Member 2020-12-31 0001119897
PCTL:NotesPayable11Member 2021-12-31 0001119897
PCTL:NotesPayable11Member 2021-01-01 2021-12-31 0001119897
PCTL:NotesPayable11Member 2020-12-31 0001119897
PCTL:NotesPayableTotalMember 2021-12-31 0001119897
PCTL:NotesPayableTotalMember 2020-12-31 0001119897
PCTL:NotesPayable4Member 2020-10-01 2020-12-31 0001119897
2020-10-01 2020-12-31 0001119897 PCTL:NotesPayable5Member
2020-11-01 2020-12-31 0001119897 PCTL:NotesPayable6Member
2020-11-01 2020-12-31 0001119897 PCTL:NotesPayable8Member
2021-09-01 2021-12-31 0001119897 PCTL:NotesPayable9Member
2021-09-01 2021-12-31 0001119897 PCTL:NotesPayable10Member
2021-12-01 2021-12-31 0001119897 PCTL:NotesPayable11Member
2021-12-01 2021-12-31 0001119897
PCTL:NotesPayableRelatedParty1Member 2021-01-01 2021-12-31
0001119897 PCTL:NotesPayableRelatedParty1Member 2021-12-31
0001119897 PCTL:NotesPayableRelatedParty2Member 2021-08-01
2021-12-31 0001119897 PCTL:NotesPayableRelatedParty2Member
2021-01-01 2021-12-31 0001119897
PCTL:NotesPayableRelatedParty2Member 2021-12-31 0001119897
PCTL:NotesPayableRelatedParty3Member 2021-08-01 2021-12-31
0001119897 PCTL:NotesPayableRelatedParty3Member 2021-02-16
0001119897 PCTL:NotesPayableRelatedParty3Member 2021-01-01
2021-12-31 0001119897 PCTL:NotesPayableRelatedParty3Member
2021-12-31 0001119897 PCTL:NotesPayableRelatedParty4Member
2021-01-01 2021-12-31 0001119897
PCTL:NotesPayableRelatedParty4Member 2021-12-31 0001119897
PCTL:NotesPayableRelatedParty5Member 2021-12-31 0001119897
PCTL:NotesPayableRelatedParty6Member 2021-01-01 2021-12-31
0001119897 PCTL:NotesPayableRelatedParty6Member 2021-12-31
0001119897 PCTL:NotesPayableRelatedParty7Member 2021-01-01
2021-12-31 0001119897 PCTL:NotesPayableRelatedParty7Member
2021-12-31 0001119897 PCTL:NotesPayableRelatedParty9Member
2021-01-01 2021-12-31 0001119897
PCTL:NotesPayableRelatedParty9Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable1Member 2021-01-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable2Member 2021-01-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable3Member 2021-11-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable3Member 2021-01-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable4Member 2020-04-10 0001119897
PCTL:ConvertibleNotePayable4Member 2020-04-01 2020-12-31 0001119897
PCTL:ConvertibleNotePayable4Member 2020-01-01 2020-12-31 0001119897
PCTL:ConvertibleNotePayable4Member 2020-12-31 0001119897
PCTL:ConvertibleNotePayable4Member 2021-01-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable4Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable5Member 2021-01-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable5Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable6Member 2020-09-22 0001119897
PCTL:ConvertibleNotePayable6Member 2020-09-01 2020-12-31 0001119897
PCTL:ConvertibleNotePayable6Member 2021-01-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable7Member 2021-01-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable7Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable8Member 2020-10-07 0001119897
PCTL:ConvertibleNotePayable8Member 2020-10-01 2020-12-31 0001119897
PCTL:ConvertibleNotePayable9Member 2020-10-16 0001119897
PCTL:ConvertibleNotePayable9Member 2020-10-01 2020-12-31 0001119897
PCTL:ConvertibleNotePayable10Member 2020-11-11 0001119897
PCTL:ConvertibleNotePayable10Member 2020-11-01 2020-12-31
0001119897 PCTL:ConvertibleNotePayable11Member 2020-12-29
0001119897 PCTL:ConvertibleNotePayable11Member 2020-12-01
2020-12-31 0001119897 PCTL:ConvertibleNotePayable12Member
2021-01-27 0001119897 PCTL:ConvertibleNotePayable12Member
2021-01-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable13Member 2021-02-22 0001119897
PCTL:ConvertibleNotePayable13Member 2021-08-01 2021-12-31
0001119897 PCTL:ConvertibleNotePayable13Member 2021-01-01
2021-12-31 0001119897 PCTL:ConvertibleNotePayable14Member
2021-03-18 0001119897 PCTL:ConvertibleNotePayable14Member
2021-09-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable15Member 2021-03-26 0001119897
PCTL:ConvertibleNotePayable15Member 2021-09-01 2021-12-31
0001119897 PCTL:ConvertibleNotePayable15Member 2021-01-01
2021-12-31 0001119897 PCTL:ConvertibleNotePayable16Member
2021-04-05 0001119897 PCTL:ConvertibleNotePayable16Member
2021-10-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable16Member 2021-01-01 2021-12-31
0001119897 PCTL:ConvertibleNotePayable17Member 2021-04-14
0001119897 PCTL:ConvertibleNotePayable17Member 2021-10-01
2021-12-31 0001119897 PCTL:ConvertibleNotePayable18Member
2021-05-03 0001119897 PCTL:ConvertibleNotePayable18Member
2021-11-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable18Member 2021-01-01 2021-12-31
0001119897 PCTL:ConvertibleNotePayable19Member 2021-11-04
0001119897 PCTL:ConvertibleNotePayable19Member 2021-01-01
2021-12-31 0001119897 PCTL:ConvertibleNotePayable19Member
2021-12-20 2022-11-04 0001119897
PCTL:ConvertibleNotePayable20Member 2021-11-30 0001119897
PCTL:ConvertibleNotePayable20Member 2021-01-01 2021-12-31
0001119897 PCTL:NotesPayableRelatedParty1Member 2020-12-31
0001119897 PCTL:NotesPayableRelatedParty2Member 2020-12-31
0001119897 PCTL:NotesPayableRelatedParty3Member 2020-12-31
0001119897 PCTL:NotesPayableRelatedParty4Member 2020-12-31
0001119897 PCTL:NotesPayableRelatedParty5Member 2021-01-01
2021-12-31 0001119897 PCTL:NotesPayableRelatedParty5Member
2020-12-31 0001119897 PCTL:NotesPayableRelatedParty6Member
2020-12-31 0001119897 PCTL:NotesPayableRelatedParty7Member
2020-12-31 0001119897 PCTL:NotesPayableRelatedParty8Member
2021-12-31 0001119897 PCTL:NotesPayableRelatedParty8Member
2021-01-01 2021-12-31 0001119897
PCTL:NotesPayableRelatedParty8Member 2020-12-31 0001119897
PCTL:NotesPayableRelatedParty9Member 2020-12-31 0001119897
PCTL:NotesPayableRelatedParty10Member 2021-12-31 0001119897
PCTL:NotesPayableRelatedParty10Member 2021-01-01 2021-12-31
0001119897 PCTL:NotesPayableRelatedParty10Member 2020-12-31
0001119897 PCTL:NotesPayableRelatedPartyTotalMember 2021-12-31
0001119897 PCTL:NotesPayableRelatedPartyTotalMember 2020-12-31
0001119897 PCTL:ConvertibleNotePayable1Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable1Member 2020-12-31 0001119897
PCTL:ConvertibleNotePayable2Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable2Member 2020-12-31 0001119897
PCTL:ConvertibleNotePayable3Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable3Member 2020-12-31 0001119897
PCTL:ConvertibleNotePayable5Member 2020-12-31 0001119897
PCTL:ConvertibleNotePayable6Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable6Member 2020-12-31 0001119897
PCTL:ConvertibleNotePayable7Member 2020-12-31 0001119897
PCTL:ConvertibleNotePayable8Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable8Member 2021-01-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable8Member 2020-12-31 0001119897
PCTL:ConvertibleNotePayable9Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable9Member 2021-01-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable9Member 2020-12-31 0001119897
PCTL:ConvertibleNotePayable10Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable10Member 2021-01-01 2021-12-31
0001119897 PCTL:ConvertibleNotePayable10Member 2020-12-31
0001119897 PCTL:ConvertibleNotePayable11Member 2021-12-31
0001119897 PCTL:ConvertibleNotePayable11Member 2021-01-01
2021-12-31 0001119897 PCTL:ConvertibleNotePayable11Member
2020-12-31 0001119897 PCTL:ConvertibleNotePayable12Member
2021-12-31 0001119897 PCTL:ConvertibleNotePayable12Member
2020-12-31 0001119897 PCTL:ConvertibleNotePayable13Member
2021-12-31 0001119897 PCTL:ConvertibleNotePayable13Member
2020-12-31 0001119897 PCTL:ConvertibleNotePayable14Member
2021-12-31 0001119897 PCTL:ConvertibleNotePayable14Member
2021-01-01 2021-12-31 0001119897
PCTL:ConvertibleNotePayable14Member 2020-12-31 0001119897
PCTL:ConvertibleNotePayable15Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable15Member 2020-12-31 0001119897
PCTL:ConvertibleNotePayable16Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable16Member 2020-12-31 0001119897
PCTL:ConvertibleNotePayable17Member 2021-12-31 0001119897
PCTL:ConvertibleNotePayable17Member 2021-01-01 2021-12-31
0001119897 PCTL:ConvertibleNotePayable17Member 2020-12-31
0001119897 PCTL:ConvertibleNotePayable18Member 2021-12-31
0001119897 PCTL:ConvertibleNotePayable18Member 2020-12-31
0001119897 PCTL:ConvertibleNotePayable19Member 2021-12-31
0001119897 PCTL:ConvertibleNotePayable19Member 2020-12-31
0001119897 PCTL:ConvertibleNotePayable20Member 2021-12-31
0001119897 PCTL:ConvertibleNotePayable20Member 2020-12-31
0001119897 PCTL:ConvertibleNotePayableTotalMember 2021-12-31
0001119897 PCTL:ConvertibleNotePayableTotalMember 2020-12-31
0001119897 PCTL:TradingLiabilitiesAtIssuanceMember 2021-01-01
2021-12-31 0001119897 us-gaap:TradingLiabilitiesMember 2021-01-01
2021-12-31 0001119897 2018-03-23 0001119897 2018-12-01 2018-12-31
0001119897 us-gaap:SeriesAPreferredStockMember 2019-04-12
0001119897 us-gaap:SeriesBPreferredStockMember 2019-08-13
0001119897 srt:ChiefFinancialOfficerMember 2019-01-01 2019-12-31
0001119897 2019-01-01 2019-12-31 0001119897
us-gaap:SeriesCPreferredStockMember 2019-09-18 0001119897
us-gaap:SeriesCPreferredStockMember 2020-01-01 2020-12-31
0001119897 us-gaap:SeriesCPreferredStockMember 2020-02-07
0001119897 us-gaap:SeriesCPreferredStockMember 2021-01-01
2021-12-31 0001119897 us-gaap:SeriesCPreferredStockMember
2021-12-02 0001119897 PCTL:CommonStock1Member 2021-01-01 2021-12-31
0001119897 PCTL:CommonStock1Member 2021-01-04 0001119897
PCTL:CommonStock2Member 2021-01-01 2021-12-31 0001119897
PCTL:CommonStock2Member 2021-01-01 2021-03-31 0001119897
PCTL:CommonStock2Member 2021-02-16 0001119897
PCTL:CommonStock3Member 2021-01-01 2021-12-31 0001119897
PCTL:CommonStock3Member 2021-02-16 0001119897
PCTL:CommonStock4Member 2021-01-01 2021-12-31 0001119897
PCTL:CommonStock5Member 2021-01-01 2021-12-31 0001119897
PCTL:CommonStock6Member 2021-01-01 2021-12-31 0001119897
PCTL:CommonStock7Member 2021-01-01 2021-12-31 0001119897
PCTL:CommonStock8Member 2021-01-01 2021-12-31 0001119897
PCTL:CommonStock9Member 2021-01-01 2021-12-31 0001119897
PCTL:CommonStock10Member 2021-01-01 2021-12-31 0001119897
PCTL:CommonStock10Member 2021-10-12 0001119897
PCTL:CommonStock11Member 2021-01-01 2021-12-31 0001119897
PCTL:Options1Member 2021-01-01 2021-12-31 0001119897
PCTL:Options1Member 2022-01-01 2022-12-31 0001119897
PCTL:StockOption1Member 2021-12-31 0001119897
PCTL:StockOption1Member 2021-01-01 2021-12-31 0001119897
PCTL:StockOption2Member 2021-12-31 0001119897
PCTL:StockOption2Member 2021-01-01 2021-12-31 0001119897
PCTL:StockOption3Member 2021-12-31 0001119897
PCTL:StockOption3Member 2021-01-01 2021-12-31 0001119897
PCTL:StockOption4Member 2021-12-31 0001119897
PCTL:StockOption4Member 2021-01-01 2021-12-31 0001119897
PCTL:StockOption5Member 2021-12-31 0001119897
PCTL:StockOption5Member 2021-01-01 2021-12-31 0001119897
PCTL:StockOption6Member 2021-12-31 0001119897
PCTL:StockOption6Member 2021-01-01 2021-12-31 0001119897
us-gaap:WarrantMember 2021-12-31 0001119897 us-gaap:WarrantMember
2021-01-01 2021-12-31 0001119897 PCTL:Warrant1Member 2021-12-31
0001119897 PCTL:Warrant1Member 2021-01-01 2021-12-31 0001119897
PCTL:Warrant2Member 2021-12-31 0001119897 PCTL:Warrant2Member
2021-01-01 2021-12-31 0001119897 PCTL:EmploymentAgreement1Member
2021-01-01 2021-12-31 0001119897 PCTL:EmploymentAgreement2Member
2021-01-01 2021-12-31 0001119897 PCTL:EmploymentAgreement3Member
2021-01-01 2021-12-31 0001119897 PCTL:EmploymentAgreement4Member
2021-01-01 2021-12-31 0001119897 2022-01-12 2022-01-12 0001119897
2022-02-01 2022-02-01 iso4217:USD xbrli:shares iso4217:USD
xbrli:shares xbrli:pure
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
|
☑ |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the
fiscal year ended
December 31, 2021
or
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 |
For
transition period from ___ to ____
Commission
file number:
000-31549
PCT LTD
(Exact
name of registrant as specified in its charter)
Nevada
(State
or other jurisdiction of incorporation or organization)
|
90-0578516
(I.R.S.
Employer Identification No.)
|
4235 Commerce Street,
Little River,
South Carolina
(Address
of principal executive offices)
|
29566
(Zip
Code)
|
(843)
390-7900
(Registrant’s
telephone number, including area code)
Securities
registered under Section 12(b) of the Act: None
Securities
registered under Section 12(g) of the Act: Common Stock, par value $0.001 per
share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes ☐
No ☑
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐
No ☑
Indicate
by check mark whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted 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 such files).
Yes ☑ No
☐
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 has filed a report on and
attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act) Yes ☐
No ☑
As at
June 30, 2021, the aggregate market value of the Registrant’s
common equity held by non-affiliates computed by reference to the
closing price ($0.0172) of the Registrant’s most recently completed
second fiscal quarter was $12,589,934.
The
number of shares outstanding of the registrant's common stock as of
March 24, 2022 was
790,924,690 which does not include 209,075,310 shares of
common stock reserved against default on convertible
debt.
Documents
incorporated by reference: None
TABLE
OF CONTENTS
|
PART I |
|
Item 1. |
Business |
5 |
Item 1A. |
Risk Factors |
15 |
Item 1B. |
Unresolved Staff Comments |
25 |
Item 2. |
Properties |
25 |
Item 3. |
Legal Proceedings |
25 |
Item 4. |
Mine Safety Disclosures |
25 |
|
|
|
|
PART II |
|
Item 5. |
Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities |
26 |
Item 6. |
[Reserved] |
27 |
Item 7. |
Management’s Discussion and Analysis of Financial Condition and
Results of Operations |
27 |
Item 7A. |
Quantitative and Qualitative Disclosures About Market
Risk |
30 |
Item 8. |
Financial Statements and Supplementary Data |
31 |
Item 9. |
Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure |
66 |
Item 9A. |
Controls and Procedures |
66 |
Item 9B. |
Other Information |
67 |
Item
9C. |
Disclosure Regarding Foreign Jurisdictions that
Prevent Inspections |
67 |
|
|
|
|
PART III |
|
Item 10. |
Directors, Executive Officers and Corporate Governance |
68 |
Item 11. |
Executive Compensation |
70 |
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters |
73 |
Item 13. |
Certain Relationships and Related Transactions, and Director
Independence |
74 |
Item 14. |
Principal Accounting Fees and Services |
75 |
|
|
|
|
PART IV |
|
Item 15. |
Exhibits, Financial Statement Schedules |
76 |
Item
16. |
Form 10-K Summary |
76 |
Signatures |
|
77 |
FORWARD-LOOKING
STATEMENTS
This
document contains “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical fact are
“forward-looking statements” for purposes of federal and state
securities laws, including, but not limited to, any projections of
earnings, revenue or other financial items; any statements of the
plans, strategies and objections of management for future
operations; any statements concerning proposed new services or
developments; any statements regarding future economic conditions
or performance; any statements or belief; and any statements of
assumptions underlying any of the foregoing.
Forward-looking statements may include the words “may,” “could,”
“should,” “project,” “position,” “target,” “plan,” “seek,”
“foresee,” “outlook,” “estimate,” “intend,” “continue,” “believe,”
“expect” or “anticipate” and variations of these words and similar
expressions. These forward-looking statements present our estimates
and assumptions only as of the date of this report. Accordingly,
readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the dates on
which they are made. We do not undertake to update forward-looking
statements to reflect the impact of circumstances or events that
arise after the dates they are made. You should, however, consult
further disclosures we make in this Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Although
we believe that the expectations reflected in any of our
forward-looking statements are reasonable, actual results could
differ materially from those projected or assumed in any of our
forward-looking statements. Our future financial condition and
results of operations, as well as any forward-looking statements,
are subject to change and inherent risks and uncertainties. The
factors impacting these risks and uncertainties include, but are
not limited to:
• our
ability to efficiently manage and repay our debt
obligations;
• our
inability to raise additional financing for working capital,
especially related to purchasing critical inventory;
• our
ability to generate sufficient revenue in our targeted markets to
support operations;
• significant
dilution resulting from our financing activities;
• actions
and initiatives taken by both current and potential
competitors;
• supply
chain disruptions for components used in our products;
• manufacturers
inability to deliver components or products on time;
• our
ability to diversify our operations;
• the
fact that our accounting policies and methods are fundamental to
how we report our financial condition and results of operations,
and they may require management to make estimates about matters
that are inherently uncertain;
• adverse
state or federal legislation or regulation that increases the costs
of compliance, or adverse findings by a regulator with respect to
existing operations;
• changes
in U.S. GAAP or in the legal, regulatory and legislative
environments in the markets in which we operate;
• deterioration
in general or global economic, market and political
conditions;
• inability
to efficiently manage our operations;
• inability
to achieve future operating results;
• the
unavailability of funds for capital expenditures;
• our
ability to recruit and hire key employees;
• the
global impact of COVID-19 on the United States economy and our
operations;
• the
inability of management to effectively implement our strategies and
business plans; and
• the
other risks and uncertainties detailed in this report.
Readers
of this report should not place undue reliance on any
forward-looking statement, each of which applies only as of the
date of this report. Before you invest in our common stock, you
should be aware that the occurrence of the events described in the
section entitled “Risk Factors” and elsewhere in this report could
negatively affect our business, operating results, financial
condition and stock price. Except as required by law, we undertake
no obligation to update or revise publicly any of the
forward-looking statements after the date of this report to conform
our statements to actual results or changed
expectations.
In this
annual report, references to “PCT LTD,” “we,” “us,” “our” and “the
Company” refer to PCT LTD and its wholly-owned operating
subsidiary, Paradigm Convergence Technologies Corporation (“PCT
Corp.” or “Paradigm”). We also have a minority owned subsidiary,
Disruptive Oil and Gas Technologies Corp, and a dormant
wholly-owned subsidiary, Technologies Development Corp.
AVAILABLE
INFORMATION
We file
annual, quarterly and special reports and other information with
the SEC. You can read these SEC filings and reports over
the Internet at the SEC’s website at www.sec.gov. You
can also obtain copies of the documents at prescribed rates by
writing to the Public Reference Section of the SEC at 100 F Street,
NE, Washington, DC 20549 on official business days between the
hours of 10:00 am and 3:00 pm. Please call the SEC at
(800) SEC-0330 for further information on the operations of the
public reference facilities. We will provide a copy of our annual
report to security holders, including audited financial statements,
at no charge upon receipt to of a written request to us at PCT LTD,
4235 Commerce Street, Little River, South Carolina
29566.
PART I
ITEM
1. BUSINESS
Historical
Development
On
February 27, 1986, PCT LTD, formerly known as Bingham Canyon
Corporation (“PCTL”), was incorporated in the State of Delaware as
Hystar Aerospace Marketing Corporation of Delaware
(“Hystar-Delaware”) and was a subsidiary of Nautilus Entertainment,
Inc., (now called VIP Worldnet, Inc.), a Nevada corporation.
Hystar-Delaware completed a change of domicile merger on August 26,
1999 with then named Bingham Canyon Corporation, now named PCT LTD,
a Nevada corporation.
On
August 31, 2016, PCTL (then known as Bingham Canyon Corporation)
entered into a Securities Exchange Agreement (the “Exchange
Agreement”) with Paradigm Convergence Technologies Corporation, a
Nevada corporation (“PCT Corp.”). Pursuant to the terms of the
Exchange Agreement, PCT Corp. became the wholly-owned subsidiary of
PCTL after the exchange transaction. PCTL is a holding company
which, through PCT Corp., is engaged in the business of marketing
new products and technologies through licensing and joint
ventures.
PCTL and
PCT Corp. are located in Little River, SC. PCT Corp. was formed
June 6, 2012 under the name of EUR-ECA, Ltd. which was changed in
September 2015 to PCT Corp.
Business Strategy – Operating Subsidiaries
PCT Corp.
PCTL
focuses its business on acquiring, developing and providing
sustainable, environmentally safe disinfecting, cleaning and
tracking technologies. The Company acquires and holds rights to
innovative products and technologies, which are commercialized
through its wholly-owned operating subsidiary, PCT Corp. PCT Corp.
is a technology development, design, assembly and manufacturing
company specializing in providing cleaning/sanitizing/disinfectant
fluid solutions and fluid-generating equipment that create
environmentally safe solutions for global sustainability. PCT Corp.
markets new products and technologies for the healthcare,
agriculture, oil and gas and other industries through multiyear
system and service contracts that provide equipment and support for
our customers.
The
Company holds and defends its patents, trademarks, intellectual
property and distribution rights to its innovative products and
technologies. While a direct-sales capability is in place and will
continue to be expanded, it is not PCT Corp.’s intent to be the
sole distributor of its proprietary products. Members of PCT
Corp.’s management also act in supportive roles for the development
of distributors and manufacturers’ representatives who are involved
in selling its products. In addition to the direct sales program,
senior management is responsible for continuing to develop the
distribution and licensing program operations for the technology,
to develop new opportunities and applications for the products and
to promote the brands. PCT Corp.’s senior management intends to
also continue the pursuit of new technologies – particularly
technologies which are complementary to or enhance applications
opportunities for its existing products - upon which it will build
and expand its business.
PCT
Corp. has developed several models of electrochemical activation
generators and systems for the production of Hydrolyte®,
an EPA registered, highly effective sanitizer/disinfectant
microbiocide that is environmentally responsible and for use around
humans and animals. Hydrolyte® has been market tested
with commercial customers and is now fully launched into the
hospital and healthcare market. Management intends to focus on
leveraging the opportunities presented by Hydrolyte®
during 2021within the healthcare market, as well as building into
its oil and gas and agriculture markets.
PCT
Corp.’s revenue streams have in the past been derived primarily
from master service contracts, placing its Annihilyzer Infection
Control Systems and other models of its equipment into clients’
locations and benefitting from recurring monthly revenue for
typically 3- to 5-year contract periods, as well as licensing and
distributor agreements, along with some outright sales of
equipment. PCT Corp. made a “soft” launch in 2017, and management
focused on establishing distributor operations and direct sales in
addition to expanding its equipment production capabilities. Direct
sales of equipment and Hydrolyte® have been managed by members of
the senior management team. During 2019, PCT Corp. added additional
distributors and supplemental EPA registrants (licenses), in
addition to building on existing distributors that have existing
healthcare, and other industry, customer relationships. The prior
years’ distributors were based in New Jersey/New York, North
Carolina, Ohio and Florida. As a result of the unprecedented
COVID-19 pandemic’s onset in March of 2020, PCT Corp. found itself
unable to travel to install Annihilyzer Infection Control Systems
into healthcare settings; so, management decided to upfit its
Little River, SC facility to produce significantly increased fluid
production capacity to 10,000 gallons a day to serve healthcare
facilities’ and others’ critical needs for a hospital level, US
EPA-registered disinfectant. During 2020, PCT Corp.’s distribution
network was vastly expanded throughout the United States, including
Puerto Rico, as well as into the United Kingdom. A
distributor-focused website was launched (www.pctcorporation.com) to
build the company’s Hydrolyte® brand and promote fluid sales.
Management expects to continue vetting and adding more
strategically located and specific industry-focused distributors
and is in negotiations with several potential entities for certain
market segments.
In
building out our production capabilities, PCT Corp. developed
strategic operating relationships with firms that are leaders in
production, manufacturing and distribution within the various
industries where the markets for our technologies exist. Management
believes that this strategy, properly executed, should allow for
the most rapid possible rollout of the products and solid capture
of market share.
Disruptive Oil and Gas
Technologies Corp
On July 11, 2021, we incorporated a new wholly-owned subsidiary,
Disruptive Oil and Gas Technologies Corp (“Disruptive O&G”), in
the State of Nevada. Disruptive O&G was formed to allow us
flexibility in operations dealing with the oil and gas industry. As
at December 31, 2021, Disruptive O&G had not commenced
operations.
In October of 2021, we entered into a contribution agreement (the
“Contribution Agreement”) among Nano Gas Technologies, Inc. (“Nano
Gas”), NGT Energy Inc, Pentagon Technical Services, Inc.
(“Pentagon”) and Disruptive O&G. Pursuant to the Contribution
Agreement, Nano Gas assigned a patent, titled “Nanobubble
Dispersions in Electrochemically Activated Solutions”, to
Disruptive O&G in return for a 46.25% ownership interest in the
entity and Pentagon was issued a 7.5% ownership interest in the
entity for services. A copy of the Contribution Agreement is
attached hereto as Exhibit 10.7.
Technologies Development
Corp
On July 11, 2021, we incorporated a new wholly-owned subsidiary,
Technologies Development Corp (“TDC”), in the State of Nevada. TDC
was formed in anticipation of expanding our operations through the
development of additional technologies, joint venturing with
industry partners or other purposes as determined by management. As
of December 31, 2021, TDC was inactive; however, subsequent to
year-end, TDC has located a company with unique technology and is
in discussions to structure a potential transaction in the second
quarter of 2022.
Principal
Technology: Hydrolyte® and PCT
Catholyte
Paradigm’s
generator systems make two products in the cleansers, hard-surface
sanitizers, and disinfectants categories:
|
• |
Hydrolyte® US EPA Registration No. 92108-1 is a highly
effective hard-surface sanitizer and/or disinfectant with the
lowest EPA toxicity rating possible (“4”); and, |
|
• |
PCT Catholyte, a similarly safe, mild detergent, degreaser and
surfactant that is easily applied using mop buckets, sprayers and
floor cleaning machines for basic janitorial cleaning
purposes. |
Both
products are outputs of a single process of electrochemical
activation (“ECA”) generation process using the Company’s
technology and input ingredients derived from naturally occurring
salt minerals and water. Commercially, the primary product is
Hydrolyte®, and the second product of the process,
Catholyte, is a very useful and effective product for which
parallel markets exist and profitable revenue streams are being
developed.
The
company had two registrations of Hydrolyte® with the U.
S. Environmental Protection Agency (“EPA”) during 2019 but retained
only the most valuable Registration (92108-1) at the end of 2019,
having sold the duplicate registration to a third-party entity.
Hypochlorous acid- (HOCl-) based solutions such as
Hydrolyte® are approved for specific uses and with
specific directions by the Food and Drug Administration (“FDA”) for
cleaning and sanitizing applications and by the United States
Department of Agriculture (“USDA”) for use in food processing.
These “approvals” are covered in various Federal Codes.
Although
it has been well known for many years that an aqueous solution of
hypochlorous acid (HOCl), branded by the Company as “Hydrolyte®”,
(commonly called “anolyte”) can deliver extremely effective
decontamination and disinfectant results, previous challenges in
the production technology had rendered its use economically
infeasible in most applications. The primary drawbacks with
previous anolyte production technology were: 1) the inability to
generate anolyte in high enough concentrations (Parts Per Million –
PPM) of the active ingredient, HOCL; 2) high enough commercial
volumes from the generators (as opposed to 1 quart to 1 gallon,
small volume batch or low flow generators); 3) reliability of the
generators or fluids; and, 4) the relatively short time that the
product maintained its maximum decontaminative efficacy (“shelf
life”) and consistency.
By
nature, Hydrolyte® is a metastable, aqueous solution of
hypochlorous acid generated through the ECA process. It has a high
redox potential (900 millivolts) and a greater biocidal effect than
chlorine and other toxic chemicals. Hydrolyte® is 99.5%
water + salt rendering it of less concern to humans; yet, it is
effective against the various classes of pathogens comprising
bacteria, viruses, spores and yeast. Organisms in these categories
include C. diff, TB, Parvovirus. Norovirus, Listeria, E. Coli, HIV,
Hepatitis C, Influenza A, Candida and antibiotic-resistant strains
such as MRSA, VRE and CRE. Using Hydrolyte® in
decontamination and sterilization processes generally eliminates
the need for the use of other highly toxic chemical biocides (such
as ammonia, chlorine bleach and glutaraldehyde) which are commonly
used in sanitizing, disinfection and decontamination. On March 31,
2020, we became sanctioned to use the US EPA’s “emerging viral
pathogens claim” which assisted our commercialization efforts to
provide Hydrolyte® to many distributors.
This Company’s proprietary production, distribution and
applications technologies have solved these problems. Its
production equipment allows the Hydrolyte® solution to
be produced consistently with specific, predetermined concentration
of HOCl within the range of concentrations typically employed (50
to 600 PPM) as well as the desired pH level (the pH scale
measures how acidic or Alkaline a substance is) that may be
desirable for any given application. To resolve the maintenance of
efficacy issue, PCT Corp. has perfected generation (production)
equipment which is small enough to be located on the customer’s
facility, allowing for production-on-demand rather than maintaining
stored product inventory. For customers who will not use enough
product to justify the on-site equipment, the company intends to
engage industry-specific distribution and commercial services
companies to provide the products to end-user customers on a
regular delivery schedule. The combination of the on-site
generation and delivery solutions should assure end-users will
always be supplied with fresh, full-strength
product.
Production:
Hydrolyte®
is generated with the Company’s proprietary equipment. The
production technology for Hydrolyte® generates a product with
predetermined PPM and pH properties, i.e., the equipment can be
calibrated to deliver any desired PPM level; and we believe it is
superior to any other known production process or equipment
available in the market today. The scalable Hydrolyte® generation
systems technology largely will be housed in portable and mobile
units, which can be readily moved within a building or from site to
site, although more permanent installations, probably employing
larger generation systems, will be made in situations where such
installation is appropriate or required. The Company’s models of
Hydrolyte® generator equipment is classified, dependent upon
configuration and volume of output:
|
• |
Annihilyzer Infection Control System –
Hospital/Healthcare |
|
• |
Annihilyzer Infection Control System – Rack Model |
|
• |
Hydrolyte Generator – Large and Medium Volume |
|
• |
SurvivaLyte Manual Generator – Small Volume |
|
• |
Annihilyzer Hospital 360 SMART Spray Cart |
|
• |
School/Hospitality Industry and General Business 360 SMART Utility
Cart |
Other
models and newer generations of the Annihilyzer® Infection Control
System and Hydrolyte® generating equipment are in research and
development.
Markets:
The
primary applications for the Hydrolyte® technology are in cleaning,
sanitizing, and disinfecting in a variety of market sectors and
settings, including:
|
• |
Institutional facilities, such as hospitals, nursing homes, hotels,
correctional facilities and schools; |
|
• |
The agriculture industry for pre- and post-harvest disinfection of
crops, sanitization in food processing, and certain applications in
animal husbandry; |
|
• |
The oil and gas industry where Hydrolyte® can provide a
process to disinfect water used in hydraulic fracking processes
(“frac water”) and to kill sulfate reducing bacteria in “sour” oil
and gas wells; and Catholyte can be used to clean equipment and aid
in product recovery when applied “down hole”; and. |
|
• |
Other potential market opportunities are available, e.g.,
disinfecting and sanitizing of water in public and private water
systems and industrial waste-water systems. |
Management
determined that the most direct paths to rapid revenue and earnings
growth are in the institutional facilities and agriculture markets,
although the agricultural market presents some EPA-related
barriers. The preponderance of business development and marketing
resources are currently being devoted to these two markets.
Management intends to also work to maintain our position and
expertise in the oil and gas industry to assure that current
customer relationships are maintained, business opportunities at
hand are pursued and that we are properly positioned for a roll-out
as, and when, drilling activity increases as anticipated. As
further market development occurs, the Company anticipates
considering and acting upon factual information.
Institutional
Facilities: Hospitals, Health Care Facilities and
Schools
PCT
Corp.’s senior research and development personnel have developed
several models of equipment to be deployed as a state-of-the-art
integrated product dispensing, tracking (patented RFID tracking
features) and management systems for applications in the
institutional facilities market. This integrated technologies
solution, branded as PCT’s Annihilyzer® Infection
Control System, has been designed most particularly for hospitals,
large long-term care, assisted living and nursing home facilities.
In various configurations (utilizing a rack model) it in can be
deployed in other health care facilities including urgent care
centers, medical, dental and veterinary offices. It is adaptable to
deployment in schools, prisons, hotels, and many other facilities,
although the primary marketing and sales goal for PCT Corp. remains
with the hospital market. A complete and custom turn-key cleaning
and disinfection program solution can be provided to each
facility.
At the
physical core of the Annihilyzer® System is PCT Corp.’s on-site
generation equipment, housed in the Annihilyzer® Filling
Station (the Hydrolyte® generating portion of the equipment), also
containing the Company’s patented tracking system, managed
disbursement and bottling system for fluid production,
containerization and use. Spray bottles and other containers are
labeled when filled or refilled with product identification and
date of production using printed labels and radio-frequency
identification (“RFID”) tags. Reading these labels and tags before
use assures that the correct and “fresh” product is always being
used. Each room is also given an RFID tag. By reading the RFID room
tags with a mobile app in a Mobile Data Terminal (ruggedized
smartphone), the system tracks what is cleaned and disinfected,
when, with what product, and by whom. The station is Wi-Fi
connected to smartphones, so it can receive and store all of the
data collected. The data can be used to generate a complete record
of all cleaning, disinfecting and sanitizing activity, including
personnel time and task data – a cost saving convenience to
management.
The
Company created and offers a proprietary automated state-of-the-art
Electrostatic Spray Cart for use in hospital (or
hospitality-industry) settings, allowing for rapid disinfecting of
rooms once a patient (guest) has vacated the room. This system is
designed to reduce the turnover time required between
patients/guests, potentially increasing revenue opportunities, and
improving efficiency of hospital/hotel personnel. A smaller scaled
model of the electrostatic spray cart is available to other
industries, such as hotels, transportation, schools, and other
businesses.
PCT
Corp. deploys its on-site production equipment under service
contracts, charging an installation and set-up fee followed by
monthly contract fees (some pricing models may include, or may be
based on, a price per gallon of product used), over a contract
period of approximately 3 – 5 years. The equipment is deployed and
maintained through PCT Corp.’s personnel at first, then through
specially-trained distributors. The Company is exploring the use of
licensed commercial services companies to provide the future
on-site support, as required. The product generators and other
components of the on-site systems are currently monitored remotely
by a PCT Corp. equipment specialist(s), but we are considering
contracting with a monitoring company that is highly experienced
and provides round the clock expertise in remote monitoring and
response systems. The precise nature of any functional problems
that may occur with any of the system’s components are, in most
cases, automatically communicated via the internet to the
monitoring and control center of the equipment. Any problem is then
resolved through a three-tiered problem response system: first by
remote access to the computerized system controls, second by an
on-site technician call, and third through a “rapid replacement”
program. If problems are not resolved by the first or second tier
responses, then PCT Corp. would overnight ship replacement parts
or, if necessary, a complete station or system and have the
defective unit returned for repair.
Agricultural
Antimicrobial Pesticide
In the
agricultural sector our microbicide is branded as
“Hydrolyte® Green.” Our testing and field trials
continue to indicate that it can provide pre-harvest disinfection
and decontamination solutions for any number of field crops that
are affected by various bacterial and fungal pathogens. Through
USDA grants and multiple studies by universities around the world,
hypochlorous acid solutions have been tested and proven effective
in post-harvest applications to include sanitizing at point of
harvest, point of packing, and points of sale.
While
Hydrolyte Green® is effective in these post-harvest applications,
the Company’s major objective is to deliver solutions for
pre-harvest pathogen contaminations, where a multitude of microbial
infestations of many crops still need effective solutions that will
qualify for regulatory approvals necessary to bring the treatment
solution into commercial use. PCT Corp.’s agricultural research
program continued throughout 2019 and is intended to support a
continuous rollout of scientifically tested and certified
applications for the treatment and prevention of numerous specific
microbial infestations of a wide variety of crops. This research
activity is expected to capture the test data required for
regulatory approvals, and market acceptance of, the specific uses
for the specific crops. During 2018, we executed a distribution and
license agreement with an agricultural chemical specialty company
and are actively involved in additional field trials of Hydrolyte
Green®. The US EPA product registration “system” has presented the
Company with challenges that have yet to be overcome so that
commercial entry in this industry may move forward. For this
reason, PCT Corp.’s prior agricultural-focused distributor allowed
its distribution and license agreement to lapse after October 1,
2019, having paid the Company $100,000 for the 1-year rights
associated with the agreement.
While
company management, technical staff and consultants are certain of
the ability of Hydrolyte® to mitigate most microbes;
further testing and documentation are required to determine optimal
protocols for treatment, including application concentrations,
volumes, and frequency, as well as optimal delivery techniques
(which could be any or all of: root drenching, foliar spray or
injection) needed to produce the most effective and least costly
solutions to microbial infestations. It must also be demonstrated
and certified by independent third-party testing that the treatment
does no harm to the plants or the crops to be harvested and leaves
no chemical residual inside the crop.
PCT
Corp. undertook a long-term testing and field trial program with an
independent agricultural pesticide research firm to determine the
feasibility of pre-harvest use of Hydrolyte® to treat
various microbial infestations in as many different crops as
possible. The research in this field continues, to-date. Management
has identified several microbial crop infestation problems for
which safe and effective treatment solutions have yet to be found
and for which there is preliminary evidence that a properly
researched Hydrolyte® treatment protocol could provide
such a solution. Management anticipates positive results from
independent testing leading to the creation, over time, of multiple
business opportunity targets on which to build a solid consistent,
long-term revenue stream with solid growth potential for the
foreseeable future.
Testing/Research:
Six
years ago (2015), an opportunity was identified for research into a
possibly significant opportunity for commercialization of a
formulation of the Company’s Hydrolyte® product. A
critical agricultural market was seeking solutions to eradicate a
serious and threatening microbial infestation. The company’s
management determined that our product’s microbicide capability
could provide a readily deployable and effective solution to the
problem. Three months (late 2015 and early 2016) were spent
determining the research requirements, target-market requirements
and the potential for successful commercialization in the
identified market. Two seasoned professionals with the necessary
expertise were brought on board, and the project was launched from
the Company’s facility in Little River, South Carolina, during the
fourth quarter of 2015.
To
demonstrate that the Company could provide a viable solution,
research protocols were developed, and a series of laboratory tests
and preliminary trials were performed at a major university by
agricultural scientists who were experts on the crop and the
infestation. The results of these tests and the trial analysis were
very favorable, showing a >97% percent kill rate on the treated
microbes in the laboratory and a >88% kill rate in the field
trial environment.
Encouraged
by early laboratory and field trial results, management secured the
services of a consulting specialist in the target crop and the
microbial pathogen causing the disease. Working with the
consultant, management determined the market to be viable for the
use of the Company’s Hydrolyte® in effectively treating
the disease.
The
second field trial, for nine months during 2016, was extensive and
involved a larger-scale operation over a greater length of time.
Specific third-party reports to the company indicated “good to
excellent control of the disease source, economically feasible, EPA
registration possible” and a continuing very high field kill rate.
Upon receiving these results, the Company began developing plans to
make certain it will be prepared to “supply fluid product in
commercial quantities.”
Preventive,
curative and health maintenance programs for the application of the
Company’s Hydrolyte® were discussed and developed, with
input and encouragement by the fruit’s national growing
association, as well as from nationally recognized educational and
research institutions.
In March
2017, the Company began a much larger-scale field trial of our
product on a 20-acre plot that has trees showing widespread
presence of the disease. We, and our consulting specialist, expect
to replicate and to validate previous results and further define
the best possible methodology and protocols for effective
application of the Hydrolyte® solution. Because the
results of the trial were positive, as expected, management
continued to expand its commercial field trial usage of Hydrolyte
Green ® with its agriculture distributor and licensee and is
gaining valuable research data to be used in further
commercialization efforts:
|
• |
Finalize regulatory approvals to enter the market as the only known
resource for resolving this agricultural disease with no known
negative effects to the fruit; |
|
• |
Finalize designs for, and assemble, large volume product generation
and delivery systems best suited to the agricultural working
environment; |
|
• |
Pursue additional EPA approvals for additional applications in the
agricultural markets; and, |
|
• |
Forecast, with greater accuracy, product deployment protocols
through research and development input for use in the distribution
and sales of product in this market. |
Although
regulatory agency progress within this market was much slower than
expected during 2020 due at least in part to the pandemic and
certain financial constraints, the Company continues its field
trials and compiling documented results.
Oil
and Gas Industry
World market prices for oil have fluctuated during the past several
years. As opportunities in this market emerge, we plan to use
oil-field service companies to market and distribute our
Hydrolyte® and Catholyte products to their
clients/customers. Management incorporated Disruptive O&G to
address this market and anticipates the Contribution Agreement with
Nano Gas will enhance our presence and success in the industry.
Management
believes that the benefits of our proven technologies continue to
be desirable for, and should continue to be used in, hydraulic
fracturing drilling worldwide. Some of the benefits of our products
and systems include: elimination of highly toxic chemicals
currently used for decontamination, reduced negative environmental
impact, reduced recovery costs, improved product quality, and
potentially opening new areas for oil and gas retrieval. As a
result, management is preparing for expanding business
opportunities in this sector in the mid-term future. As part of
this preparation, Paradigm is developing a large-scale system
utilizing Hydrolyte® to decontaminate water and fluid
going “down hole” in oil and gas-well drilling; and to
decontaminate recovered “frac” water for reuse in the fracking
process. Operational experience has shown that
Hydrolyte® not only effectively decontaminates the water
supply of microbes, but also does not cause corrosive damage to gas
and oil recovery equipment; nor does it cause any loss of
performance to the other chemicals, additives, and propellants
currently used in drilling and fracking processes.
Hydrolyte®
also addresses another problem in the oil and gas industry. In a
separate application, Hydrolyte® can be used to reduce
the sulfur content of crude oil in the ground. There are
sulfite-producing microbes in crude oil which cause higher levels
of hydrogen sulfide (“H2S”) and “sour” wells with sour
crude oil which is less valuable than “sweet” crude which has low
H2S. It has been demonstrated that Hydrolyte®
is effective in reducing or eliminating these microbes, thus
improving the quality and value of the oil recovered from the
treated well.
Hydrolyte®
can reduce the costs of transporting contaminated water from the
wellbore to a treatment facility and back for reuse, thus reducing
the need for construction of water processing capacity, providing a
substantial reduction in the costs of drilling, and enabling a
sustainable increase in efficiency. The Company intends to maintain
an active marketing program; and expects that there will be renewed
opportunities for revenue growth from the frac drilling and related
oil-field applications.
In 2019
we put in place a commercial collaboration agreement and sold
additional Hydrolyte® large volume equipment with a distributor
located in Meeker, Oklahoma. Collaboration in oilfield/gas industry
testing, along with preliminary conversations and observations
about the Cannabis market, regarding models of delivery of the
fluids to the oil and gas market. During 2020, we engaged the
consulting services of Pentagon Technical Services led by David
Holcomb, PhD, a renowned oil and gas industry expert. Building on
laboratory testing, Dr. Holcomb guided the development of protocols
for a three- to four-month in-field testing program of PCT
Catholyte and other additives to enhance oil production in wells.
The in-field testing project was initiated utilizing six (6) test
wells in the Grassy Creek oil field located in Deerfield, MO. Four
weeks were spent establishing a baseline of oil production from
each well. Initial test results were very encouraging, so the
Company determined it needed to further explore the oil to water
ratio results in the test wells. Recently, it was concluded that
three of the six wells were so damaged that it was unlikely there
would be any positive results from the PCT Catholyte treatments.
The damage to the wells was due to previous recovery efforts that
utilized a super-heated steam process that increased the number of
fractures, which, when combined with the viscosity of oil (16°),
created a prohibitive situation wherein primarily waters would “go
through.” We continue to perform testing on the remaining three
wells and are encouraged by the increasing ratio of oil to
water.
Marketing,
Sales and Distribution of Hydrolyte®
Once
again, marketing and sales activities were nominal in the first
half of 2021 while management focused on adapting its business
model to meet the climate created by the worldwide pandemic. A good
portion of 2021 was spent building sufficient physical production
capacity to meet demand, while developing work flows, shipper
relationships and accounting systems to serve fluids customers
instead of assembling equipment. New distributor and customer
relationships were established through management’s existing
contacts and as a result of much of the business world seeking an
effective disinfectant to protest themselves during the
unprecedented pandemic event. Management, working with consultants
well-known to management, continues to establish distributor and/or
joint venture opportunities and other agreements for the marketing
and sales of PCT Corp.’s products and services.
The
Company began updating marketing materials and websites in order to
present a consistent brand identity.
PCT
Corp. uses its production, operations and research and development
facility in Little River, South Carolina to display its products
and technologies, to produce fluids for shipment, and also
established a fluid production depot in Fort Wayne, Indiana during
2020, and is considering strategic assembly capabilities for this
facility. The Little River location provides a meeting and
demonstration area where working models and simulations allow
first-hand interaction and live demonstrations for interested
parties. Little River hosts on-site visits for training, as well as
allowing for research and development to freely occur in a
controlled environment.
The
Institutional program for PCT Corp.’s healthcare sales program
began with agreements with prospective customers for
pilot/demonstration installations at their facilities; those pilot
installations were completed early in 2019 and the Company has
completely moved away from “trial” installations in the healthcare
industry, as pre-contract trial periods are no longer
necessary.
Production,
Assembly and Principal Suppliers
Hydrolyte®
Generation and Equipment Production:
PCT
Corp. moved into its operations, research and development and
production facility in Little River, South Carolina on December 15,
2016. The research, development and testing spaces were suitable
and functional as already built. A new design and layout for a
final systems assembly area and an expanded testing area was
finalized in January 2018. Since 2019, PCT Corp. has designed and
built the following Hydrolyte® generating systems in the Little
River facility:
|
• |
Annihilyzer Infection Control System –
Hospital/Healthcare |
|
• |
Annihilyzer Infection Control System – Rack Model |
|
• |
Hydrolyte Generator – Large and Medium Volume |
|
• |
SurvivaLyte Manual Generator – Small Volume |
|
• |
Annihilyzer Hospital 360 Electrostatic SMART Spray Cart |
|
• |
School/Hospitality Industry and General Business Electrostatic 360
SMART Spray Cart |
Annihilyzer® Systems
Assembly:
Annihilyzer
generator systems are assembled and tested in Little River and the
other outsourced components for the Annihilyzer®
Infection Control Systems are shipped to Werks Manufacturing Inc.,
in Ft. Wayne, Indiana for final assembly of the
Annihilyzer® Kiosk and Filling Station cabinet. The
Kiosks, Filling Stations and the 360 Electrostatic Spray Carts are
fabricated by Werks, where PCT LTD’s patented RFID technology is
inserted, as well.
Competition
In all
our target markets, PCT Corp. will compete directly with large
firms selling competing, but toxic, traditional cleanser and
disinfectant products that are manufactured off-site and shipped to
customers or distributors. These competitors have longer operating
histories, more experience, substantially greater financial and
human resources, greater size, more substantial research and
development and marketing operations, established distribution
channels and are well positioned in the market to fight
aggressively to defend their market share. However, the combined
markets in which PCT Corp. is engaged are so massive that its
competitive position as environmentally-responsible and, growing
numbers of installations in various markets, combined with being
less expensive, are allowing PCT Corp. to prosper. The Company’s
on-site generation technology provides a substantial competitive
advantage in addition to its unique properties.
There
are a limited number of potential competitors providing some form
of anolyte-based biocide. Based on management’s research these
companies are largely in early operating stages, concentrated in
local or regional markets and have no technology or pricing
advantage. These include Aquaox, Ecologic Solutions, and MIOX
Corporation. During 2020, several new HOCl-focused companies have
entered the market, but we find that the competitors are oftentimes
not producing the same, consistent, 500 ppm, near-neutral pH fluid
solutions or that they may be altering the fluid to increase
“shelf-life,” which changes the chemical composition of the HOCl.
The markets for HOCl (Hydrolyte®) are so vast, that we believe that
credible competitors will positively impact our growth.
In
institutional facilities and agricultural industries, PCT Corp.
believes that its proprietary integrated technologies solutions in
production, distribution, applications management and tracking will
continue to provide a competitive advantage in direct competition
with other HOCl-producers. In the oil and gas industry PCT Corp.
has demonstrated the effectiveness and efficiencies of its
Hydrolyte® and continues to develop commercial market data and test
results to further promote the use of PCT Catholyte and processes
and commercial acceptance from its customers. It is well positioned
with respect to other companies providing anolyte-based
biocides.
Intellectual
Property
EPA
product registrations of disinfectants and pesticides allow the
registered products to be sold and distributed with labels
identifying specific laboratory tested and proven kill claims of
its effectiveness against specific microbial pathogens. Below is a
summary of recent EPA registrations, EPA sub-registrations and
other intellectual property the Company has acquired. The Company
continues to hold certain intellectual properties relative to the
Soloplax biodegradable plastics technology but does not anticipate
pursuing commercialization of the technology associated in the
foreseeable future.
On
December 15, 2016, Paradigm acquired an EPA sub-registration
(#82341-1-92108), which provides for entry into the facilities and
agricultural markets described previously in this document. The
company is actively pursuing sales under this registration and
label. In addition, the Company has registered its products in
several states, under its US EPA No. 92108-1.
On March
13, 2017, the Company entered into a Registration Transfer
Agreement (“Transfer Agreement”) and a Data License and Assignment
Agreement (“Data Agreement”) with a third party. Pursuant to the
Transfer Agreement, the Company received United States
Environmental Protection Agency’s (“EPA”) Registration number
82341-4 for Excelyte® VET for a one-time fee of
$125,000.
On April
6, 2017, Paradigm, acquired the complete intellectual property,
including know-how, trade secrets and patent rights to the
hardware, firmware and software comprising the product inventory
generation, disbursement, containerization, tracking and reporting
system, trademarked as the Annihilyzer® System. The
Annihilyzer® System is designed to be employed on-site in
healthcare facilities. The company already owns IP rights in the
generation system employed in this integrated technology
system.
The
Company has developed proprietary know-how related to the
electrolytic cells and systems that generate our
Hydrolyte® and Catholyte products. Paradigm continues,
through its research and development program, to perfect the
production innovation, know-how, trade secrets and patentable
innovations incorporated into the improved production, inventory
management and reporting systems. Current focus is on customizing
system and equipment design to suite the production parameters and
conditions in various specific venues and applications, e.g.,
agricultural field setting vs. packing house or oil and gas
field.
On April
12, 2018 the Company entered into an agreement to purchase the
original US EPA Registration No. 83241-1 for EcaFlo® Anolyte. The
Company paid a $5,000 deposit on the agreement with the remaining
balance due in increments during the second quarter of 2018 to
finalize the agreement. The Company continued to make installment
payments to complete the purchase of this label and, during 2019,
sold the rights to this registration to a third-party for a price
that included the remaining portion of the registration that PCTL
had not yet paid to the owner, thus completing the transaction and
conveying the registration to the new owner.
Research
and Development
PCT
Corp.’s research and development costs for the years ended 2021 and
2020 were $38,630, and $40,429, respectively. During that period,
PCTL continued ongoing research and development testing of the
application of the Hydrolyte® technology in the oil and gas
industry; as a biocide in institutional facilities, such as,
hospitals, jails and medical facilities; and continued in trial
tests in agriculture and food processing.
Research
and Development is an ongoing process to develop new and more
functional designs for our equipment, specifically Annihilyzer® and
“rack model,” high-volume equipment.
Several
years ago, PCT Corp. entered into an agreement with Florida
Pesticide Research, Inc. to conduct agricultural research intended
to support an aggressive rollout of tested and certified
applications for the treatment and prevention of numerous specific
microbial infestations of a wide variety of crops. While company
management, technical staff and consultants are confident of
Hydrolyte® Green’s ability to kill many damaging
microbe, further testing and testing validation is required to
determine proper application concentrations, volumes, frequency and
delivery techniques (which could be any or all of: root drenching,
foliar spray or injection) needed to be most effective and least
costly. It also must be demonstrated that the treatment does no
harm to the plants or the product to be harvested and that no
harmful residual remains in the crop because of the treatment.
Management continues to maintain and expand the testing and
demonstration program currently in place over to other crops, as
well as to target various additional crop infestation problems for
the foreseeable future.
Government
Regulations and Compliance with Environmental Laws
PCTL is
not aware of any existing or probable government regulations that
would negatively impact our operations, other than requiring
additional time for US EPA protocol approval in the agricultural
market. As a licensor of water treatment technology, the Company is
not subject to government regulations for the removal of oils,
solids and pathogens from water, other than normal safety standards
and certifications (such as UL or CE) for goods that we manufacture
for demonstrations and joint ventures, and our product lines.
However, prospective customers are subject to local, state and
federal laws and regulations governing water quality, environmental
quality and pollution control. To date, compliance with government
regulations has had no material effect on the company’s operations,
capital, earnings, or competitive position, and the cost of such
compliance has not been material. The Company is unable to assess
or predict at this time what effect additional regulations or
legislation could have on its activities.
In
addition, PCT Corp.’s prospective customers will be subject to the
Clean Water Act which regulates the discharge of pollutants into
streams and other waters of the U.S. (as defined in the statute)
from a variety of sources. If wastewater or runoff from facilities
or operations may be discharged into surface waters, the Clean
Water Act requires that person to apply for and obtain discharge
permits, conduct sampling and monitoring and, under certain
circumstances, reduce the quantity of pollutants in those
discharges. The federal government may delegate Clean Water Act
authority to the states.
Employees
At the
end of 2021, PCT Corp. had sixteen (16) full-time employees, two
(2) part-time employees, and contract consultants who were engaged
on a regular basis. Management confers with outside expert
consultants, attorneys and accountants as necessary. The company
anticipates engaging additional full-time employees in
2022.
ITEM
1A. RISK FACTORS
You should carefully consider the risks described below together
with all of the other information included in this report before
making an investment decision with regard to PCTL’s securities. The
risks and uncertainties described below are not the only risks and
uncertainties facing us. Additional risks not currently known to us
or that we currently believe are immaterial may also impair our
operating results, financial condition, and liquidity. Our business
is also subject to general risks and uncertainties that affect many
other companies. For purposes of this section, references to our
business include the businesses of our subsidiaries, PCT Corp.,
Disruptive O&G and TDC. The risks discussed below are not
presented in order of importance or probability of occurrence.
COVID-19
The current and potential effects of coronavirus may impact our
business, results of operations and financial
condition.
Actual
or threatened epidemics, pandemics, outbreaks, or other public
health crises could materially and adversely impact or disrupt our
operations, adversely affect the local economies where we operate
and negatively impact our customers' spending in the impacted
regions or depending upon the severity, globally, which could
materially and adversely impact our business, results of operations
and financial condition. For example, since December 2019, a strain
of novel coronavirus (causing "COVID-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.
Risks
Related to Our Business
We have a history of losses and may never become
profitable.
We have
recorded net losses for the past four years and have significant
accumulated deficits. We have relied upon loans and advances for
operating capital. Total revenues will be insufficient to pay off
existing debt and fund research and development. We cannot
assure you that we can identify suitable license or joint venture
opportunities, or that any such agreements will be profitable. We
may be required to rely on further debt financing, further loans
from related parties, and private placements of our common and
preferred stock for our additional cash needs. Such funding sources
may not be available, or the terms of such funding sources may not
be acceptable to the Company.
Our inability to generate sufficient cash flows may result in us
not being able to continue as a going
concern.
Our
overall cash position as of December 31, 2021 provides limited
liquidity to fund day-to-day operations. The Company’s independent
registered public accounting firm has expressed substantial doubt
about our ability to continue as a going concern. We may need to
seek additional financing to support our continued operations;
however, there are no assurances that any such financing can be
obtained or achieved on commercially reasonable terms, if at all.
In view of these conditions, our ability to continue as a going
concern depends on our ability to generate sufficient cash flows
from our new technology products or to obtain the necessary
financing for operations. The outcome of these matters cannot be
predicted at this time. The audited consolidated financial
statements for the year ended December 31, 2021 do not include any
adjustment to the amounts and classification of assets and
liabilities that might be necessary should we be unable to continue
business operations. Any such adjustment could be
material.
Our indebtedness could adversely affect our business and limit our
ability to plan for or respond to changes in our business, and we
may be unable to generate sufficient cash flow to satisfy
significant debt service obligations.
As of
December 31, 2021, our consolidated indebtedness was $2,165,102
(net of discounts), with approximately $85,850 due to related
parties. Our indebtedness could have important consequences,
including the following:
|
• |
|
increasing our vulnerability to general adverse economic and
industry conditions; |
|
• |
|
reducing the availability of our cash flow for other
purposes; |
|
• |
|
limiting our flexibility in planning for, or reacting to, changes
in our business and the industries in which we operate, which would
place us at a competitive disadvantage compared to our competitors
that may have less debt; and |
|
• |
|
having a material adverse effect on our business if we fail to
comply with the covenants in our debt agreements, because such
failure could result in an event of default that, if not cured or
waived, could result in all or a substantial amount of our
indebtedness becoming immediately due and payable. |
Further,
a portion of our current indebtedness is in default, which subjects
us to potential litigation, increased fees and expenses, increased
interest rates and other potential damages.
Our
ability to repay our significant indebtedness will depend on our
ability to generate cash, whether through cash from operations or
cash raised through the issuance of additional equity-based
securities. To a certain extent, our ability to generate cash is
subject to general economic, financial, competitive, legislative,
regulatory, and other factors that are beyond our control. If our
business does not generate sufficient cash flow from operations or
if future equity financings are not available to us in amounts
sufficient to enable us to fund our liquidity needs, our financial
condition and operating results may be adversely affected. If we
cannot make scheduled principal and interest payments on our debt
obligations in the future, we may need to refinance all or a
portion of our indebtedness on or before maturity, sell assets,
delay capital expenditures, cease operations or seek additional
equity.
Despite the Company’s indebtedness levels, we are able to incur
substantially more debt, including secured debt. This could further
increase the risks associated with its
leverage.
The
Company may incur substantial additional indebtedness in the
future. The terms of current debt agreements do not fully prohibit
it from doing so. To the extent that the Company incurs additional
indebtedness, the risks associated with its substantial
indebtedness describe above, including its possible inability to
service its debt, will increase.
A significant portion of our current debt is in default, which may
subject us to litigation by the debt holders.
As of
December 31, 2021, we had cash and cash equivalents of $116,497 and
had a portion of short-term debt in default. The short-term debt
agreements provide legal remedies for satisfaction of defaults,
including increased interest rates, default fees and other
financial penalties. As of the date of this Annual Report none of
the lenders have pursued their legal remedies. 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 Preferred Series C shares and 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 and settlement of convertible debt in the year
ended December 31, 2021 for the convertible notes has been to
substantially dilute existing holders of common stock of our
Company. However, there is no assurance that management will be
successful in being able to continue to obtain additional funding
or defend potential litigation by note holders.
We will need additional capital in the future to finance our
planned growth, which we may not be able to raise or it may only be
available on terms unfavorable to us or our stockholders, which may
result in our inability to fund our working capital requirements
and harm our operational results.
We have
and expect to continue to have substantial working capital needs.
Our cash on hand, together with cash generated from product sales,
services, cash equivalents and short-term investments will not meet
our working capital and capital expenditure requirements for the
next twelve months. In fact, we will be required to raise
additional funds throughout 2022 or we will need to limit
operations until such time as we can raise substantial funds to
meet our working capital needs. In addition, we will need to raise
additional funds to fund our operations and implement our growth
strategy, or to respond to competitive pressures and/or perceived
opportunities, such as investment, acquisition, marketing and
development activities.
If we
experience operating difficulties or other factors, many of which
may be beyond our control, cause our revenues or cash flows from
operations, if any, to decrease, we may be limited in our ability
to spend the capital necessary to complete our development,
marketing and growth programs. We require additional financing, in
addition to anticipated cash generated from our operations, to fund
our working capital requirements. Additional financing
might not be available on terms favorable to us, or at all. If
adequate funds were not available or were not available on
acceptable terms, our ability to fund our operations, take
advantage of unanticipated opportunities, develop or enhance our
business or otherwise respond to competitive pressures would be
significantly limited. In such a capital restricted situation, we
may curtail our marketing, development, and operational activities
or be forced to sell some of our assets on an untimely or
unfavorable basis.
We are highly dependent on our officers and directors. The loss of
any of them, whose knowledge, leadership and technical expertise
upon which we rely, could harm our ability to execute our business
plan.
Our
success depends heavily upon the continued contributions of our
current officers and directors, whose knowledge, leadership and
technical expertise may be difficult to replace at this stage in
our business development, and on our ability to retain and attract
experienced experts, and other technical and professional
staff. If we were to lose the services of our officers
or directors, our ability to execute our business plan would be
harmed and we may be forced to limit operations until such time as
we could hire suitable replacements.
At this stage of our business operations, even with our good faith
efforts, potential investors have an increased probability of
losing their entire investment.
Because
the nature of our business is expected to change as a result of
shifts in the industries in which we operate, competition, and the
development of new and improved technology, management forecasts
are not necessarily indicative of future operations and should not
be relied upon as an indication of future performance. Further, we
have raised substantial debt and equity to fund our business
operations, which to date have generated insufficient revenue to
support our working capital needs.
While
Management believes its estimates of projected occurrences and
events are within the timetable of its business plan, our actual
results may differ substantially from those that are currently
anticipated. If our revenues do not increase to a level to support
our working capital needs, we will be forced to seek equity capital
to fund our operations and repay our substantial debt balances,
which may not be available to us at all or on acceptable
terms.
Our ability to license our products and technologies on a
commercially viable basis is unproven, which could have a
detrimental effect on our ability to generate or sustain
revenues.
The
technologies we offer to waste water and water from oil and gas
drilling have never been utilized on a full-scale commercial basis.
The Hydrolyte™ technology was only recently developed and all of
the tests conducted to date with respect to the technology have
been performed in a limited scale or small commercial scale
environment and the same or similar results may not be obtainable
at competitive costs on a large-scale commercial basis.
Accordingly, the Hydrolyte™ technology may not perform successfully
on a commercial basis and may never generate significant revenues
or be profitable.
We may not be able to successfully protect our intellectual
property rights.
We rely
on a combination of product registration, trademark, patent and
other proprietary rights laws to protect the intellectual property
rights that we own or license. It is possible that third parties
may challenge our rights to such intellectual property. In
addition, there is a risk of third parties infringing upon our
licensors’ or our intellectual property rights and producing
counterfeit products. These events may result in lost revenue as
well as litigation, which may be expensive and time-consuming even
if a favorable outcome is obtained. There can be no assurance that
adequate remedies would be available for any infringement of the
intellectual property rights owned or licensed by us. Any such
failure to successfully protect our intellectual property rights
may have a material adverse effect on our competitive
position.
Because our technology products are designed to provide a solution
which competes with existing methods, we are likely to face
resistance to change, which could impede our ability to
commercialize this business.
Our
Hydrolyte™ products are designed to provide a solution to replacing
traditional chemicals that are used in the treatment of bacteria
and scaling in industrial water processes. Specifically, we believe
it can provide a cost effective and environmentally friendly
solution in industrial facilities, agriculture, oil and gas and
other industries that consume large amounts of water in their
industrial processes. Currently, large and well-capitalized service
companies provide traditional chemical equipment and services in
these areas. These competitors have strong relationships with their
customers’ personnel, and there is a natural reluctance for
businesses to change to new technologies. This reluctance is
increased when potential customers make significant capital
investments in competing technologies. Because of these obstacles,
we may face substantial barriers to commercializing our
business.
To the extent demand for our products increase, our future success
will be dependent upon our ability to ramp up manufacturing
production capacity.
We
intend to continue marketing our products and services. To the
extent demand for our products and services, or other products we
may develop, increases significantly in future periods, one of our
key challenges will be to ramp up production capacity to meet sales
demand, while maintaining product quality. Our inability to meet
any future increase in sales demand, access capital for inventory,
may hinder growth or increase dilution.
Component shortages could result in our inability to produce volume
to adequately meet customer demand. This could result in a loss of
sales, delay in deliveries and injury to our
reputation.
Single
source components used in the manufacture of our products may
become unavailable or discontinued. Delays caused by industry
allocations, or obsolescence may take weeks or months to resolve.
In some cases, parts obsolescence may require a product re-design
to ensure quality replacement components. These delays could cause
significant delays in manufacturing and loss of sales, leading to
adverse effects significantly impacting our financial condition or
results of operations.
We may acquire assets or other businesses in the
future.
We may
consider acquisitions of assets or other business. Any acquisition
involves a number of risks that could fail to meet our expectations
and adversely affect our profitability. For example:
• The
acquired assets or business may not achieve expected
results;
• We
may incur substantial, unanticipated costs, delays or other
operational or financial problems when integrating the acquired
assets;
• We
may not be able to retain key personnel of an acquired
business;
• Our
management’s attention may be diverted; or
• Our
management may not be able to manage the acquired assets or
combined entity effectively or to make acquisitions and grow our
business internally at the same time.
If these
problems arise, we may not realize the expected benefits of an
acquisition.
We may not be able to
successfully fund future acquisitions of new businesses due to the
lack of availability of debt or equity financing on acceptable
terms, which could impede the implementation of our acquisition
strategy and materially adversely impact our financial condition,
business and results of operations.
In order to make future acquisitions, we intend to raise capital
primarily through debt financing, additional equity offerings, the
sale of stock or assets of our businesses, and by offering equity
in the businesses to the sellers of target businesses or by
undertaking a combination of any of the above. Since the timing and
size of acquisitions cannot be readily predicted, we may need to be
able to obtain funding on short notice to benefit fully from
attractive acquisition opportunities. Such funding may not be
available on acceptable terms. In addition, the level of our
indebtedness may impact our ability to borrow funds on acceptable
terms. Another source of capital for us may be the sale of
additional shares of common stock, subject to market conditions and
investor demand for the shares at prices that we consider to be in
the interests of our stockholders. These risks may materially
adversely affect our ability to pursue our acquisition strategy
successfully and materially adversely affect our financial
condition, business and results of operations.
Risk
Related to Our Industries
We are subject to extensive, complex, and challenging healthcare
and other laws.
The
Healthcare industry is highly regulated, and further regulation of
our distribution businesses and technology products and services
could impose increased costs, negatively impact our profit margins
and the profit margins of our customers, delay the introduction or
implementation of our new products, or otherwise negatively impact
our business and expose the Company to litigation and regulatory
investigations. Any noncompliance by us with applicable laws or the
failure to maintain, renew or obtain necessary permits and licenses
could lead to litigation and might have a materially adverse impact
on our business operations and our financial position or results of
operations.
Global increases in the supply of natural gas or oil may reduce
drilling operations in shale deposits, which could adversely affect
the attractiveness of our Hydrolyte™ technology in the oil and gas
industry.
The
development of new horizontal drilling techniques and the discovery
of unconventional oil and gas in new shale areas throughout the
U.S. and world market have opened up an enormous opportunity for
the Hydrolyte™ technology to replace traditional chemicals used to
kill bacteria in waters used for hydraulic fracturing. These
fracturing operations rely on enormous supplies of clean water to
be pumped downhole to break the rock that holds the oil and gas.
Much of the water used in drilling oil and natural gas wells and
the resulting water that flows back needs to be treated and creates
an opportunity for our Hydrolyte™ technology. However, horizontal
drilling in shale areas is very expensive; and if current oil
prices remain depressed, horizontal drilling may not be
cost-effective, and the lack thereof may adversely affect the
market for the Hydrolyte™ technology.
If federal and state legislation and regulatory initiatives
relating to horizontal drilling are passed, then it could
materially and adversely affect our results of
operations.
Our
business relies upon supplying chemical-free solutions for cleaning
the large amounts of water used in hydraulic fracturing
applications. Objections have been raised by environmentalists,
some landowners and some government officials including
environmental authorities that there have been adverse side effects
affecting the purity of the water supply as a result of the
injection of chemicals and water in connection with horizontal
drilling. Although we believe that Hydrolyte™ is a chemical-free
solution which should result in increased business, we cannot
assure you that legislation or rules will not be passed, or action
taken by environmental authorities that will preclude the use of
horizontal drilling.
At the
state level, certain states and localities have implemented
moratoriums and certain obligations on oil and gas companies using
horizontal drilling. The adoption of any future federal, state or
local laws or implementing regulations imposing reporting or
permitting obligations on, or otherwise limiting, the horizontal
drilling process could make it more difficult to perform, or even
prohibit oil and gas companies from using horizontal drilling, to
complete gas and oil wells. These additional costs to drillers
could result in reduced oil and gas drilling. This would reduce our
potential licensing revenue. If this were to occur more widely in
the United States, the demand for Hydrolyte™ may be eliminated or
substantially reduced. If any such federal or state legislation on
horizontal fracturing were passed, our revenues and results of
operations could be adversely affected.
Risks
Related to PCTL’s Common Stock
We have been late in filing our SEC Reports several times over the
last two years and may not be able to timely file our reports in
the future.
We are
subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith, are
required to file quarterly, annual and current reports, proxy
statements and other information with the SEC. Over the last two
years, we have been late in filing some of our quarterly reports
and our annual report. There can be no assurance we will not become
delinquent in our reporting requirements in the future, which may
result in Rule 144 becoming unavailable for resales of our common
stock or the SEC seeking to deregister our common stock from
reporting under the 34 Act.
There is a limited trading market for our shares of common stock on
the OTC Pink. You may not be able to sell your shares of
common stock if you need money.
Our
common stock is traded on the OTC Pink, an inter-dealer automated
quotation system for equity securities. There has been
limited trading activity in our common stock, and when it has
traded, the price has fluctuated widely. We consider our
common stock to be “thinly traded” and any last reported sale
prices might not be a true market-based valuation of the common
stock. Stockholders may experience difficulty selling
their shares if they choose to do so because of the illiquid market
and limited public float for our common stock.
Since
PCTL has been a shell company as defined in subparagraph (i) of
Rule 144 any “restricted securities” issued by the Company, while
we were a shell company, cannot be publicly sold for at least one
year from September 2, 2016, the date we filed a Current Report on
Form 8-K regarding Paradigm’s operations. In addition, we must have
filed all reports and other materials required to be filed by
section 13 or 15(d) of the Exchange Act, as applicable, during the
preceding 12 months.
Compliance
with the criteria for securing exemptions under federal securities
laws and the securities laws of the various states is extremely
complex, especially in respect of those exemptions affording
flexibility and the elimination of trading restrictions in respect
of securities received in exempt transactions and subsequently
disposed of without registration under the Securities Act or state
securities laws.
Because our common stock is deemed a low-priced “Penny” stock, an
investment in our common stock should be considered high risk and
subject to marketability restrictions.
Since
our common stock is a penny stock, as defined in Rule 3a51-1 under
the Securities Exchange Act of 1934, as amended, it will be more
difficult for investors to liquidate their investment even if and
when a market develops for the common stock. Until the trading
price of the common stock rises above $5.00 per share, if ever,
trading in the common stock is subject to the penny stock rules of
the Securities Exchange Act specified in rules 15g-1 through
15g-10. Those rules require broker-dealers, before effecting
transactions in any penny stock, to:
• Deliver
to the customer, and obtain a written receipt for, a disclosure
document;
• Disclose
certain price information about the stock;
• Disclose
the amount of compensation received by the broker-dealer or any
associated person of the broker-dealer;
• Send
monthly statements to customers with market and price information
about the penny stock; and
• In
some circumstances, approve the purchaser’s account under certain
standards and deliver written statements to the customer with
information specified in the rules.
Consequently,
the penny stock rules may restrict the ability or willingness of
broker-dealers to sell the common stock and may affect the ability
of holders to sell their common stock in the secondary market and
the price at which such holders can sell any such securities. These
additional procedures could also limit our ability to raise
additional capital in the future.
Financial Industry Regulatory Authority, Inc. (“FINRA”) sales
practice requirements may limit a shareholder’s ability to buy and
sell our common shares.
In
addition to the “penny stock” rules described above, FINRA has
adopted rules that require that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior
to recommending speculative low-priced securities to their
non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer’s financial
status, tax status, investment objectives and other information.
Under interpretations of these rules, FINRA believes that there is
a high probability that speculative low-priced securities will not
be suitable for at least some customers. FINRA requirements make it
more difficult for broker-dealers to recommend that their customers
buy our common stock, which may limit your ability to buy and sell
our stock and have an adverse effect on the market for our
shares.
If we fail to maintain effective internal controls over financial
reporting, then the price of our common stock may be adversely
affected.
Our
internal control over financial reporting may have weaknesses and
conditions that could require correction or remediation, the
disclosure of which may have an adverse impact on the price of our
common stock. We are required to establish and maintain appropriate
internal controls over financial reporting. Failure to establish
those controls, or any failure of those controls once established,
could adversely affect our public disclosures regarding our
business, prospects, financial condition or results of operations.
In addition, management’s assessment of internal controls over
financial reporting may identify weaknesses and conditions that
need to be addressed in our internal controls over financial
reporting or other matters that may raise concerns for investors.
Any actual or perceived weaknesses and conditions that need to be
addressed in our internal control over financial reporting or
disclosure of management’s assessment of our internal controls over
financial reporting may have an adverse impact on the price of our
common stock.
Transfers of our securities may be restricted by virtue of state
securities “blue sky” laws that prohibit trading absent compliance
with individual state laws. These restrictions may make
it difficult or impossible to sell shares in those
states.
Transfers
of our common stock may be restricted under the securities or
securities regulation laws promulgated by various states and
foreign jurisdictions, commonly referred to as “blue sky”
laws. Absent compliance with such individual state laws,
our common stock may not be traded in such
jurisdictions. Because the securities registered
hereunder have not been registered for resale under the blue sky
laws of any state, the holders of such shares and persons who
desire to purchase them should be aware that there may be
significant state blue sky law restrictions upon the ability of
investors to sell the securities and of purchasers to purchase the
securities. These restrictions may prohibit the
secondary trading of our common stock. Investors should
consider the secondary market for our securities to be a limited
one.
We do not intend to pay dividends on our common stock in the
foreseeable future.
For the
foreseeable future, we intend to retain any earnings to finance the
development of our business, and we do not anticipate paying any
cash dividends on our common stock. Any future determination to pay
dividends will be at the discretion of our board of directors (the
“Board”) and will be dependent upon then-existing conditions,
including our operating results and financial condition, capital
requirements, contractual restrictions, business prospects and
other factors that our Board considers relevant. Accordingly,
investors must rely on sales of their common stock after price
appreciation, which may never occur, as the only way to realize a
return on their investment.
We have the ability to issue additional shares of our common stock
and shares of preferred stock without obtaining stockholder
approval, which could cause your investment to be
diluted.
Our articles of incorporation authorizes the Board of Directors to
issue up to 1,000,000,000 shares of common stock and up to
10,000,000 shares of preferred stock, of which we have designated
1,000,000 shares as Series A, 1,000,000 shares as Series B and
1,500,000 shares as Series C. The power of the Board of
Directors to issue shares of common stock, preferred stock or
warrants or options to purchase shares of common stock or preferred
stock is generally not subject to stockholder
approval. Accordingly, any additional issuance of our
common stock, or preferred stock that may be convertible into
common stock, may have the effect of diluting your investment.
Along these lines, at December 31, 2020 we had approximately 722.5
million shares of common stock outstanding and ended 2021 with
approximately 790.9 million shares outstanding, an increase of
9.5%. In addition, as of March 24, 2022 we had approximately 790.9
million shares outstanding.
Our Board of Directors has issued Series B Preferred Stock with
voting terms that may not be beneficial to common stockholders and
has the ability to affect adversely stockholder voting power and
allows our current management to perpetuate their control over
us.
Our
Articles of Incorporation allow us to issue shares of preferred
stock without any vote or further action by our stockholders. Along
these lines, our Board of Directors authorized 1,000,000 shares of
Series B Preferred Stock, which were issued to two members of our
current management (Messrs. Grieco and Read). These shares have
superior voting rights (500 to 1) over shares of our Common Stock.
Further, our Board of Directors has the ability to fix and
determine the relative rights and preferences of additional series
of preferred stock. Our Board of Directors has the authority to
issue additional series of preferred stock without further
stockholder approval, including large blocks of preferred stock
that would grant to the holders the preferred right to our assets
upon liquidation, the right to receive dividend payments before
dividends are distributed to the holders of common stock, superior
voting or conversion rights and the right to the redemption of the
shares, together with a premium, prior to the redemption of our
common stock.
By issuing preferred stock, PCTL may be able to delay, defer or
prevent a change of control.
PCTL is
authorized to issue a total of 10,000,000 shares of “blank check”
preferred stock and has issued: 500,000 shares of Series A
Preferred Stock, 1,000,000 shares of Series B Preferred Stock
(which contain voting rights of 500-to-1) and 1,500,000 shares of
Series C Preferred Stock. PCTL’s Board of Directors can determine
the rights, preferences, privileges, and restrictions granted to,
or imposed upon, the shares of preferred stock and to fix the
number of shares constituting any series and the designation of
such series. It is possible that PCTL’s Board of Director, in
determining the rights, preferences and privileges to be granted
when the preferred stock is issued, may include provisions that
have the effect of delaying, deferring, or preventing a change in
control, discouraging bids for our common stock at a premium over
the market price, or that adversely affect the market price of and
the voting and other rights of the holders of PCTL’s common
stock.
Future sales of our common stock may result in a decrease in the
market price of our common stock, even if our business is doing
well.
The
market price of our common stock could drop due to sales of a large
number of shares of our common stock in the market or the
perception that such sales could occur. This could make it more
difficult to raise funds through future offerings of common
stock.
Our articles of incorporation and bylaws contain provisions that
could discourage an acquisition or change of control of
us.
Our
articles of incorporation authorize our Board of Directors to issue
preferred stock and common stock without stockholder approval. If
our board of directors’ elects to issue preferred stock, it could
be more difficult for a third party to acquire control of us. In
addition, provisions of the articles of incorporation and bylaws
could also make it more difficult for a third party to acquire
control of us.
There are limitations in connection with the availability of quotes
and order information on the OTC Pink.
Trades
and quotations on the OTCBB involve a manual process and the market
information for such securities cannot be guaranteed. In addition,
quote information, or even firm quotes, may not be
available. The manual execution process may delay order
processing and intervening price fluctuations may result in the
failure of a limit order to execute or the execution of a market
order at a significantly different price. Execution of
trades, execution reporting and the delivery of legal trade
confirmation may be delayed significantly. Consequently,
one may not be able to sell shares of our common stock at the
optimum trading prices.
There are delays in order communication on the OTC
Pink.
Electronic
processing of orders is not available for securities traded on the
OTC Pink and high order volume and communication risks may prevent
or delay the execution of one’s OTC Pink trading orders. This lack
of automated order processing may affect the timeliness of order
execution reporting and the availability of firm quotes for shares
of our common stock. Heavy market volume may lead to a delay in the
processing of OTC Pink security orders for shares of our common
stock, due to the manual nature of the market. Consequently, one
may not be able to sell shares of our common stock at the optimum
trading prices.
There is a risk of market fraud on the OTC
Pink.
OTC Pink
securities are frequent targets of fraud or market manipulation.
Not only because of their generally low price, but also because the
OTC reporting requirements for these securities are less stringent
than for listed or NASDAQ traded securities, and no exchange
requirements are imposed. Dealers may dominate the market and set
prices that are not based on competitive forces. Individuals or
groups may create fraudulent markets and control the sudden, sharp
increase of price and trading volume and the equally sudden
collapse of the market price for shares of our common
stock.
There is a limitation in connection with the editing and canceling
of orders on the OTC Pink.
Orders
for OTC Pink securities may be canceled or edited like orders for
other securities. All requests to change or cancel an order must be
submitted to, received and processed by the OTC Pink. Due to the
manual order processing involved in handling OTC Pink trades, order
processing and reporting may be delayed, and one may not be able to
cancel or edit one’s order. Consequently, one may not able to sell
their shares of our common stock at the optimum trading
prices.
Increased dealer compensation could adversely affect our stock
price.
The
dealer’s spread (the difference between the bid and ask prices) may
be large and may result in substantial losses to the seller of
shares of our common stock may incur an immediate “paper” loss due
to the price spread. Moreover, dealers trading on the
OTC Pink may not have a bid price for shares of our common stock on
the OTC Pink. Due to the foregoing, demand for shares of
our common stock on the OTC Pink may be decreased or
eliminated.
Additional Risks and Uncertainties
If any
of the risks that we face actually occur, irrespective of whether
those risks are described in this section or elsewhere in this
report, our business, financial condition and operating results
could be materially adversely affected.
ITEM
1B. UNRESOLVED STAFF COMMENTS
Not
applicable.
ITEM
2. PROPERTIES
The
Company re-negotiated an annual lease on the Little River, SC
facility for $7,500 per month, retroactive from July 1, 2020, which
was renewed for another year, effective July 1, 2021, at $7,650 per
month. In addition, a three-year lease for 9,600 s.f. of warehouse
space in Fort Wayne, Indiana was added, effective November 1, 2020,
for $4,500 per month. The Company also committed to a two-year
building lease for additional office space in Little River, SC,
effective April 1, 2021, for $2,750 per month, which was terminated
effective October 14, 2021.
ITEM
3. LEGAL PROCEEDINGS
Auctus
Fund Litigation
In March
of 2019, we entered into a Securities Purchase Agreement with
Auctus Fund, LLC (“Auctus”), whereby we borrowed $75,000 from
Auctus under the terms of a convertible promissory note and
included the issuance to 187,500 warrants to Auctus. Adjustment
provisions in the Securities Purchase Agreement and the note
required PCTL to adjust the number of warrants and exercise price
based upon future financings.
In late
2019, we defaulted on the Auctus note, which triggered a number of
default provisions of the note. We disputed the amounts claimed to
be owed to Auctus, the number of shares of common stock to be
reserved for conversion of the note and the number and exercise
price of the warrants held by Auctus. Negotiations of these
disputes lasted for several months.
In
October of 2020, we entered into a Conditional Settlement Agreement
with Auctus to settle all disputes and claims between the parties.
A material dispute between the parties was the warrants, which
according to Auctus had ballooned to 107,142,857 shares at an
exercise price of $0.00035. Pursuant to the settlement agreement,
Auctus agreed to settle such disputes and claims based upon the
payment of $145,000 in cash and the issuance of 8,000,000 shares of
common stock.
On
September 1, 2021, we issued 8,000,000 common shares and paid the
remaining cash balance to Auctus under the terms of the settlement.
We fully complied with all payments required under the settlement
agreement and issued the shares of common stock to Auctus, which
triggered the mutual release of all disputes and claims between us
and Auctus. Despite our compliance with the terms of the settlement
agreement, Auctus has refused to execute the mutual release
required by the settlement agreement and acknowledge the
cancellation of the warrants as part of the settlement.
On January 14, 2022, we filed a complaint in the United States
District Court for the District of Massachusetts (Case
1:22-cv-10053), against Auctus seeking damages for:
|
2. |
Breach of Implied Covenant of Good
Faith and Fair Dealing; |
|
3. |
Reformation of Mutual
Release; |
The case is currently ongoing.
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable to our operations.
PART II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
Information
PCT
LTD’s common stock is quoted on the OTC Pink market under the
symbol “PCTL.” Our common stock has traded infrequently on the OTC
Pink.
On March
24, 2022, the closing price of shares of common stock of the
Company was $0.016. However, we consider our common
stock to be thinly traded and, as a result, any reported sales
prices may not be a true market-based valuation of the common
stock.
(b)
Holders of Common Stock
We had
271 stockholders of record as of March 24, 2022 and 790,924,690
shares outstanding, which does not include 209,075,310 shares of
common stock reserved against default on convertible
debt.
(c)
Dividends
In the
future we intend to follow a policy of retaining earnings, if any,
to finance the growth of the business and do not anticipate paying
any cash dividends in the foreseeable future. The declaration and
payment of future dividends on the Common Stock will be the sole
discretion of board of directors and will depend on our
profitability and financial condition, capital requirements,
statutory and contractual restrictions, future prospects and other
factors deemed relevant.
(d)
Securities Authorized for Issuance under Equity Compensation
Plans
None.
Recent
Sales of Unregistered Securities
On
September 1, 2021, the Company issued 8,000,000 common shares and
paid $21,000 to settle the remaining outstanding principal on a
convertible note payable with Auctus Fund, LLC, of $88,795 and
accrued interest of $26,153.
On
September 10, 2021, the Company issued 2,000,000 common shares
pursuant to a general release agreement dated July 23, 2021 with a
former employee of the Company.
On
October 12, 2021, the Company issued 15,000,000 common shares to
settle a convertible note with a remaining balance of
$0.
On
December 14, 2021, the Company issued 2,548,461 common shares
pursuant to a cashless exercise of 2,593,999 warrants to Auctus
Fund, LLC.
All of
the above-described issuances were exempt from registration
pursuant to Section 4(a)(2) and/or Regulation D of the Securities
Act as transactions not involving a public offering. With respect
to each transaction listed above, no general solicitation was made
by either the Company or any person acting on its behalf. All such
securities issued pursuant to such exemptions are restricted
securities as defined in Rule 144(a)(3) promulgated under the
Securities Act, appropriate legends have been placed on the
documents evidencing the securities and may not be offered or sold
absent registration or pursuant to an exemption
therefrom.
Issuer
Purchase of Securities
We did
not repurchase any of our equity securities during the year ended
December 31, 2021.
Defaults
Upon Senior Securities
We have
entered into a number of promissory notes, some of which are in
default as of December 31, 2021, or went into default before the
filing of this Annual Report (See Note 6 to the financial
statements).
A portion of our current debt is in default, which may subject us
to litigation by the debt holders.
As of
December 31, 2021, we had cash and cash equivalents of $116,497 and
had a portion of short-term debt in default. 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 Preferred C stock and 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, 2021 and 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
6. [RESERVED]
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Executive
Overview
On
August 31, 2016, PCT LTD entered into a Securities Exchange
Agreement (the "Exchange Agreement") with Paradigm Convergence
Technologies Corporation, a Nevada corporation ("Paradigm").
Pursuant to the terms of the Exchange Agreement, Paradigm became
the wholly-owned subsidiary of PCT LTD after the exchange
transaction. PCT LTD is a holding company, which through Paradigm
is engaged in the business of marketing new products and
technologies through licensing and joint ventures.
PCT LTD
had not recorded revenues for the two fiscal years prior to its
acquisition of Paradigm and was dependent upon financing to
continue basic operations. Paradigm has recorded revenue since it
initiated operations in 2012; however, those revenues have not been
sufficient to finance operations. The Company recorded a net income
of $988,619 for the year ended December 31, 2021 and accumulated
losses of $29,598,993 from inception through December 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 2022; and |
|
• |
general and administrative operating costs. |
Management
projects these costs to total approximately $2,580,000. To minimize
these costs, the Company intends to maintain its practice of
controlling operating overheads with efficient facilities
commitments, generally below market salaries and consulting fees,
and rigorous prioritization of expenditure requirements. Based on
its understanding of the commercial readiness of its products and
technologies, the capabilities of its personnel (current and being
hired), established business relationships and the general market
conditions, management believes that the Company expects to be
covering its fixed operating expenses ("burn rate") by the end of
the third quarter of 2022.
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 |
|
December 31,
2021 |
|
December 31,
2020 |
Cash
and cash equivalents |
|
$ |
116,497 |
|
|
$ |
115,196 |
|
Total
current assets |
|
|
310,763 |
|
|
|
747,756 |
|
Total
assets |
|
|
4,254,258 |
|
|
|
4,634,610 |
|
Total
liabilities |
|
|
6,283,637 |
|
|
|
11,038,156 |
|
Accumulated deficit |
|
|
(29,598,993 |
) |
|
|
(30,587,612 |
) |
Total
stockholders' deficit |
|
$ |
(4,498,024 |
) |
|
$ |
(6,662,191 |
) |
For the
year ended December 31, 2021, the Company recorded net income of
$988,619 and at December 31, 2021 had a working capital deficit of
$4,466,106. Since inception we had not established an ongoing
source of revenue sufficient to cover our operating costs. During
the years ended December 31, 2021 and 2020 we primarily relied upon
equity issuances and 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 $116,497 in cash at
December 31, 2021, compared to $115,196 in cash at December 31,
2020. We had total liabilities of $6,283,637 at December 31, 2021
compared to $11,038,156 at December 31, 2020.
Total assets decreased by $380,352 to $4,254,258 at December 31,
2021 compared to $4,634,610 at December 31, 2020. This decrease is
primarily from a decrease in accounts receivable and prepaid
expenses and from depreciation and amortization recorded on
intangible assets and right-of-use assets during the year ended
December 31, 2021.
Total liabilities decreased by $4,754,519 to $6,283,637 at December
31, 2021 compared to $11,038,156 at December 31, 2020. This
decrease is primarily from a decrease in derivative liabilities of
$4,058,767 and a decrease in notes payable, notes payable – related
party, and convertible notes payable of $616,995.
Our
current cash flow is not sufficient to meet our monthly expenses of
approximately $215,000 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.
The
table below presents information regarding cash flows:
SUMMARY OF
CASH FLOWS |
|
Year ended
December 31, 2021 |
|
Year ended
December 31, 2020 |
Net cash
used in operating activities |
|
$ |
(1,508,640 |
) |
|
$ |
(830,664 |
) |
Net cash used in
investing activities |
|
$ |
(468,866 |
) |
|
$ |
(163,133 |
) |
Net cash provided by
operating activities |
|
$ |
1,978,807 |
|
|
$ |
1,041,380 |
|
Net change in cash |
|
$ |
1,301 |
|
|
$ |
47,583 |
|
Commitments
and Obligations
At
December 31, 2021 the Company recorded notes payable totaling
approximately $2,165,102 (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.
At December 31, 2021, all of the notes payable carry effective
interest from 0% to 12% and are due ranging from on demand to
November 30, 2023.
The
Company headquarters and operations are 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). Effective July 1, 2021 through June 30, 2022,
the monthly lease payment is $7,650. The Company added a three-year
lease for 9,600 sf. of warehouse space in Fort Wayne, Indiana,
effective November 1, 2020, for $4,500/month. Effective April 1,
2021, the Company entered into a 2-year lease for additional office
space in Little River, SC, for $2,750 per month, which was
terminated effective October 14, 2021.
Results
of Operations
SUMMARY OF OPERATIONS |
|
Year Ended December 31 |
|
|
|
|
|
|
2021 |
|
|
|
2020 |
|
Revenues |
|
$ |
1,281,177 |
|
|
$ |
2,519,914 |
|
Total
operating expenses |
|
|
3,773,257 |
|
|
|
3,921,143 |
|
Total
other income (expense) |
|
|
3,480,699 |
|
|
|
(2,410,816 |
) |
Net
income (loss) |
|
|
988,619 |
|
|
|
(3,812,045 |
) |
Net income (loss) attributable to common stockholders' |
|
|
988,619 |
|
|
|
(4,082,045 |
) |
Basic income (loss) per share |
|
|
0.00 |
|
|
|
(0.01 |
) |
Diluted income (loss) per share |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
Revenues
decreased to $1,281,177 for the year ended December 31, 2021
compared to $2,519,914 for the year ended December 31, 2020. The
revenue decrease for the period was primarily due to the decreased
volume of fluids sold as a result of the decreased need for an
effective US EPA-registered disinfectant as the country came out of
the COVID-19 pandemic. Accordingly, product sales decreased to
$233,147 during the year ended December 31, 2021 compared to
$1,527,465 during the year ended December 31, 2020. However,
revenue for equipment leases increased to $894,786 during the year
ended December 31, 2021 compared to $750,496 during the year ended
December 31, 2020.
Total
operating expenses decreased to $3,773,257 during the year ended
December 31, 2021 compared to $3,921,143 during the year ended
December 31, 2020. The decrease during the period was primarily due
to a decrease in cost of product, licensing, and equipment leases
of $884,456 partially offset by an increase in general and
administrative expenses of $719,543.
General
and administrative expenses increased to $3,204,922 for the year
ended December 31, 2021 compared to $2,485,379 during the year
ended December 31, 2020. General and administrative increased due
to stock-based compensation for consulting services, salaries and
wages, and professional and accounting fees.
Depreciation
and amortization expenses increased to $367,534 during the year
ended December 31, 2021 compared to $348,708 during the year ended
December 31, 2020.
Total
other income was $3,480,699 for the year ended December 31, 2021
compared to other expense of $2,410,816 during the year ended
December 31, 2020. The overall change was a primarily due to a gain
on change in fair value of derivative liability of $22,861 and a
gain on settlement of debt of $3,930,402 during the year ended
December 31, 2021 versus a loss on change in fair value of
derivative liability of $13,046,832 and a gain settlement of debt
of $12,020,966 during the year ended December 31, 2020.
As a
result of the changes described above, net income was $988,619
during the year ended December 31, 2021 compared to a net loss of
$3,812,045 during the year ended December 31, 2020.
Off-Balance
Sheet Arrangements
We have
not entered into any off-balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources and would be considered material to
investors.
Critical
Accounting Policies
Our
financial statements and accompanying notes have been prepared in
accordance with United States generally accepted accounting
principles applied on a consistent basis. The preparation of
financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods.
We
regularly evaluate the accounting policies and estimates that we
use to prepare our financial statements. A complete summary of
these policies is included in the notes to our financial
statements. In general, management’s estimates are based on
historical experience, on information from third party
professionals, and on various other assumptions that are believed
to be reasonable under the facts and circumstances. Actual results
could differ from those estimates made by management.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not
applicable to smaller reporting companies.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PCT
LTD
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |
|
Report of Independent Registered Public Accounting Firm (PCAOB ID:
3627) |
32 |
|
|
Consolidated Balance Sheets |
33 |
|
|
Consolidated Statements of Operations |
34 |
|
|
Consolidated Statements of Stockholders’ Deficit |
35 |
|
|
Consolidated Statements of Cash Flows |
36 |
|
|
Notes to the Consolidated Financial Statements |
37 |
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of PCT LTD:
Opinion on the Financial
Statements
We have audited the accompanying consolidated balance sheets of PCT
LTD ("the Company") as of December 31, 2021 and 2020, the related
consolidated statements of operations, stockholders' deficit, and
cash flows for each of the years in the two-year period ended
December 31, 2021 and the related notes (collectively referred to
as the "financial statements"). In our opinion, the financial
statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31,
2021 and 2020, and the results of its operations and its cash flows
for each of the years in the two-year period ended December 31,
2021, in conformity with accounting principles generally accepted
in the United States of America.
Explanatory Paragraph
Regarding Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 2 to the financial statements, the Company has recurring
losses, negative cash flows from operations, and negative working
capital, which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
Basis for
Opinion
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) ("PCAOB") and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company's internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining on a test basis, evidence
regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit
Matters
The critical audit matters communicated below are matters arising
from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee
and that: (1) related to accounts or disclosures that are material
to the financial statements and (2) involved our especially
challenging, subjective, or complex judgements. The communication
of critical audit matters does not alter in any way our opinion on
the financial statements, taken as a whole, and we are not, by
communicating the critical matters below, providing separate
opinions on the critical audit matters or on the accounts or
disclosures to which they relate.
Determination and Valuation of Derivative Liabilities
Critical Audit Matter Description
As described further in Notes 6, 7, and 10 of the financial
statements, during the year ended December 31, 2021 and in prior
periods, the Company issued convertible notes and warrants that
required management to assess whether the conversion features of
the convertible notes required bifurcation and separate valuation
as a derivative liability, and whether the warrants required
accounting treatment as derivative liabilities. The Company
determined that the conversion features of certain of its
convertible notes and certain warrants issued in financing
arrangements required to be accounted for as derivative liabilities
due to: (1) the inclusion of embedded put options within the
fundamental transaction clause of certain warrants; and (2) certain
instruments containing variable conversion rates with no explicit
limit on the number of shares that may be required to be issued;
and (3) in some cases the Company could not assert it had
sufficient authorized but unissued shares available to settle
instruments considering all other stock-based commitments. The
derivative liabilities were recorded at fair value when issued and
subsequently re-measured to fair value upon settlement or at the
end of each reporting period. The Company utilized a binomial
option pricing model to determine the fair value of the derivative
liabilities, which uses certain assumptions related to exercise
price, term, expected volatility, and risk-free interest rate.
We identified auditing the determination and valuation of the
derivative liabilities as a critical audit matter due to the
significant judgements used by the Company in determining whether
the embedded conversion features and warrants required derivative
accounting treatment and the significant judgements used in
determining the fair value of the derivative liabilities. Auditing
the determination and valuation of the derivative liabilities
involved a high degree of auditor judgement, and specialized skills
and knowledge were needed.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures included the following, among others:
|
· |
We inspected and reviewed debt
agreements, warrant agreements, conversion notices, and settlement
agreements to evaluate the Company's determination of whether
derivative accounting was required, including assessing and
evaluating management's application of relevant accounting
standards to such transactions. |
|
· |
We tested the reasonableness of the
assumptions used by the Company in the binomial option model,
including exercise price, expected term, expected volatility, and
risk-free interest rate. |
|
· |
We tested the accuracy and
completeness of data used by the Company in developing the
assumptions used in the binomial option model. |
|
· |
We developed an independent
expectation for comparison to the Company's estimate, which
included developing our own binomial option model and
assumptions. |
|
· |
We evaluated the accuracy and
completeness of the Company's presentation of these instruments in
the financial statements and related disclosures in Notes 6, 7, and
10, including evaluating whether such disclosures were in
accordance with relevant accounting standards. |
Professionals with specialized skill and knowledge were utilized by
the Firm to assist in the evaluation of the Company estimate of
fair value and the development of our own independent
expectation.
/s/
Sadler, Gibb & Associates, LLC
We
have served as the Company's auditor since 2015.
Draper, UT
March
31, 2022
PCT
LTD
Consolidated
Balance Sheets
The
accompanying notes are an integral part of these consolidated
financial statements
PCT
LTD
Consolidated
Statements of Operations
The
accompanying notes are an integral part of these consolidated
financial statements
PCT
LTD
Consolidated
Statements of Stockholders’ Deficit
For
the years ended December 31, 2021 and 2020
The
accompanying notes are an integral part of these consolidated
financial statements
PCT
LTD
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
For the years ended
December 31,
|
|
|
2021 |
|
2020 |
|
|
|
|
|
Cash Flows from Operating
Activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
988,619 |
|
|
$ |
(3,812,045 |
) |
Adjustments to reconcile net income
(loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
367,534 |
|
|
|
348,708 |
|
Amortization of debt
discounts |
|
|
249,171 |
|
|
|
436,352 |
|
Amortization of operating lease
right-of-use asset |
|
|
48,534 |
|
|
|
5,229 |
|
Loss on disposal of property and
equipment |
|
|
— |
|
|
|
173,551 |
|
Bad debt expense |
|
|
— |
|
|
|
45,575 |
|
Common stock issued for
services |
|
|
521,101 |
|
|
|
676,119 |
|
(Gain) loss on change in fair value
of derivative liability |
|
|
(22,861 |
) |
|
|
13,046,832 |
|
(Gain) loss on settlement of
debt |
|
|
(3,930,401 |
) |
|
|
(12,020,966 |
) |
Stock-based compensation |
|
|
104,369 |
|
|
|
— |
|
Default penalties on convertible
notes |
|
|
26,227 |
|
|
|
28,762 |
|
Changes in operating assets and
liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
210,118 |
|
|
|
(283,186 |
) |
Inventory |
|
|
(30,766 |
) |
|
|
20,481 |
|
Prepaid expenses and
deposits |
|
|
(52,151 |
) |
|
|
(243,863 |
) |
Other Assets |
|
|
(6,090 |
) |
|
|
— |
|
Deposits |
|
|
9,726 |
|
|
|
— |
|
Operating lease liability |
|
|
(48,534 |
) |
|
|
(5,229 |
) |
Deferred revenue |
|
|
(1,075 |
) |
|
|
1,075 |
|
Accounts payable |
|
|
(200,105 |
) |
|
|
(42,250 |
) |
Accrued expenses – related
party |
|
|
16,663 |
|
|
|
54,742 |
|
Accrued expenses |
|
|
241,281 |
|
|
|
739,449 |
|
Net cash used in operating
activities |
|
|
(1,508,640 |
) |
|
|
(830,664 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities: |
|
|
|
|
|
|
|
|
Purchase of property and
equipment |
|
|
(468,866 |
) |
|
|
(163,133 |
) |
Net cash used in investing
activities |
|
|
(468,866 |
) |
|
|
(163,133 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing
Activities: |
|
|
|
|
|
|
|
|
Proceeds from notes payable – related
parties |
|
|
— |
|
|
|
3,500 |
|
Proceeds from notes
payable |
|
|
419,575 |
|
|
|
695,470 |
|
Proceeds from convertible notes
payable |
|
|
1,121,250 |
|
|
|
1,463,000 |
|
Proceeds from series C preferred
stock subscriptions |
|
|
— |
|
|
|
270,000 |
|
Proceeds from the sale of series C
preferred stock |
|
|
2,250,000 |
|
|
|
— |
|
Proceeds from common stock
subscriptions |
|
|
75,000 |
|
|
|
230,500 |
|
Repayments of notes payable – related
parties |
|
|
(78,798 |
) |
|
|
(41,286 |
) |
Repayments of notes
payable |
|
|
(904,341 |
) |
|
|
(716,897 |
) |
Repayments of convertible notes
payable |
|
|
(903,879 |
) |
|
|
(862,907 |
) |
Net cash provided by financing
activities |
|
|
1,978,807 |
|
|
|
1,041,380 |
|
|
|
|
|
|
|
|
|
|
Net change in cash |
|
|
1,301 |
|
|
|
47,583 |
|
Cash and cash equivalents at
beginning of year |
|
|
115,196 |
|
|
|
67,613 |
|
Cash and cash equivalents at end of
year |
|
$ |
116,497 |
|
|
$ |
115,196 |
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow
Information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
75,251 |
|
|
$ |
219,194 |
|
Cash paid for income
taxes |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Non-Cash Investing and Financing
Activities: |
|
|
|
|
|
|
|
|
Original debt discounts against notes
payable |
|
$ |
174,435 |
|
|
$ |
223,942 |
|
Original debt discounts against
convertible notes |
|
$ |
34,412 |
|
|
$ |
201,388 |
|
Deemed dividend from beneficial
conversion feature on preferred series C stock |
|
$ |
— |
|
|
$ |
270,000 |
|
Common stock issued in cashless
exercise of warrants |
|
$ |
— |
|
|
$ |
429,948 |
|
Common stock issued in conversion of
convertible notes payable |
|
$ |
158,594 |
|
|
$ |
996,168 |
|
Common stock issued in conversion of
notes payable |
|
$ |
40,000 |
|
|
$ |
— |
|
Common stock issued to settle notes
payable – related parties |
|
$ |
653,310 |
|
|
$ |
— |
|
Initial operating lease right-of-use
asset and liability |
|
$ |
— |
|
|
$ |
123,614 |
|
Common stock issued in conversion of
preferred series C stock |
|
$ |
40,000 |
|
|
$ |
494,000 |
|
Property and equipment transferred to
inventory |
|
$ |
— |
|
|
$ |
26,669 |
|
Right of use assets and
liabilities |
|
$ |
52,599 |
|
|
$ |
— |
|
Settlement of debt with accounts
receivable form related party |
|
$ |
43,386 |
|
|
$ |
— |
|
The
accompanying notes are an integral part of these consolidated
financial statements
PCT
LTD
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2021 AND 2020
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of
Operations
PCT
LTD., (the “Company” or “PCT LTD”), a Delaware corporation, was
formed on February 27, 1986. The Company changed its domicile to
Nevada on August 26, 1998. The Company acquires, develops and
provides sustainable, environmentally safe disinfecting, cleaning
and tracking technologies. The Company specializes in providing
cleaning, sanitizing and disinfectant fluid solutions and
fluid-generating equipment that creates environmentally safe
solutions for global sustainability.
On
August 31, 2016, the Company entered into a Securities Exchange
Agreement with Paradigm Convergence Technologies Corporation
(“Paradigm,” or “PCT Corp.”) to effect the acquisition of Paradigm
as a wholly-owned subsidiary. Paradigm is located in Little River,
SC, was formed June 6, 2012, and is a technology licensing company
specializing in environmentally safe solutions for global
sustainability. Paradigm 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 complementary relationship
and association with its wholly-owned operating company,
Paradigm.
On July 11, 2021, the Company incorporated two wholly-owned
subsidiaries, Disruptive Oil and Gas Technologies Corp.
(“Disruptive”) and Technologies Development Corp., both in the
State of Nevada. On October 20, 2021, the Company sold a 53.25%
interest in Disruptive in consideration for the assignment of
certain patents to Disruptive and realized no gain or loss on the
sale.
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, by
installing greater storage reserves and by assembling more of it
higher-volume equipment to produce the hospital grade disinfectant
known as Hydrolyte®. There were hard costs associated with these
adaptations to the Little River, SC facility, but the Company
continues to benefit from its fluid production capacities over the
longer term. As the Federal, state and other restrictions
associated with the pandemic have lessened, the Company is able to
act more effectively in obtaining new contracts for its healthcare
equipment, the Annihilyzer® and other equipment.
Principles of
Consolidation
The accompanying consolidated financial statements include the
accounts of PCT LTD (“Parent”) and its two wholly-owned
subsidiaries, Paradigm Convergence Technologies Corporation and
Technologies Development Corp. All intercompany accounts have been
eliminated upon consolidation. At December 31, 2021, the Company
owns a 46.25% interest in Disruptive Oil and Gas Technologies
Corp., which had no material assets, liabilities or operations.
Use of
Estimates
The
preparation of the consolidated financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingencies at the date of the financial statements as well as
the reported amounts of revenues and expenses during the reporting
periods. Estimates are based on historical experience and on
various other market-specific and other relevant assumptions that
are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from
other sources. Actual results could differ materially from those
estimates.
Cash and Cash
Equivalents
Cash and
cash equivalents are considered to be cash and highly liquid
securities with original maturities of three months or less. The
cash of $116,497
and $115,196
as of December 31, 2021 and December 31, 2020, respectively,
represents cash on deposit in various bank accounts. There were no
cash equivalents as of December 31, 2021 and December 31,
2020.
Fair Value
Measurements
The
Company follows ASC 820, “Fair Value Measurements and
Disclosures”, which defines fair value as the exchange
price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between
market participants on the measurement date. Valuation techniques
used to measure fair value must maximize the use of observable
inputs and minimize the use of unobservable inputs. A fair value
hierarchy based on three levels of inputs, of which the first two
are considered observable and the last is considered unobservable,
is used to measure fair value:
|
• |
Level 1 - Valuations for assets and liabilities traded in active
markets from readily available pricing sources such as quoted
prices in active markets for identical assets or
liabilities. |
|
• |
Level 2 - Observable inputs (other than Level 1 quoted prices)
such as quoted prices in active markets for similar assets or
liabilities, quoted prices in markets that are not active for
identical or similar assets or liabilities, or other inputs that
are observable or can be corroborated by observable market
data. |
|
• |
Level 3 - Unobservable inputs that are supported by little or no
market activity and that are significant to determining the fair
value of the assets or liabilities, including pricing models,
discounted cashflow methodologies and similar
techniques. |
The
carrying values of our financial instruments, including cash and
cash equivalents, accounts receivable, inventory, prepaid expenses,
accounts payable and accrued expenses approximate their fair value
due to the short maturities of these financial
instruments.
Derivative
liabilities are determined based on “Level 3” inputs, which are
significant and unobservable and have the lowest priority. The
recorded values of all other financial instruments approximate
their current fair values because of their nature and respective
relatively short maturity dates or durations.
Our
financial assets and liabilities carried at fair value measured on
a recurring basis as of December 31, 2021, consisted of the
following:
|
|
Total fair value at
December 31, 2021
$ |
|
Quoted prices in active markets
(Level 1)
$ |
|
Significant other observable inputs
(Level 2)
$ |
|
Significant unobservable inputs
(Level 3)
$ |
Description: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability (1) |
|
|
3,044,034 |
|
|
|
— |
|
|
|
— |
|
|
|
3,044,034 |
|
Total |
|
|
3,044,034 |
|
|
|
— |
|
|
|
— |
|
|
|
3,044,034 |
|
Our
financial assets and liabilities carried at fair value measured on
a recurring basis as of December 31, 2020, consisted of the
following:
|
|
Total fair value at
December 31,
2020
$ |
|
Quoted prices in active markets
(Level 1)
$ |
|
Significant other observable inputs
(Level 2)
$ |
|
Significant unobservable inputs
(Level 3)
$ |
Description: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability (1) |
|
|
7,102,801 |
|
|
|
— |
|
|
|
— |
|
|
|
7,102,801 |
|
Total |
|
|
7,102,801 |
|
|
|
— |
|
|
|
— |
|
|
|
7,102,801 |
|
(1) The
Company has estimated the fair value of these liabilities using the
Binomial Model.
Derivative
Liabilities
The
Company accounts for derivative instruments in accordance with ASC
Topic 815, “Derivatives and Hedging” and all derivative
instruments are reflected as either assets or liabilities at fair
value in the balance sheet. The Company uses estimates of fair
value to value its derivative instruments. Fair value is defined as
the price to sell an asset or transfer a liability in an orderly
transaction between willing and able market participants. In
general, the Company’s policy in estimating fair values is to first
look at observable market prices for identical assets and
liabilities in active markets, where available. When these are not
available, other inputs are used to model fair value such as prices
of similar instruments, yield curves, volatilities, prepayment
speeds, default rates and credit spreads, relying first on
observable data from active markets. Depending on the availability
of observable inputs and prices, different valuation models could
produce materially different fair value estimates. The values
presented may not represent future fair values and may not be
realizable. The Company categorizes its fair value estimates in
accordance with ASC 820 based on the hierarchical framework
associated with the three levels of price transparency utilized in
measuring financial instruments at fair value as discussed above.
As of December 31, 2021, and December 31, 2020, the Company had a
$3,044,034
and $7,102,801
derivative liability, respectively.
Fair
value estimates are made at a specific point in time, based on
relevant market information and information about the financial
statement. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates. See Note 7 for additional
information.
Sequencing
Policy
Under
ASC 815-40-35, the Company has adopted a sequencing policy whereby,
in the event that reclassification of contracts from equity to
assets or liabilities is necessary pursuant to ASC 815 due to the
Company’s inability to demonstrate it has sufficient authorized
shares as a result of certain securities with a potentially
indeterminable number of shares, shares will be allocated on the
basis of the earliest issuance date of potentially dilutive
instruments with the earliest grants receiving the first allocation
of shares. Pursuant to ASC 815, issuance of securities to the
Company’s employees or directors is not subject to the sequencing
policy.
Accounts
Receivable
Trade
accounts receivable are recorded at the time product is shipped or
services are provided including any shipping and handling fees. The
Company provided allowances for uncollectible accounts receivable
equal to the estimated collection losses that will be incurred in
collection of all receivables. Accounts receivable is periodically
evaluated for collectability basis on past credit history with
customers and their current financial condition. The Company’s
management determines which accounts are past due and if deemed
uncollectible, the Company charges off the receivable in the period
the determination is made. Based on management’s evaluation, the
Company provided an allowance for doubtful accounts of $0
and $61,825
at December 31, 2021 and December 31, 2020,
respectively.
Inventories
Inventories
are stated at the lower of cost or market. Cost is determined by
using the first in, first out (FIFO) method. We record the value of
our inventory for estimated obsolescence or unmarketable inventory
equal to the difference between the cost of inventory and the
estimated market value based upon assumptions about future demand,
future pricing and market conditions. As of December 31, 2021 and
December 31, 2020, the inventory consisted of parts for equipment
sold as replacement parts to existing customers or sold to new
customers. The Company has recorded a reserve allowance of
$0
as of December 31, 2021 and December 31, 2020, respectively. The
Company has determined that some of the supplies inventory is
necessary to be placed into service, after assembly into equipment
to be used in product manufacturing and classified as lease
equipment in property and equipment. The balance at December 31,
2021 and December 31, 2020 of such supplies and equipment not yet
placed in service amounted to $450,151
and $32,580,
respectively.
Property and
Equipment
Property
and equipment are stated at purchased cost and depreciated
utilizing a straight-line method over estimated useful lives
ranging from 3 to 7 years after the asset has been placed in
service. Upon selling equipment that had been under a lease
agreement, the Company discontinues the depreciation on that piece
of equipment, as it transfers ownership to another entity.
Additions and major improvements that extend the useful lives of
property and equipment are capitalized. Maintenance and repairs are
charged to operations as incurred. Upon trade-in, sale or
retirement of property and equipment, the related cost and
accumulated depreciation are removed from the accounts, and any
related gains or losses are recorded in the results of
operations.
Impairment of
Long-lived Assets
The
carrying values of the Company’s long-lived assets are reviewed for
impairment annually and whenever events or changes in circumstances
indicate that they may not be recoverable. When projections
indicate that the carrying value of the long-lived asset is not
recoverable, the carrying value is reduced by the estimated excess
of the carrying value over the fair value. An impairment charge is
recognized if the carrying amount is not recoverable and the
carrying amount exceeds the fair value of the long-lived assets as
determined by projected discounted net future cashflows. The
recorded impairment expense was $0
for the years ended December 31, 2021 and December 31, 2020,
respectively.
Intangible
Assets
Costs to
obtain or develop patents are capitalized and amortized over the
remaining life of the patents, and technology rights are amortized
over their estimated useful lives. The Company currently has the
right to several patents and proprietary technology. Patents
and technology are amortized from the date the Company acquires or
is awarded the patent or technology right over their estimated
useful lives, which range from 1 to 15 years.
Research and
Development
Research
and development costs are recognized as an expense during the
period incurred, which is until the conceptual formulation, design
and testing of a process is completed and the process has been
determined to be commercially viable.
Leases
The
Company accounts for leases in accordance with ASC 842,
“Leases”, which requires lessees to recognize right-of-use
("ROU") assets and related lease liabilities on the balance sheet
for all leases greater than one year in duration. The Company
records the associated lease liability and corresponding
right-of-use asset upon commencement of the lease using the
implicit rate or a discount rate based on a credit-adjusted secured
borrowing rate commensurate with the term of the lease. When
determining the lease term, the Company includes options to extend
or terminate the lease when it is reasonably certain that it will
exercise that option, if any. As the Company’s leases do not
typically provide an implicit rate, the Company utilizes the
appropriate incremental borrowing rate, determined as the rate of
interest that the Company would have to pay to borrow on a
collateralized basis over a similar term and in a similar economic
environment. The Company has elected to adopt the following lease
policies: (i) for leases that have lease terms of 12 months or less
and does not include a purchase option that is reasonably certain
to exercise, the Company elected not to apply ASC 842 recognition
requirements; and (ii) the Company elected to apply the package of
practical expedients for existing arrangements entered into prior
to January 1, 2019 to not reassess (a) whether an arrangement is or
contains a lease, (b) the lease classification applied to existing
leases, and(c) initial direct costs. The Company has also elected
the practical expedient to not separate between lease and non-lease
components. During the year ended December 31, 2021, the Company
recognized an initial operating lease right-of-use asset of
$83,420
and operating lease liability of $83,420.
During the year ended December 31, 2020, the Company recognized an
initial operating lease right-of-use asset of $118,385
and operating lease liability of $118,385.
See Note 5 for further details.
ASC 842
requires lessors to expense costs that are not direct leasing
costs, to continually assess collectability of lessee payments, and
if operating lease payments are not probable of collection, to only
recognize into income equal to the lesser of (i) straight-line
rental income or (ii) lease payments received to date.
Revenue
Recognition
The
Company accounts for revenue in accordance with ASC 606,
“Revenue from Contracts with Customers”, which provides a
five-step analysis of transactions to determine when and how
revenue is recognized. The core principle is that a company should
recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflect the consideration
to which the entity expects to be entitled in exchange for those
goods or services.
The
Company recognizes revenue based on the following five criteria: 1)
identify the contract, 2) identify separate performance
obligations, 3) determine the transaction price, 4) allocate the
transaction price among the performance obligations, and 5)
recognize revenue as the performance obligations are
satisfied.
The
Company has the following three revenue streams:
|
1) |
Product sales (equipment and/or fluid solutions): Contracts for
product sales consist of invoices that specify the transaction
price. The only performance commitment is the provision of products
and the transaction price is allocated to the products specified on
the invoice. The Company recognizes revenue from the sale of
products when the performance obligation is satisfied by
transferring control of the product to a customer. |
|
2) |
Licensing: The Company licenses a contract-based use of the
Company’s US EPA Product Registration, returning revenue in
licensing fees and/or royalties from minimum or actual fluid sales.
The Contract specifies the term, fees and/or royalty. Performance
obligations include the provision of a sub-registration to use the
US EPA Product Registration and/or the provision of a license to
use the product for a period of time. The Company allocates the
transaction price based on the relative standalone, selling price
of each performance obligation. The Company’s licenses provide a
right-to-use and create performance obligations, satisfied at a
point in time. The Company recognizes revenue from licenses when
the performance obligation is satisfied through the transfer of the
license. For licenses that include royalties, the Company will
recognize royalty revenue as the underlying sales or usages occur,
as long as this approach does not result in the acceleration of
revenue ahead of the entity’s performance. |
|
3) |
Equipment leases: Contracts for equipment leases are systems
service agreements, usually 3-year contracts for the provision of
the Company’s equipment, and service of such, under contract to
customers, with renewable terms. The Company has elected to use the
practical expedient under ASC 842 and account for each separate
lease component and non-lease components associated with the
systems service agreements as a single combined component and as a
single performance obligation entirely under ASC 606. The
performance obligation consists of the provision of leased
equipment and all other services under the systems service
agreements. The Company recognizes revenue from the leasing of
equipment and services as the entity provides the equipment and the
customer simultaneously receives and consumes the benefits through
the use of the equipment and services. This revenue-generating
activity would meet the criteria for a performance obligation
satisfied over time. As a result, the Company recognizes revenue
over time by using the output method, as the Company can measure
progress of the performance obligation using the time elapsed under
each obligation. Additionally, under ASC 842, lessors are
required to continually assess collectability of lessee payments,
and if operating lease payments are not probable of collection, to
only recognize into income equal to the lesser of (i) straight-line
rental income or (ii) lease payments received to date. |
The
Company has disclosed disaggregated revenue via revenue stream on
the face of the statement of operations. The Company did not have
any contract assets or liabilities at December 31, 2021 or 2020,
respectively.
For the
year ended December 31, 2021, one customer accounted for 68% of
consolidated revenues for the year. For the year ended December 31,
2020, three customers accounted for 41%, 19% and 10%, respectively,
of consolidated revenues for the year.
Stock Based
Compensation
The
Company records stock-based compensation in accordance with ASC 718
“Compensation – Stock Compensation”. Under the provisions of
ASC 718, stock-based compensation expense is measured at the grant
date, based on the fair value of the award, and is recognized over
the requisite service period, which is generally the vesting
period. The fair value of our stock options and warrants is
estimated using a Black-Scholes option valuation model. Refer to
Notes 9 and 10 for further details.
Income
Taxes
Deferred
income taxes are provided on a liability method, whereby deferred
tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards. Deferred tax
liabilities are recognized for taxable temporary differences, which
are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by
a valuation allowance when, in the opinion of management, it is
more likely than not that some portion or all the deferred tax
assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on
the date of enactment. The Company recognizes the financial
statement benefit of a tax position only after determining that the
relevant tax authority would more likely than not sustain the
position following an audit. For tax positions meeting the
more-likely-than-not threshold, the amount recognized in the
consolidated financial statements is the largest benefit that has a
greater than 50 percent likelihood of being realized upon ultimate
settlement with the relevant tax authority.
Basic and
Diluted Loss Per Share
Basic
income (loss) per share is computed by dividing net income (loss)
by the weighted-average number of common shares outstanding during
the period. Diluted income (loss) per share is computed by
dividing net income (loss) by the weighted-average number of common
shares outstanding for the period and, if dilutive, potential
common shares outstanding during the period. Potentially dilutive
securities consist of the incremental common shares issuable upon
exercise of common stock equivalents such as options, warrants,
convertible notes payable, preferred series A stock and preferred
series C stock. Potentially dilutive securities are excluded from
the computation if their effect is anti-dilutive. As a result, for
the year ended December 31, 2021, there were outstanding common
share equivalents which amounted to 266,287,933 shares of common
stock that were not included in the calculation as their effect is
anti-dilutive. For fiscal periods with net losses, these common
share equivalents were not included in the computation of diluted
loss per share as their effect would have been
anti-dilutive.
|
|
Year ended
December 31, 2021 |
|
Year ended December 31, 2020 |
Numerator: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
988,619 |
|
|
$ |
(4,082,045 |
) |
(Gain) / Loss on change in fair value of derivative liability |
|
|
(728,188 |
) |
|
|
— |
|
(Gain) / Loss on settlement of debt |
|
|
(3,342,759 |
) |
|
|
— |
|
Interest expense |
|
|
18,167 |
|
|
|
— |
|
Adjusted net income (loss) |
|
$ |
(3,064,161 |
) |
|
$ |
(4,082,045 |
) |
|
|
|
|
|
|
|
|
|
Denominator: Weighted average shares outstanding used in computing
net income (loss) per share |
|
|
|
|
|
|
|
|
Basic |
|
|
765,752,715 |
|
|
|
609,029,869 |
|
|
|
|
|
|
|
|
|
|
Effect of dilutive warrants |
|
|
49,706,458 |
|
|
|
— |
|
Effect of convertible note weighted shares |
|
|
6,016,889 |
|
|
|
— |
|
Diluted |
|
|
821,476,062 |
|
|
|
609,029,869 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share applicable to common shareholders: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.00 |
|
|
$ |
(0.00 |
) |
Diluted |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
Recent
Accounting Pronouncements
In
August 2020, the FASB issued ASU 2020-06, "Debt - Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging - Contracts in Entity's Own Equity (Subtopic 815- 40)"
("ASU 2020-06"). ASU 2020-06 simplifies the accounting for certain
financial instruments with characteristics of liabilities and
equity, including convertible instruments and contracts on an
entity's own equity. The ASU is part of the FASB's simplification
initiative, which aims to reduce unnecessary complexity in U.S.
GAAP. The ASU's amendments are effective for fiscal years beginning
after December 15, 2023, and interim periods within those fiscal
years. The Company is currently evaluating the impact ASU 2020-06
will have on its financial statements.
The
Company has implemented all new accounting pronouncements that are
in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that
have been issued that might have a material impact on its financial
position or results of operations.
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 recurring losses, an accumulated deficit of $29,598,993, and
negative cashflows from operations. As of December 31, 2021, the
Company had a negative working capital of $4,466,166. 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
cashflow 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.
The
Company expects that working capital requirements will continue to
be funded through a combination of its existing funds and further
issuances of securities. Working capital requirements are expected
to increase in line with the growth of the business. The Company
has no lines of credit or other bank financing arrangements. The
Company has financed operations to date through the proceeds of
private placement of equity and debt instruments. In connection
with the Company’s business plan, management anticipates additional
increases in operating expenses and capital expenditures relating
to: (i) developmental expenses associated with business growth and
(ii) marketing expenses. The Company intends to finance these
expenses with further issuances of securities, and debt issuances.
Thereafter, the Company expects it will need to raise additional
capital and generate revenues to meet long-term operating
requirements. Additional issuances of equity or convertible debt
securities will result in dilution to current stockholders.
Further, such securities might have rights, preferences or
privileges senior to common stock. Additional financing may not be
available upon acceptable terms, or at all. If adequate funds are
not available or are not available on acceptable terms, the Company
may not be able to take advantage of prospective new business
endeavors or opportunities, which could significantly and
materially restrict business operations.
NOTE 3. PROPERTY AND EQUIPMENT
Property
and equipment at December 31, 2021 and December 31, 2020 consisted
of the following:
|
|
December 31, 2021 |
|
December 31, 2020 |
Leasehold improvements |
|
$ |
61,580 |
|
|
$ |
18,840 |
|
Machinery and leased equipment |
|
|
365,483 |
|
|
|
365,483 |
|
Leased equipment not yet in service |
|
|
440,150 |
|
|
|
32,580 |
|
Office equipment and furniture |
|
|
57,913 |
|
|
|
39,357 |
|
Website |
|
|
2,760 |
|
|
|
2,760 |
|
|
|
|
|
|
|
|
|
|
Total property and equipment |
|
$ |
927,886 |
|
|
$ |
459,020 |
|
Less: Accumulated Depreciation |
|
|
(165,832 |
) |
|
|
(100,301 |
) |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
762,054 |
|
|
|
358,719 |
|
Depreciation
expense was $65,531
and $44,303
for the year ended December 31, 2021 and 2020, respectively of
which $52,212
(2020 - $39,413)
related to leased equipment. During the year ended December 31,
2021, the Company recorded a loss on disposal of equipment of
$0 (2020 - $173,551).
NOTE 4. INTANGIBLE ASSETS
Intangible
assets at December 31, 2021 and December 31, 2020 consisted of the
following:
|
|
December 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 |
|
|
(1,607,468 |
) |
|
|
(1,305,465 |
) |
Net Carrying Amount |
|
$ |
3,098,021 |
|
|
$ |
3,400,024 |
|
Amortization
expense was $302,003
for the year ended December 31, 2021, of which $293,670
relates to patents and $8,333
relates to technology rights. Amortization expense was $304,405
for the year ended December 31, 2020, of which $294,474
relates to patents and $9,931
relates to technology rights. No impairment was recognized during
the years ended December 31, 2021 and 2020.
Estimated
Future Amortization Expense:
|
|
$ |
|
For year ending December 31, 2022 |
|
|
302,003 |
|
For year ending December 31, 2023 |
|
|
302,003 |
|
For year ending December 31, 2024 |
|
|
302,003 |
|
For year ending December 31, 2025 |
|
|
302,003 |
|
For year ending December 31, 2026 |
|
|
302,003 |
|
Thereafter |
|
|
1,588,006 |
|
Total |
|
|
3,098,021 |
|
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
per month.
On
October 19, 2020, the Company entered into a building lease with a
three-year term and an effective date of November 1, 2020. The
lease requires the Company to make payments of $4,500
per month. The Company recognized operating lease expense of
$54,000
during the year ended December 31, 2021.
On March
15, 2021, the Company entered into a building lease with a two-year
term and an effective date of April 1, 2021. The lease required the
Company to make payments of $2,750
per month. The Company recognized operating lease expense of
$19,250
during the year ended December 31, 2021. The Company terminated the
lease effective October 14, 2021 and recognized an impairment of
$39,030
during the year ended December 31, 2021.
At
December 31, 2021, the weighted average remaining operating lease
term was 1.83 years and the weighted average discount rate
associated with operating leases was 18.5%.
The
components of lease expenses for the year ended December 31, 2021
and 2020 were as follows:
|
2021
$
|
2020
$
|
|
|
|
Total operating lease cost |
73,250 |
10,458 |
The
following table provides supplemental cashflow and other
information related to leases for the year ended December 31, 2021
and 2020:
|
2021
$
|
2020
$
|
|
|
|
Lease payments |
164,150 |
9,000 |
Supplemental
balance sheet information related to leases as of December 31, 2021
and 2020 are as below:
|
2021
$
|
2020
$
|
|
|
|
Cost |
176,213 |
123,614 |
Accumulated amortization |
(53,763) |
(5,229) |
Impairment |
(39,030) |
— |
Net carrying value |
83,420 |
118,385 |
Future
minimum lease payments related to lease obligations are as follows
as of December 31, 2021:
|
$ |
|
|
2022 |
54,000 |
2023 |
45,000 |
|
|
Total minimum lease payments |
99,000 |
|
|
Less: amount of lease payments representing effects of
discounting |
(15,580) |
|
|
Present
value of future minimum lease payments |
83,420 |
|
|
Less: current obligations under leases |
(42,012) |
|
|
Lease liabilities, net of current portion |
41,408 |
NOTE 6. NOTES PAYABLE
The
following tables summarize notes payable as of December 31, 2021
and December 31, 2020:
Type |
|
Original Amount |
|
Origination
Date
|
|
Maturity
Date
|
|
Effective Annual
Interest
Rate
|
|
Balance at
December 31, 2021
|
|
Balance at
December 31, 2020
|
Note Payable (a)** |
|
$ |
25,000 |
|
|
05/08/2017 |
|
06/30/2018 |
|
|
0 |
% |
|
$ |
22,500 |
|
|
$ |
27,500 |
|
Note Payable (b) |
|
$ |
8,700 |
|
|
11/15/2018 |
|
06/30/2019 |
|
|
10 |
% |
|
$ |
- |
|
|
$ |
8,700 |
|
Note Payable ** |
|
$ |
118,644 |
|
|
05/05/2020 |
|
05/05/2021 |
|
|
8 |
% |
|
$ |
110,644 |
|
|
$ |
110,644 |
|
Note Payable (c) |
|
$ |
199,500 |
|
|
10/01/2020 |
|
09/28/2021 |
|
|
66 |
% |
|
$ |
- |
|
|
$ |
149,573 |
|
Note Payable (d) |
|
$ |
126,000 |
|
|
11/03/2020 |
|
04/23/2021 |
|
|
166 |
% |
|
$ |
- |
|
|
$ |
85,050 |
|
Note Payable (e) |
|
$ |
113,980 |
|
|
11/04/2020 |
|
03/15/2021 |
|
|
210 |
% |
|
$ |
- |
|
|
$ |
65,988 |
|
Note Payable (f) |
|
$ |
177,800 |
|
|
01/02/2021 |
|
07/12/2021 |
|
|
116 |
% |
|
$ |
- |
|
|
$ |
- |
|
Note Payable (g) |
|
$ |
111,920 |
|
|
03/09/2021 |
|
05/21/2021 |
|
|
220 |
% |
|
$ |
- |
|
|
$ |
- |
|
Note Payable (h) |
|
$ |
29,686 |
|
|
03/09/2021 |
|
Demand |
|
|
34 |
% |
|
$ |
- |
|
|
$ |
- |
|
Note Payable (i) |
|
$ |
222,400 |
|
|
06/01/2021 |
|
Demand |
|
|
181 |
% |
|
$ |
- |
|
|
$ |
- |
|
Note Payable (j) |
|
$ |
87,000 |
|
|
06/29/2021 |
|
Demand |
|
|
211 |
% |
|
$ |
- |
|
|
$ |
- |
|
Sub-total |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
133,144 |
|
|
$ |
447,455 |
|
Debt
discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
(63,075 |
) |
Balance, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
133,144 |
|
|
$ |
384,380 |
|
Less current
portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(133,144 |
) |
|
$ |
(384,380 |
) |
Total
long-term |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** Currently in default |
|
a) |
On
July 19, 2021, the Company repaid the principal amount of
$5,000
leaving a note balance of $22,500. |
|
b) |
On
July 19, 2021, the Company repaid the principal amount of
$8,700
leaving a note balance of $0. |
|
c) |
On
October 1, 2020, the Company sold future receivables with a
non-related party for $199,500,
of which $53,250
was loan fees and original issue
discount resulting in cash proceeds to the Company of $146,250.
The advance is to be repaid through weekly payments of $3,841.
In connection with the advance, the Company granted the lender a
security interest and all past, present and future assets of the
Company. During the year ended December 31, 2021, $30,642
of the discount was amortized to
expense, and the note was repaid leaving a note balance of
$0. |
|
d) |
On
November 3, 2020, the Company sold future receivables with a
non-related party for $126,000,
of which $39,650
was loan fees and original issue
discount resulting in cash proceeds to the Company of $86,350.
The advance is to be repaid through $1,050
daily payments. In connection with
the advance, the Company granted the lender a security interest and
all past, present and future assets of the Company. During the year
ended December 31, 2021, $18,944
of the discount was amortized to
expense, and the remaining $85,050
was repaid leaving a note balance of
$0. |
|
e) |
On
November 4, 2020, the Company sold future receivables with a
non-related party for $113,980,
of which $34,440
was loan fees and original issue
discount resulting in cash proceeds to the Company of $79,540.
The advance is to be repaid through $5,999
weekly payments. In connection with
the advance, the Company granted the lender a security interest and
all past, present and future assets of the Company. During the year
ended December 31, 2021, $13,489
of the discount was amortized to
expense, and the remaining $65,988
was repaid leaving a note balance of
$0. |
|
f) |
On
January 2, 2021, the Company sold future receivables with a
non-related party for $177,800,
of which $39,795
was loan fees and original issue
discount resulting, and $35,994
was paid to settle the loan described
in Note (e) 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 year
ended December 31, 2021, $39,795
of the discount was amortized to
expense, and the remaining $46,383
was settled through a payment of
$43,600
resulting in a gain on settlement of
debt of $2,783
and a note balance of $0. |
|
g) |
On
March 9, 2021, the Company sold future receivables with a
non-related party for $111,920,
of which $35,120
was loan fees and original issue
discount resulting in cash proceeds to the Company of $76,800.
The advance is to be repaid through $1,399
weekly payments. In connection with
the advance, the Company granted the lender a security interest and
all past, present and future assets of the Company. During the year
ended December 31, 2021, $35,120
of the discount was amortized to
expense, and $111,920
was repaid leaving a note balance of
$0. |
h) |
On
March 9, 2021, the Company sold future receivables with a
non-related party for $29,686,
of which $10,120
was loan fees and original issue
discount resulting in cash proceeds to the Company of $19,566.
During the year ended December 31, 2021, $10,120
of the discount was amortized to
expense and $29,686
was repaid, leaving a note balance of
$0. |
i) |
On
June 1, 2021, the Company sold future receivables with a
non-related party for $222,400,
of which $8,000
was attributable to loan fees and
$62,400
to original issue discount resulting
in cash proceeds to the Company of $152,000.
The advance is to be repaid through weekly payments of $8,554.
In connection with the advance, the Company granted the lender a
security interest and all past, present, and future assets of the
Company. During the year ended December 31, 2021, $70,400
of the discount was amortized to
expense, and $222,400
was repaid leaving a net note balance
of $0. |
j) |
On
June 29, 2021, the Company sold future receivables with a
non-related party for $87,000,
of which $27,000
was loan fees and original issue
discount resulting in cash proceeds to the Company of $60,000.
During the year ended December 31, 2021, $23,041
of the discount was amortized to
expense, and $87,000
was repaid leaving a net note balance
of $0. |
The
following table summarizes notes payable, related parties as of
December 31, 2021 and December 31, 2020:
Type |
|
Original Amount |
|
Origination
Date
|
|
Maturity
Date
|
|
Annual
Interest
Rate
|
|
Balance at
December 31,
2021
|
|
Balance at
December 31, 2020
|
Note Payable, RP (k) |
|
$ |
30,000 |
|
|
04/10/2018 |
|
01/15/2019 |
|
|
3 |
% |
|
$ |
- |
|
|
$ |
30,000 |
|
Note Payable, RP (l) |
|
$ |
380,000 |
|
|
06/20/2018 |
|
01/02/2020 |
|
|
8 |
% |
|
$ |
- |
|
|
$ |
380,000 |
|
Note Payable, RP (m) |
|
$ |
350,000 |
|
|
06/20/2018 |
|
01/02/2020 |
|
|
5 |
% |
|
$ |
- |
|
|
$ |
285,214 |
|
Note Payable, RP (n)** |
|
$ |
17,000 |
|
|
06/20/2018 |
|
01/02/2020 |
|
|
5 |
% |
|
$ |
10,000 |
|
|
$ |
17,000 |
|
Note Payable, RP (o) |
|
$ |
50,000 |
|
|
07/27/2018 |
|
11/30/2018 |
|
|
8 |
% |
|
$ |
10,850 |
|
|
$ |
50,000 |
|
Note Payable, RP (p) |
|
$ |
5,000 |
|
|
10/09/2018 |
|
Demand |
|
|
0 |
% |
|
$ |
- |
|
|
$ |
5,000 |
|
Note Payable, RP (q) |
|
$ |
5,000 |
|
|
10/19/2018 |
|
Demand |
|
|
0 |
% |
|
$ |
- |
|
|
$ |
5,000 |
|
Note Payable, RP ** |
|
$ |
15,000 |
|
|
08/16/2019 |
|
02/16/2020 |
|
|
8 |
% |
|
$ |
15,000 |
|
|
$ |
15,000 |
|
Note Payable, RP (r) |
|
$ |
2,000 |
|
|
02/11/2020 |
|
Demand |
|
|
0 |
% |
|
$ |
- |
|
|
$ |
2,000 |
|
Note Payable, RP (m) |
|
$ |
84,034 |
|
|
02/16/2021 |
|
Demand |
|
|
5 |
% |
|
$ |
50,000 |
|
|
$ |
- |
|
Subtotal |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
85,850 |
|
|
$ |
789,214 |
|
Debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
- |
|
Balance, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
85,850 |
|
|
$ |
789,214 |
|
Less current
portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(85,850 |
) |
|
$ |
(789,214 |
) |
Total long-term |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** Currently in default |
|
k) |
During the year ended December 31, 2021, the
Company made several payments to repay the principal amount of
$30,000
leaving a note balance of $0. |
|
l) |
On
February 16, 2021, the Company issued
2,663,299 shares of
common stock to settle a June 20, 2018, note payable of $380,000
and accrued interest of $26,153
owed to the current COO and Director
of the Company. The Company recognized the fair value of
the shares issued of $74,572
and due to the related party nature
of the transaction no gain was recognized for the difference
between the fair value of the shares and the extinguished debt. The
resulting difference was recorded as Additional Paid-in Capital in
the amount of $328,919. |
|
m) |
On
February 16, 2021, the Company issued
1,803,279 shares of
common stock to settle $247,270
from a $275,000
note payable dated June 20, 2018,
which has a balance of $331,304,
including interest, to the current Chairman and CEO of the Company.
The Company also agreed to issue a new note for the remaining
balance owed to the Chairman and CEO of $84,034,
dated February 16, 2021. The note will bear interest at
5% per annum and is due
on June 30, 2021. The Company recognized the fair value of the
shares issued of $50,492
and due to the related party nature
of the transaction no gain was recognized for the difference
between the fair value of the shares and the extinguished debt. The
resulting difference was recorded as Additional Paid-in Capital in
the amount of $194,861.
During the year ended December 31, 2021, the Company made several
payments to repay the principal amount of $34,034
leaving a note balance of $50,000. |
|
n) |
During the year ended December 31, 2021, the
Company made several payments to repay the principal amount of
$7,000
leaving a note balance of $10,000. |
|
o) |
During the year ended December 31, 2021, the Company made several
payments to repay the principal amount of $39,150
leaving a note balance of $10,850. |
|
p) |
On September 23, 2021, the Company repaid the principal amount of
$5,000
leaving a note balance of $0. |
|
q) |
During the year ended December 31, 2021, the Company made several
payments to repay the principal amount of $5,000
leaving a note balance of $0. |
|
r) |
On September 23, 2021, the Company repaid the principal amount of
$2,000
leaving a note balance of $0. |
The
following table summarizes convertible notes payable as of December
31, 2021 and December 31, 2020:
Type |
|
Original Amount |
|
Origination
Date
|
|
Maturity
Date
|
|
Annual
Interest
Rate
|
|
Balance at
September 30,
2021
|
|
Balance at
December 31, 2020
|
Convertible Note Payable (s) |
|
$ |
65,000 |
|
|
12/06/2018 |
|
12/06/2019 |
|
|
12 |
% |
|
$ |
- |
|
|
$ |
46 |
|
Convertible Note Payable (t) |
|
$ |
75,000 |
|
|
03/18/2019 |
|
12/13/2019 |
|
|
24 |
% |
|
$ |
- |
|
|
$ |
177,795 |
|
Convertible Note Payable (u) |
|
$ |
30,000 |
|
|
03/06/2020 |
|
03/05/2021 |
|
|
12 |
% |
|
$ |
- |
|
|
$ |
21,662 |
|
Convertible Note Payable (v) |
$ |
150,000 |
|
|
04/10/2020 |
|
04/09/2021 |
|
|
12 |
% |
|
$ |
25,000 |
|
|
$ |
165,000 |
|
Convertible Note Payable (w) |
|
$ |
300,000 |
|
|
08/27/2020 |
|
07/31/2021 |
|
|
12 |
% |
|
$ |
270,000 |
|
|
$ |
300,000 |
|
Convertible Note Payable (x) |
|
$ |
53,500 |
|
|
09/22/2020 |
|
03/21/2022 |
|
|
12 |
% |
|
$ |
- |
|
|
$ |
53,500 |
|
Convertible Note Payable (y) |
|
$ |
87,500 |
|
|
09/24/2020 |
|
Demand |
|
|
8 |
% |
|
$ |
- |
|
|
$ |
40,000 |
|
Convertible Note Payable (z) |
|
$ |
200,000 |
|
|
10/07/2020 |
|
10/06/2021 |
|
|
5 |
% |
|
$ |
- |
|
|
$ |
200,000 |
|
Convertible Note Payable (aa) |
|
$ |
200,000 |
|
|
10/16/2020 |
|
10/15/2021 |
|
|
5 |
% |
|
$ |
- |
|
|
$ |
200,000 |
|
Convertible Note Payable (bb) |
|
$ |
300,000 |
|
|
11/11/2020 |
|
11/10/2021 |
|
|
5 |
% |
|
$ |
- |
|
|
$ |
300,000 |
|
Convertible Note Payable (cc) |
|
$ |
150,000 |
|
|
12/29/2020 |
|
12/28/2021 |
|
|
5 |
% |
|
$ |
- |
|
|
$ |
150,000 |
|
Convertible Note Payable (dd) |
|
$ |
150,000 |
|
|
01/27/2021 |
|
01/27/2022 |
|
|
5 |
% |
|
$ |
- |
|
|
$ |
- |
|
Convertible Note Payable (ee) |
|
$ |
128,000 |
|
|
02/22/2021 |
|
02/22/2022 |
|
|
12 |
% |
|
$ |
- |
|
|
$ |
- |
|
Convertible Note Payable (ff) |
|
$ |
200,000 |
|
|
03/18/2021 |
|
03/18/2022 |
|
|
5 |
% |
|
$ |
- |
|
|
$ |
- |
|
Convertible Note Payable (gg) |
|
$ |
83,000 |
|
|
03/26/2021 |
|
03/26/2022 |
|
|
12 |
% |
|
$ |
- |
|
|
$ |
- |
|
Convertible Note Payable (hh) |
|
$ |
43,000 |
|
|
04/05/2021 |
|
04/05/2022 |
|
|
12 |
% |
|
$ |
- |
|
|
$ |
- |
|
Convertible Note Payable (ii) |
|
$ |
200,000 |
|
|
04/14/2021 |
|
04/14/2022 |
|
|
5 |
% |
|
$ |
- |
|
|
$ |
- |
|
Convertible Note Payable (jj) |
|
$ |
128,000 |
|
|
05/03/2021 |
|
05/03/2022 |
|
|
12 |
% |
|
$ |
- |
|
|
$ |
- |
|
Convertible Note Payable (kk) |
|
$ |
226,162 |
|
|
11/04/2021 |
|
11/04/2022 |
|
|
19 |
% |
|
$ |
203,546 |
|
|
$ |
- |
|
Convertible Note Payable (ll) |
|
$ |
1,465,300 |
|
|
11/30/2021 |
|
11/30/2023 |
|
|
5 |
% |
|
$ |
1,465,300 |
|
|
$ |
- |
|
Subtotal |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,963,846 |
|
|
$ |
1,608,003 |
|
Debt
discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(17,738 |
) |
|
$ |
- |
|
Balance, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,946,108 |
|
|
$ |
1,608,003 |
|
Less
current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(480,808 |
) |
|
$ |
(1,554,503 |
) |
Total
long-term |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,465,300 |
|
|
|
53,500 |
|
* Embedded conversion feature
accounted for as a derivative liability at period end
** Currently in default |
|
s) |
During the year ended December 31, 2021, the Company settled the
remaining outstanding debt of $46
and accrued interest of $1,863
through an acknowledge from the creditor that no further amounts
were owing. |
|
t) |
During the year ended December 31, 2021, the
Company repaid $70,000
of the convertible note payable and
settled the remaining outstanding debt of $107,795
and accrued interest of $76,569
through a cash payment of $40,000
and the issuance of
8,000,000 shares of
common stock at a fair value of $124,000
resulting in a gain on settlement of
debt of $20,364. |
|
u) |
On
May 7, 2021, the Company deemed in the best interest to settle the
convertible debt with a non-related party and allow for the
cashless exercise to purchase
1,921,875 shares of the
Company's common stock at the rate of $0.032
per share. In addition, the
non-related party shall release
60,072,853 shares to
the agreed upon payment terms of $36,994
cash. During the year ended December
31, 2021, the Company incurred additional default penalties of
$15,174
on the convertible note and settled
the outstanding debt of $36,836
and accrued interest of $3,657
through a cash payment of $36,994
and the cashless exercise to purchase
1,921,875 shares of the
Company's common stock with a fair value of $34,594
resulting in a loss on settlement of
debt of $31,095. |
|
v) |
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 year, 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 year ended December 31, 2021, the Company settled
$140,000
of outstanding debt through cash
payments totaling $125,000
and the forgiveness of the $15,000
penalty, leaving a note balance of $25,000.
|
|
w) |
During the year ended December 31, 2021, the
Company repaid $30,000
of the note, leaving a note balance
of $270,000. |
|
x) |
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 year
ended December 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. |
|
y) |
During the year ended December 31, 2021 the
Company issued
25,000,000 common
shares upon the conversion of $25,000
of the convertible note payable,
leaving a note balance of $15,000.
On October 11, 2021, the Company issued
15,000,000 common
shares upon the conversion of the remaining $15,000
of the convertible note payable,
leaving a note balance of $0. |
|
z) |
On
October 7, 2020, the Company entered into a convertible promissory
note with a non-related party for $200,000.
The note is due on October 6, 2021 and bears interest on the unpaid
principal balance at a rate of
5% per annum. The Note
may be converted by the Lender at any time after 180 days of the
date of issuance into shares of Company's common stock at a
conversion price of $0.20. As the stock price at the issuance date
was lesser than the effective conversion price, it was determined
that no beneficial conversion feature exists. The Company
determined that there was no derivative liability associated with
the debenture under ASC 815-15 Derivatives and Hedging. On November
30, 2021, the Company rolled this debt into a new convertible
promissory note with the same creditor. Refer to note
6(ll). |
|
aa) |
On
October 16, 2020, the Company entered into a convertible promissory
note with a non-related party for $200,000.
The note is due on October 15, 2021 and bears interest on the
unpaid principal balance at a rate of
5% per annum. The Note
may be converted by the Lender at any time after 180 days of the
date of issuance into shares of Company's common stock at a
conversion price of $0.20. As the stock price at the issuance date
was lesser than the effective conversion price, it was determined
that no beneficial conversion feature exists. The Company
determined that there was no derivative liability associated with
the debenture under ASC 815-15 Derivatives and Hedging. On November
30, 2021, the Company rolled this debt into a new convertible
promissory note with the same creditor. Refer to note
6(ll). |
|
bb) |
On
November 11, 2020, the Company entered into a convertible
promissory note with a non-related party for $300,000.
The note is due on November 10, 2021 and bears interest on the
unpaid principal balance at a rate of
5% per annum. The Note
may be converted by the Lender at any time after 180 days of the
date of issuance into shares of Company's common stock at a
conversion price of $0.15. As the stock price at the issuance date
was lesser than the effective conversion price, it was determined
that no beneficial conversion feature exists. The Company
determined that there was no derivative liability associated with
the debenture under ASC 815-15 Derivatives and Hedging. On November
30, 2021, the Company rolled this debt into a new convertible
promissory note with the same creditor. Refer to note
6(ll). |
|
cc) |
On
December 29, 2020, the Company entered into a convertible
promissory note with a non-related party for $150,000.
The note is due on December 28, 2021 and bears interest on the
unpaid principal balance at a rate of
5% per annum. The Note
may be converted by the Lender at any time after 180 days of the
date of issuance into shares of Company's common stock at a
conversion price of $0.10. As the stock price at the issuance date
was lesser than the effective conversion price, it was determined
that no beneficial conversion feature exists. The Company
determined that there was no derivative liability associated with
the debenture under ASC 815-15 Derivatives and Hedging. On November
30, 2021, the Company rolled this debt into a new convertible
promissory note with the same creditor. Refer to note
6(ll). |
|
dd) |
On
January 27, 2021, the Company entered into a convertible promissory
note with a non-related party for $150,000.
The note is due on January 26, 2022 and bears interest on the
unpaid principal balance at a rate of
5% per annum. The note
may be converted by the lender at any time before 180 days of the
date of issuance into shares of Company's common stock at a
conversion price equal to $0.10. As the stock price at the issuance
date was lesser than the effective conversion price, it was
determined that no beneficial conversion feature exists. The
Company determined that there was no derivative liability
associated with the debenture under ASC 815-15 Derivatives and
Hedging. On November 30, 2021, the Company rolled this debt into a
new convertible promissory note with the same creditor. Refer to
note 6(ll). |
|
ee) |
On
February 22, 2021, the Company entered into a convertible
promissory note with a non-related party for $128,000,
of which $3,000
was an original issue discount
resulting in cash proceeds to the Company of $125,000.
The note is due on February 22, 2022 and bears interest on the
unpaid principal balance at a rate of
12% per annum.
Stringent pre-payment terms apply (from 15% to 40%, dependent upon
the timeframe of repayment during the note's term) and any part of
the note which is not paid when due shall bear interest at the rate
of 22% per annum from the due date until paid. The Note may be
converted by the Lender at any time after 180 days of the date of
issuance into shares of Company's common stock at a conversion
price equal to 61% of the lowest trading price during the
15-trading day period prior to the conversion date. As the stock
price at the issuance date was lesser than the effective conversion
price, it was determined that no beneficial conversion feature
exists. During the year ended December 31, 2021 the Company repaid
the $128,000
note as well as $51,000
of interest and prepayment penalties.
As the note was repaid prior to becoming convertible no derivative
liability was recognized. |
|
ff) |
On
March 18, 2021, the Company entered into a convertible promissory
note with a non-related party for $200,000.
The note is due on March 17, 2022 and bears interest on the unpaid
principal balance at a rate of
5% per annum. The note
may be converted by the lender at any time before 180 days of the
date of issuance into shares of Company's common stock at a
conversion price equal to $0.10. As the stock price at the issuance
date was lesser than the effective conversion price, it was
determined that no beneficial conversion feature exists. The
Company determined that there was no derivative liability
associated with the debenture under ASC 815-15 Derivatives and
Hedging. On November 30, 2021, the Company rolled this debt into a
new convertible promissory note with the same creditor. Refer to
note 6(ll). |
|
gg) |
On
March 26, 2021, the Company entered into a convertible promissory
note with a non-related party for $83,000,
of which $3,000
was an original issue discount
resulting in cash proceeds to the Company of $80,000.
The note is due on March 24, 2022 and bears interest on the unpaid
principal balance at a rate of
12% per annum.
Stringent pre-payment terms apply (from 15% to 40%, dependent upon
the timeframe of repayment during the note's term) and any part of
the note which is not paid when due shall bear interest at the rate
of 22% per annum from the due date until paid. The Note may be
converted by the Lender at any time after 180 days of the date of
issuance into shares of Company's common stock at a conversion
price equal to 61% of the lowest trading price during the
15-trading day period prior to the conversion date. As the stock
price at the issuance date was lesser than the effective conversion
price, it was determined that no beneficial conversion feature
exists. During the year ended December 31, 2021 the Company repaid
the $83,000
note as well as $39,694
of interest and prepayment penalties.
As the note was repaid prior to becoming convertible no derivative
liability was recognized. |
|
hh) |
On
April 5, 2021, the Company entered into a convertible promissory
note with a non-related party for $43,000,
of which $3,000
was an original issue discount
resulting in cash proceeds to the Company of $40,000.
The note is due on April 5, 2022 and bears interest on the unpaid
principal balance at a rate of
12% per annum.
Stringent pre-payment terms apply (from 15% to 40%, dependent upon
the timeframe of repayment during the note's term) and any part of
the note which is not paid when due shall bear interest at the rate
of 22% per annum from the due date until paid. The Note may be
converted by the Lender at any time after 180 days of the date of
issuance into shares of Company's common stock at a conversion
price equal to 61% of the lowest trading price during the
15-trading day period prior to the conversion date. As the stock
price at the issuance date was lesser than the effective conversion
price, it was determined that no beneficial conversion feature
exists. During the year ended December 31, 2021 the Company repaid
the $43,000
note as well as $12,270
of interest and prepayment penalties.
As the note was repaid prior to becoming convertible no derivative
liability was recognized. |
|
ii) |
On
April 14, 2021, the Company entered into a convertible promissory
note with a non-related party for $200,000.
The note is due on April 14, 2022 and bears interest on the unpaid
principal balance at a rate of
5% per annum. The Note
may be converted by the Lender at any time after 180 days of the
date of issuance into shares of Company's common stock at a
conversion price of $0.10. As the stock price at the issuance date
was lesser than the effective conversion price, it was determined
that no beneficial conversion feature exists. The Company
determined that there was no derivative liability associated with
the debenture under ASC 815-15 Derivatives and Hedging. On November
30, 2021, the Company rolled this debt into a new convertible
promissory note with the same creditor. Refer to note
6(ll). |
|
jj) |
On
May 3, 2021, the Company entered into a convertible promissory note
with a non-related party for $128,000,
of which $3,000
was an original issue discount
resulting in cash proceeds to the Company of $125,000.
The note is due on May 3, 2022 and bears interest on the unpaid
principal balance at a rate of
12% per annum.
Stringent pre-payment terms apply (from 15% to 40%, dependent upon
the timeframe of repayment during the note's term) and any part of
the note which is not paid when due shall bear interest at the rate
of 22% per annum from the due date until paid. The Note may be
converted by the Lender at any time after 180 days of the date of
issuance into shares of Company's common stock at a conversion
price equal to 61% of the lowest trading price during the
15-trading day period prior to the conversion date. As the stock
price at the issuance date was lesser than the effective conversion
price, it was determined that no beneficial conversion feature
exists. On November 5, 2021, the Company repaid the $128,000
note as well as $61,952
of interest and prepayment
penalties. |
|
kk) |
On November 4, 2021, the Company entered into a convertible
promissory note with a non-related party for $226,162,
of which $22,412
was an original issue discount and $2,500
was issue costs resulting in cash proceeds to the Company of
$201,250.
The note is due on November 4, 2022 and was subject to a one-time
19% interest charge applied on the issuance date to the principal
amount. Repayment of principal and interest shall be made in ten
monthly payment of $25,204
commencing December 20, 2021. The Note may only be converted by the
Lender at any time after an Event of Default into shares of
Company's common stock at a conversion price equal to 75% of the
lowest trading price during the 5-trading day period prior to the
conversion date. |
|
ll) |
On
November 30, 2021, the Company issued a new convertible promissory
note with a non-related party that extinguished seven previous
convertible promissory notes payable with the same party with an
aggregate principal balance owing of $1,400,000
and accrued interest of $65,300.
Refer to notes 6(z),(aa),(bb),(cc),(dd),(ff),(ii). The new note has
a principal balance of $1,465,300,
is due on November 30, 2023 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 into shares of Company's common stock at a conversion price
equal to $0.07.
The
Company assessed the extinguishment of the seven previous
convertible notes payable under ASC 470 and determined that the
guidance under troubled debt restructuring should apply. Per ASC
470-60-35-5, a debtor in a troubled debt restructuring involving
only modification of terms of a payable—that is, not involving a
transfer of assets or grant of an equity interest—shall account for
the effects of the restructuring prospectively from the time of
restructuring, and shall not change the carrying amount of the
payable at the time of the restructuring unless the carrying amount
exceeds the total future cash payments specified by the new terms.
As the future undiscounted cash flows were greater than or equal to
the net carrying value of the original debt, the carrying amount of
the debt at the time of the restructuring was not changed (that is,
no gain recognized).
|
NOTE 7 – DERIVATIVE LIABILITIES
The
embedded conversion option of (1) the convertible notes payable
described in Note 6; (2) warrants; contain conversion features that
qualify for embedded derivative classification. The fair value of
the liabilities will be re-measured at the end of every reporting
period and the change in fair value will be reported in the
statement of operations as a gain or loss on derivative financial
instruments.
Upon the
issuance of the convertible notes payable described in Note 6, the
Company concluded that it only has sufficient shares to satisfy the
conversion of some but not all of the outstanding convertible
notes, warrants and options. The Company elected to reclassify
contracts from equity with the earliest inception date first. As a
result, none of the Company's previously outstanding convertible
instruments qualified for derivative reclassification, however, any
convertible securities issued after the election, including the
warrants described in Note 10, qualified for derivative
classification. The Company reassesses the classification of the
instruments at each balance sheet date. If the classification
changes as a result of events during the period, the contract is
reclassified as of the date of the event that caused the
reclassification.
The
table below sets forth a summary of changes in the fair value of
the Company's Level 3 financial liabilities.
|
|
December 31,
2021 |
|
December 31,
2020 |
Balance at the beginning of period |
|
$ |
7,102,801 |
|
|
$ |
10,517,873 |
|
Original discount limited to proceeds of convertible notes |
|
|
— |
|
|
|
166,000 |
|
Change in fair value of embedded conversion option |
|
|
(22,861 |
) |
|
|
13,243,597 |
|
Balance at the end of the period |
|
$ |
3,044,034 |
|
|
$ |
7,102,801 |
|
The
Company uses Level 3 inputs for its valuation methodology for the
embedded conversion option and warrant liabilities as their fair
values were determined by using the Binomial Model based on various
assumptions.
Significant
changes in any of these inputs in isolation would result in a
significant change in the fair value measurement. As required,
these are classified based on the lowest level of input that is
significant to the fair value measurement. The following table
shows the assumptions used in the calculations:
|
|
Expected Volatility |
|
|
|
Risk-free Interest Rate |
|
|
|
Expected Dividend Yield |
|
Expected Life (in years) |
At issuance |
|
212-358 |
% |
|
|
0.25-1.47 |
% |
|
|
|
0 |
% |
|
1.00-5.00 |
At December 31, 2021 |
|
117-240 |
% |
|
|
0.39-1.12 |
% |
|
|
|
0 |
% |
|
1.00-3.65 |
The
Company uses Level 3 inputs for its valuation methodology for the
preferred series A stock liability as their fair values were
determined by using the Binomial Model based on various
assumptions.
NOTE 8 - STOCKHOLDERS’ DEFICIT
Preferred Stock
Effective
March 23, 2018, the Company amended the articles of incorporation
and authorized
10,000,000 shares of preferred stock with a par value of
$0.001
per share. The preferred stock may be issued from time to time by
the Board of Directors as shares of one or