UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
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).
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 ☐ |
Accelerated filer ☐ Smaller reporting company Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐
The number of shares outstanding of the registrant's common stock as of August 15, 2022 was which does not include common stock reserved against default on convertible debt.
TABLE OF CONTENTS
| Part I - Financial Information | Page | |
| Item 1. | Condensed Consolidated Financial Statements (Unaudited) | 3 |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 24 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 27 |
| Item 4. | Controls and Procedures | 27 |
| Part II - Other Information | ||
| Item 1. | Legal Proceedings | 28 |
| Item 1A. | Risk Factors | 28 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 28 |
| Item 3. | Defaults Upon Senior Securities | 29 |
| Item 4. | Mine Safety Disclosures | 29 |
| Item 5. | Other Information | 29 |
| Item 6. | Exhibits | 30 |
| Signatures | 31 | |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial information set forth below with respect to our statements of operations, stockholders' equity (deficit), and cash flows for the three and six-month periods ended June 30, 2022 and 2021 is unaudited. This financial information, in the opinion of management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the three and six-month periods ended June 30, 2022 and 2021 are not necessarily indicative of results to be expected for any subsequent period.
PCT LTD
Condensed Consolidated Balance Sheets
June 30, 2022 | December
31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| PROPERTY AND EQUIPMENT | ||||||||
| Property and equipment, net | ||||||||
| OTHER ASSETS | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Checks issued in excess of cash balance | ||||||||
| Accrued expenses - related parties | ||||||||
| Accrued expenses | ||||||||
| Advances payable | ||||||||
| Operating lease liability | ||||||||
| Current portion of notes payable – related parties, net | ||||||||
| Current portion of notes payable, net | ||||||||
| Current portion of convertible notes payable, net | ||||||||
| Derivative liability | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Convertible notes payable, net of current portion and discounts | ||||||||
| Operating lease liability, net of current portion | ||||||||
| TOTAL LIABILITIES | $ | |||||||
| MEZZANINE EQUITY | ||||||||
| Preferred series A stock, $ par value; authorized; issued and outstanding at June 30, 2022 and December 31, 2021, respectively | ||||||||
| Preferred series B stock, $ par value; authorized; issued and outstanding at June 30, 2022 and December 31, 2021, respectively | ||||||||
| Preferred series C stock, $ par value; authorized; issued and outstanding at June 30, 2022 and December 31, 2021, respectively | ||||||||
| TOTAL MEZZANINE EQUITY | ||||||||
| STOCKHOLDERS' DEFICIT | ||||||||
| Common stock, $ par value; authorized; and issued and outstanding at June 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS' DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
PCT LTD
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| REVENUES | ||||||||||||||||
| Product | $ | $ | $ | $ | ||||||||||||
| Licensing | ||||||||||||||||
| Equipment leases | ||||||||||||||||
| Total Revenues | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Cost of product, licensing and equipment leases | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Gain on change in fair value of derivative liability | ||||||||||||||||
| Gain on settlement of debt | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Misc. income | ||||||||||||||||
| Total other income (expense) | ||||||||||||||||
| Income (loss) before income taxes | ||||||||||||||||
| Income taxes | ||||||||||||||||
| NET (INCOME (LOSS) | $ | $ | $ | $ | ||||||||||||
| Basic income (loss) per share | $ | $ | $ | $ | ||||||||||||
| Diluted income (loss) per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic weighted average shares outstanding | ||||||||||||||||
| Diluted weighted average shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
PCT LTD
Condensed Consolidated Statements of Stockholders' Equity (deficit)
For the Three and Six Months Ended June 30, 2022 and 2021
(Unaudited)
| Additional | Total Stockholders' | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Equity | |||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance - December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common stock issued for services | ||||||||||||||||||||
| Common stock issued in settlement of debt | ||||||||||||||||||||
| Common stock issued in conversion of convertible notes payable | ||||||||||||||||||||
| Conversion of preferred series C stock | ||||||||||||||||||||
| Net loss for the three-months ended March 31, 2020 | — | ( | ) | ( | ) | |||||||||||||||
| Balance - March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common stock issued for cash | ||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||
| Common stock issued in cashless exercise of warrants | ||||||||||||||||||||
| Net income for the three-months ended June 30, 2021 | — | |||||||||||||||||||
| Balance - June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance - December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock-based compensation | — | — | 7,952 | — | 7,952 | |||||||||||||||
| Net income for the three-months ended March 31, 2022 | — | ) | ||||||||||||||||||
| Balance – March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common stock issued in conversion of convertible notes payable | ||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Net income for the three-months ended June 30, 2021 | — | |||||||||||||||||||
| Balance - June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
PCT LTD
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of debt discount | ||||||||
| Common stock issued for services | ||||||||
| (Gain) loss on change in fair value of derivative liability | ( | ) | ( | ) | ||||
| Amortization of right of use asset | ||||||||
| (Gain) loss on settlement of debt | ( | ) | ( | ) | ||||
| Default penalties on convertible notes | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Prepaid expenses | ||||||||
| Deposits | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Checks issued in excess of cash balance | ||||||||
| Accrued expenses | ||||||||
| Accrued expenses - related party | ||||||||
| Accounts payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Net cash used for by investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from advances payable | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from notes payable - related parties | ||||||||
| Proceeds from convertible notes payable | ||||||||
| Proceeds from common stock subscriptions | ||||||||
| Repayment of convertible notes payable | ( | ) | ( | ) | ||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Repayment of notes payable - related parties | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental Cash Flow Information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Original debt discount against convertible notes | $ | $ | ||||||
| Original debt discount against notes payable | $ | $ | ||||||
| Common stock issued for services | $ | $ | ||||||
| Common stock issued in conversion of convertible notes payable | $ | $ | ||||||
| Common stock issued in settlement of notes payable to related parties | $ | $ | ||||||
| Common stock issued in cashless exercise of warrants | $ | — | $ | 34,594 | ||||
| Common stock issued in conversion of preferred series C stock | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
PCT LTD
Notes to the Unaudited
Condensed Consolidated Financial Statements
June 30, 2022
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim condensed consolidated financial statements of PCT LTD (the “Company”) have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of our balance sheet, statements of operations, stockholders’ equity (deficit), and cash flows for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative of the results to be expected for a full year.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2021 audited financial statements as reported in its Form 10-K, filed on March 31, 2022.
COVID-19
In December 2019 COVID-19 emerged in Wuhan, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to almost all other countries, including the United States, and infections have been reported globally. Because COVID-19 infections have been reported throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future.
The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak. Any resulting financial impact cannot be reasonably estimated at this time but may have a material impact on our business, financial condition and results of operations. The significance of the impact of the COVID-19 outbreak on the Company’s businesses and the duration for which it may have an impact cannot be determined at this time. At a minimum, the COVID-19 pandemic caused the Company to restrict travel of its personnel and to initiate distributor installations of certain of the Company’s equipment, as possible. The Company adapted to the immediate need for its US EPA registered disinfectant at the end of March and beginning of April, 2020, but installing greater storage reserves and by assembling more of it higher-volume equipment to produce the hospital grade disinfectant known as Hydrolyte®. There were hard costs associates with these adaptations to the Little River, SC facility, but the Company continues to benefit from its fluid production capacities over the longer term. As the Federal, state and other restrictions associated with the pandemic have lessened, the Company is able to act more effectively in obtaining new contracts for its healthcare equipment, the Annihilyzer®.
Nature of Operations
PCT LTD (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 53.75% interest in Disruptive in consideration for the assignment of certain patents to Disruptive and realized no gain or loss on the sale. On April 12, 2022, the Company incorporated two wholly-owned subsidiaries, 21st Century Healthcare, Inc. and 21st Century Energy, Inc., both in the State of Nevada, and neither have commenced operations to June 30, 2022.
| 7 |
Significant Accounting Policies
There have been no changes to the significant accounting policies of the Company from the information provided in Note 1 of the Notes to the Consolidated Financial Statements in the Company's most recent Form 10-K.
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 three months and six months ended June 30, 2022 and 2021, there were outstanding common share equivalents which amounted to 188,039,278 and 24,637,488 shares of common stock, respectively, 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.
| Three months
ended June 30, 2022 $ | Three months
ended June 30, 2021 $ | Six months
ended June 30, 2022 $ | Six months
ended June 30, 2021 $ | |||||||||||||
| Numerator: | ||||||||||||||||
| Net income | ) | |||||||||||||||
| (Gain) loss on change in fair value of derivative liability | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on settlement of debt | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||||||
| Adjusted net income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Denominator: Weighted average shares outstanding used in computing net income (loss) per share | ||||||||||||||||
| Basic | ||||||||||||||||
| Effect of dilutive warrants | ||||||||||||||||
| Effect of convertible note weighted shares | ||||||||||||||||
| Diluted | ||||||||||||||||
| Net income (loss) per share applicable to common shareholders: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ( | ) | ||||||||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 8 |
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 limited assets, has an accumulated deficit of $ and has negative cash flows from operations. As of June 30, 2022, the Company had a working capital deficit of $. The Company has relied on raising debt and equity capital in order to fund its ongoing day-to-day operations and its corporate overhead. The Company will require additional working capital from either cash flow from operations, from debt or equity financing, or from a combination of these sources. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 June 30, 2022 and December 31, 2021 consisted of the following:
| June 30, 2022 | December 31, 2021 | |||||||
| Leasehold improvements | $ | $ | ||||||
| Machinery and leased equipment | ||||||||
| Machinery and equipment not yet in service | ||||||||
| Office equipment and furniture | ||||||||
| Website | ||||||||
| Total property and equipment | $ | $ | ||||||
| Less: Accumulated Depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense was $
| 9 |
NOTE 4. INTANGIBLE ASSETS
Intangible assets at June 30, 2022 and December 31, 2021 consisted of the following:
| June 30, 2022 | December 31, 2021 | |||||||
| Patents | $ | $ | ||||||
| Technology rights | ||||||||
| Intangibles, at cost | ||||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Net Carrying Amount | $ | $ | ||||||
Amortization expense was $
Estimated Future Amortization Expense:
| $ | ||||||
| For year ending December 31, 2022 | ||||||
| For year ending December 31, 2023 | ||||||
| For year ending December 31, 2024 | ||||||
| For year ending December 31, 2025 | ||||||
| For year ending December 31, 2026 | ||||||
| Thereafter | ||||||
| Total | ||||||
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 $
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 $
At June 30, 2022, the weighted average remaining operating lease term was 1.34 years and the weighted average discount rate associated with operating leases was 18.5%.
| 10 |
The components of lease expenses for the six month period ended June 30, 2022 and 2021 were as follows:
| 2022 $ |
2021 $ | |||||||
| Total operating lease cost | ||||||||
The following table provides supplemental cashflow and other information related to leases for the six month period ended June 30, 2022 and 2021:
| 2022 $ |
2021 $ | |||||||
| Lease payments | ||||||||
Supplemental balance sheet information related to leases as of June 30, 2021 and 2020 are as below:
| 2022 $ |
2021 $ | |||||||
| Cost | ||||||||
| Accumulated amortization | ( |
) | ( |
) | ||||
| Net carrying value | ||||||||
Future minimum lease payments related to lease obligations are as follows as of June 30, 2022:
| $ | ||||
| 2022 | ||||
| 2023 | ||||
| Total minimum lease payments | ||||
| Less: amount of lease payments representing effects of discounting | ( |
) | ||
| Present value of future minimum lease payments | ||||
| Less: current obligations under leases | ( |
) | ||
| Lease liabilities, net of current portion | ||||
| 11 |
NOTE 6. Notes Payable
The following tables summarize notes payable as of June 30, 2022 and December 31, 2021:
| Type | Original Amount | Origination Date | Maturity Date | Effective Annual Interest Rate | Balance at June 30, 2022 | Balance at December 31, 2021 | ||||||||||||||
| Note Payable ** | $ | % | $ | $ | ||||||||||||||||
| Note Payable ** | $ | % | $ | $ | ||||||||||||||||
| Note Payable (a) | $ | % | $ | $ | ||||||||||||||||
| Note Payable (b) | $ | % | $ | $ | ||||||||||||||||
| Note Payable (c) | $ | % | $ | |||||||||||||||||
| Sub-total | $ | $ | ||||||||||||||||||
| Debt discount | $ | ( | ) | $ | ||||||||||||||||
| Balance, net | $ | $ | ||||||||||||||||||
| Less current portion | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Total long-term | $ | $ | ||||||||||||||||||
| ** Currently in default | ||||||||||||||||||||
| a) | On February 4, 2022, the Company entered into a loan agreement with a
non-related party for $,
of which $ |
| b) | On March 4, 2022, the Company sold future receivables with a
non-related party for $,
of which $ |
| c) | On April 13, 2022, the Company sold future receivables with a non-related party for $, of which $ |
| 12 |
The following table summarizes notes payable, related parties as of June 30, 2022 and December 31, 2021:
| Type | Original Amount | Origination Date | Maturity Date | Annual Interest Rate | Balance at June 30, 2022 | Balance at December 31, 2021 | ||||||||||||||
| Note Payable, RP ** | $ | % | $ | $ | ||||||||||||||||
| Note Payable, RP ** | $ | % | $ | $ | ||||||||||||||||
| Note Payable, RP ** | $ | % | $ | $ | ||||||||||||||||
| Note Payable, RP (d) | $ | Demand | % | $ | $ | |||||||||||||||
| Note Payable, RP (e) | $ | % | $ | $ | ||||||||||||||||
| Note Payable, RP (e) | $ | % | $ | $ | ||||||||||||||||
| Note Payable, RP (e) | $ | % | $ | $ | ||||||||||||||||
| Subtotal | $ | $ | ||||||||||||||||||
| Debt discount | $ | $ | ||||||||||||||||||
| Balance, net | $ | $ | ||||||||||||||||||
| Less current portion | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Total long-term | $ | $ | ||||||||||||||||||
| ** Currently in default | ||||||||||||||||||||
| d) | On March 7, 2022, the Company repaid the principal amount of $ |
| e) | During June, 2022, the Company entered into three promissory notes
with the CFO of the Company for an aggregate principal amount of $ |
The following table summarizes convertible notes payable as of June 30, 2022 and December 31, 2021:
| Type | Original Amount | Origination Date | Maturity Date | Annual Interest Rate | Balance at June 30, 2022 | Balance at December 31, 2021 | ||||||||||||||
| Convertible Note Payable (f) * ** | $ | % | $ | $ | ||||||||||||||||
| Convertible Note Payable (g) ** | $ | % | $ | $ | ||||||||||||||||
| Convertible Note Payable (h) | $ | % | $ | $ | ||||||||||||||||
| Convertible Note Payable | $ | % | $ | $ | ||||||||||||||||
| Convertible Note Payable (i) | $ | % | $ | $ | ||||||||||||||||
| Convertible Note Payable (j) | $ | % | $ | $ | ||||||||||||||||
| Convertible Note Payable (k) | $ | % | $ | $ | ||||||||||||||||
| Subtotal | $ | $ | ||||||||||||||||||
| Debt discount | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Balance, net | $ | $ | ||||||||||||||||||
| Less current portion | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Total long-term | $ | $ | ||||||||||||||||||
* Embedded conversion feature accounted for as a derivative liability at period end ** Currently in default | ||||||||||||||||||||
| f) | During the six months ended June 30, 2022, the Company repaid $ |
| g) | During the six months ended June 30, 2022, the Company repaid $ |
| h) | During the six months ended June 30, 2022, $ |
| i) | On March 29, 2022, the Company entered into a convertible promissory note with a non-related party for $ |
| j) | On June 1, 2022, the Company entered into a convertible promissory note with a non-related party for $ |
| k) | On June 14, 2022, the Company entered into a convertible promissory note with a non-related party for $ |
| 13 |
NOTE 7. DERIVATIVE LIABILITIES
The embedded conversion option of (1) the convertible debentures described in Note 6 and (2) warrants, containing conversion features that qualify for embedded derivative classification. The fair value of the liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.
Upon the issuance of the convertible notes payable described in Note 6, the Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible notes, warrants and options. The Company elected to reclassify contracts from equity with the earliest inception date first. As a result, none of the Company’s previously outstanding convertible instruments qualified for derivative reclassification, however, any convertible securities issued after the election, including the warrants described in Note 10, qualified for derivative classification. The Company reassesses the classification of the instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.
The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities.
| June 30, 2022 | December 31, 2021 | |||||||
| Balance at the beginning of period | $ | $ | ||||||
| Original discount limited to proceeds of notes | ||||||||
| Settlement of derivative instruments | ( | ) | ( | ) | ||||
| Change in fair value of embedded conversion option | ( | ) | ( | ) | ||||
| Balance at the end of the period | $ | $ | ||||||
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 June 30, 2022 | -% | -% | % | - | ||||||||
NOTE 8. STOCKHOLDERS' DEFICIT
Preferred Stock
Effective March 23, 2018, the Company amended the articles of incorporation and authorized shares of preferred stock with a par value of $per share. The preferred stock may be issued from time to time by the Board of Directors as shares of one or more classes or series, as summarized below.
| 14 |
Series A Preferred Shares
On December 1, 2018, the Company’s Board of
Directors authorized an offering for
On April 12, 2019, the Company filed a Certificate of Designation with the Nevada Secretary of State designating shares of its authorized preferred stock as Series A Convertible Preferred Stock. The principal terms of the Series A Preferred Shares are as follows:
Issue Price
The stated price for the Series A Preferred shall be $0.10 per share.
Redemption
This Company may at any time following the first anniversary date of issuance (the “Redemption Date”), at the option of the Board of Directors, redeem in whole or in part the Shares by paying in cash in exchange for the Shares to be redeemed a price equal to the Original Series A Issue Price ($0.10) (the “Redemption Price”). Any redemption affected pursuant to this provision shall be made on a pro rata basis among the holders of the Shares in proportion to the number of the shares then held by them.
Dividends
None.
Preference of Liquidation
In the event of any liquidation, dissolution or winding up of the Company, the holders of Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets of this Company, to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of (i) $0.10 for each outstanding Share (the “Original Series A Issue Price”) and (ii) an amount equal to 6% of the Original Series A Issue Price for each 12 months that has passed since the date of issuance of any Shares (such amount being referred to herein as the “Premium”).
For purposes of this provision, a liquidation, dissolution or winding up of this Company shall be deemed to be occasioned by, or to include, (A) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (B) a sale of all or substantially all of the assets of the Company; unless the Company’s stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise), hold at least 50% of the voting power of the surviving or acquiring entity.
If upon the occurrence of such liquidation, dissolution or winding up event, the assets and funds thus distributed among the holders of the Shares shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of series of preferred stock that may from time to time come into existence, the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the Shares in proportion to the preferential amount each such holder is otherwise entitled to receive.
In any of such liquidation, dissolution or winding up event, if the consideration received by the Company is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:
| A. | Securities not subject to investment letter or other similar restrictions on free marketability (covered by (B) below): |
| 1) | If traded on a securities exchange (NASDAQ, AMEX, NYSE, etc.), the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty-day period ending three (3) days prior to the closing; |
| 2) | If traded on a quotation system, such as the OTC:QX, OTC:QB or OTC Pink Sheets, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty-day period ending three (3) days prior to the closing; and |
| 3) | If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding shares of Preferred Stock. |
| B. | The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding shares of such Preferred Stock: |
| 15 |
Voting
The holder of each Share shall not have any voting rights, except in the case of voting on a change in the preferences of Shares.
Conversion
Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.10 (1 Share converts into 1 share of Common Stock), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth day prior to the Redemption Date, if any, as may have been fixed in any Redemption Notice with respect to the Shares, at the office of this Company or any transfer agent for such stock. Each Share shall automatically be converted into shares of Common Stock on the first day of the thirty-sixth (36th) month following the original issue date of the shares at the Conversion Price per share. To date, the Shares have not yet been converted into Common Stock.
The Company was unable to issue the subscribers the preferred shares until the Company filed a Certificate of Designation and the Preferred Series “A” stock had been duly validly authorized. As the Company had not filed the Certificate of Designation and as the Company could not issue the preferred shares to settle the proceeds received, it was determined the subscriptions were settleable in cash. As a result, the Company classified the subscriptions received as a liability in accordance with ASC 480 Distinguishing Liabilities from Equity. The filing of the Certificate of Designation and issuance of the preferred shares in 2019 resulted in the reclassification of the Series A Preferred Shares from a liability to temporary equity or “mezzanine” because the preferred shares include the liquidation preferences described above. The fair value of the preferred series A stock on April 12, 2019 was $60,398 and was valued by using the Binomial Model based on various assumptions and was reclassified from a liability to mezzanine equity.
As of June 30, 2022, and December 31, 2021, there were shares of Series A Convertible Preferred Stock issued and outstanding, respectively. The Series A Convertible Preferred Stock are currently in default as they were subject to automatic conversion to shares of Common Stock on April 19, 2022, which did not occur due to the Company not having the sufficient number of common shares available for conversion. The Company is continuing to negotiate an extension of the conversion date with the Series A Convertible Preferred Stock shareholders.
Series B Preferred Shares
Effective August 13, 2019, the Company filed a Certificate of Designation with the Nevada Secretary of State thereby designating shares of its authorized preferred stock as Series B –Preferred Stock. The principal terms of the Series B Preferred Shares are as follows:
Voting Rights
Holders of the Series B Preferred Stock shall be entitled to cast five hundred (500) votes for each share held of the Series B Preferred Stock on all matters presented to the stockholders of the Corporation for stockholder vote which shall vote along with holders of the Corporation’s Common Stock on such matters.
Redemption Rights
The Series B Preferred Stock shall be redeemed by the Corporation upon the successful receipt by the Corporation of at least $1,000,000 in equity capital following the issuance of the Series B Preferred Stock. The Company has received in excess of $1,000,000 of equity capital during the year ended December 31, 2021, and the redemption right has been triggered. However, to date the Company has not exercised the redemption rights to redeem the Series B Preferred Stock and currently has no plans to do so.
Conversion Rights
The Series B Preferred Stock is not convertible into shares of Common Stock of the Corporation.
| 16 |
Protective Provisions
So long as any shares of Series B Preferred Stock are outstanding, this Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the Holders of the Series B Preferred Stock which is entitled, other than solely by law, to vote with respect to the matter, and which Preferred Stock represents at least a majority of the voting power of the then outstanding shares of such Series B Preferred Stock:
| a) | sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Corporation is disposed of; |
| b) | alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock so as to affect adversely the shares; |
| c) | increase or decrease (other than by redemption or conversion) the total number of authorized shares of preferred stock; |
| d) | authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security (i) having a preference over, or being on a parity with, the Series B Preferred Stock with respect to dividends or upon liquidation, or (ii) having rights similar to any of the rights of the Series B Preferred Stock; or |
| e) | amend the Corporation’s Articles of Incorporation or bylaws. |
Dividends
None.
Preference of Liquidation
None.
Upon designation, the Company issued
As of June 30, 2022, and December 31, 2021, there were shares of Series B Preferred Stock issued and outstanding, respectively.
| 17 |
Series C Preferred Shares
Pursuant to the September 18, 2019, the Company filed a Certificate of Designation with the Nevada Secretary of State designating shares of its authorized preferred stock as Series C Convertible Preferred Stock. The Registrant is awaiting the file stamped Certificate of Designation from the Nevada Secretary of State. The rights and preferences of such preferred stock are as follows:
The number of shares constituting the Series C Convertible Preferred Stock shall be . Such number of shares may be increased or decreased by resolution of the Board of Directors, provided that no decrease shall reduce the number of shares of Series C Convertible Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series C Convertible Preferred Stock.
Conversion Rights
Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.01 (1 Share converts into 100 shares of Common Stock) (the “Conversion Price”), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth (5th) day prior to the redemption Date, if any, as may have been fixed in any redemption notice with respect to the Shares, at the office of this Company or any transfer agent for such stock.
Voting Rights
The holder of each Share shall not have any voting rights, except in the case of voting on a change in the preferences of Shares.
Protective Provisions
So long as any Shares are outstanding, this Company shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of Shares which is entitled, other than solely by law, to vote with respect to the matter, and which Shares represents at least a majority of the voting power of the then outstanding Shares:
| a) | sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company is disposed of; |
| b) | alter or change the rights, preferences or privileges of the Shares so as to affect adversely the Shares; |
| c) | increase or decrease (other than by redemption or conversion) the total number of authorized shares of preferred stock; |
| d) | authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security (i) having a preference over, or being on a parity with, the Shares with respect to liquidation, or (ii) having rights similar to any of the rights of the Preferred Stock; or |
| e) | amend the Company’s Articles of Incorporation or bylaws. |
Other Rights
There are no other rights, privileges or preferences attendant or relating to in any way the Shares, including by way of illustration but not limitation, those concerning dividend, ranking, other conversion, other redemption, participation or anti-dilution rights or preferences.
| 18 |
As conversion of the Series C Preferred Shares is not within the control of the Company, and it is not certain that the Company could satisfy its obligation to deliver shares upon conversion, the Series C Preferred Shares were classified in temporary equity or “mezzanine”.
On February 15, 2021, shares of preferred series C stock were converted into common stock (1 share converts into 100 shares of common stock), resulting in the issuance of shares of common stock.
Effective December 1, 2021, the Company filed an Amended and Restated Certificate of Designation with the Nevada Secretary of State designating shares of its authorized preferred stock as Series C Convertible Preferred Stock. The revised rights and preferences of such preferred stock are as follows:
The amended number of shares constituting the Series C Convertible Preferred Stock shall be . Such number of shares may be increased or decreased by resolution of the Board of Directors, provided that no decrease shall reduce the number of shares of Series C Convertible Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series C Convertible Preferred Stock. At June 30, 2022, the Company is in default of the terms of the Series C Convertible Preferred Stock due to not having enough reserved common shares available for conversion of all outstanding Series C Convertible Preferred Stock.
Amended Conversion Rights
Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.015 (1 Share converts into 150 shares of Common Stock) (the “Conversion Price”), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth (5th) day prior to the redemption Date, if any, as may have been fixed in any redemption notice with respect to the Shares, at the office of this Company or any transfer agent for such stock.
During the year ended December 31, 2021, the Company
sold shares of preferred series C stock at $1.50 per share for proceeds of $
As of June 30, 2022, and December 31, 2021, there were shares of Series C Preferred Stock issued and outstanding, respectively. The Company has sufficient shares of Common Stock reserved for any potential conversion of Series C Preferred Stock.
Common Stock
The authorized shares of common stock consists of shares with a par value of $ per share. The number of shares of common stock outstanding as of June 30, 2022 and December 31, 2021 was and , respectively.
On May 26, 2022, $
On June 1, 2022, $
On June 2, 2022, $
On June 6, 2022, $
On June 8, 2022, $
On June 13, 2022, $
On June 21, 2022, $
| 19 |
NOTE 9. STOCK OPTIONS
Below is a table summarizing the options issued and outstanding as of June 30, 2022:
| Number of options | Weighted average exercise price $ | |||||||||
| Balance, December 31, 2021 | ||||||||||
| Granted | ||||||||||
| Expired/Cancelled | ( | ) | ||||||||
| Settled | ||||||||||
| Balance, June 30, 2022 | ||||||||||
| Exercisable | ||||||||||
As at June 30, 2022, the following share stock options were outstanding:
| Date | Number | Number | Exercise | Weighted Average Remaining Contractual | Expiration | Proceeds to Company if | ||||||||||||||||||||
| Issued | Outstanding | Exercisable | Price $ | Life (Years) | Date | Exercised | ||||||||||||||||||||
| 09/01/2021 | ||||||||||||||||||||||||||
| 04/01/2021 | ||||||||||||||||||||||||||
| 04/01/2021 | ||||||||||||||||||||||||||
| 04/01/2021 | ||||||||||||||||||||||||||
| 04/01/2021 | ||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
At June 30, 2022, the weighted average exercise prices are $ and $ for the options outstanding and exercisable, respectively. The intrinsic value of stock options outstanding at June 30, 2022 was $.
During the six months ended June 30, 2022, the Company revised the terms of an employment agreement with the CFO to increase the amount of unvested stock options from 4,000,000 to 7,000,000 which shall vest incrementally over four years in the following manner: 1,500,000 stock options on September 1, 2022, 1,500,000 stock options on September 1, 2023, 2,000,000 stock options on September 1, 2024 and the final 2,000,000 stock options on September 1, 2025. Upon modification of the stock options, the Company calculated the incremental compensation cost of $42,899, which will be amortized to expense over the vesting period.
| 20 |
NOTE 10. WARRANTS
The Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible instruments. The initial fair value of the warrants issued during the period was calculated using the Binomial Model as described in Note 7.
The following table summarizes the continuity of share purchase warrants:
| Number of warrants | Weighted average exercise price $ | |||||||||
| Balance, December 31, 2021 | ||||||||||
| Cancelled | ||||||||||
| Granted | ||||||||||
| Exercised | ||||||||||
| Balance, June 30, 2022 | ||||||||||
As at June 30, 2022, the following share purchase warrants were outstanding:
| Date | Number | Number | Exercise | Weighted Average Remaining Contractual | Expiration | Proceeds to Company if | ||||||||||||||||||||
| Issued | Outstanding | Exercisable | Price $ | Life (Years) | Date | Exercised | ||||||||||||||||||||
| 12/3/2018 | * | |||||||||||||||||||||||||
| 3/31/2019 | * | * | * | |||||||||||||||||||||||
| 8/26/2020 | ||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
*The number of warrants outstanding and exercisable is variable based on adjustments to the exercise price of the warrant due to dilutive issuances.
The intrinsic value of warrants outstanding at June 30, 2022 was $.
NOTE 11. RELATED PARTY TRANSACTIONS
The Company has agreements with related parties for consulting services, accrued rent, accrued interest, notes payable and stock options. See Notes to Financial Statements numbers 6, 8, and 9 for more details.
| 21 |
NOTE 12. COMMITMENTS AND CONTINGENCIES
Consulting Agreements -
On March 1, 2021, the Company entered into
a consulting agreement. Pursuant to the agreement, the consultant will provide consulting services to the Company in various marketing
and management matters for a period of three months. In consideration for the services performed by the consultant, the Company agreed
to compensate the consultant $
The Company also uses the professional services of securities attorneys, a US EPA specialist, professional accountants, and other public-company specialists.
Employment Agreements -
On April 1, 2022, the Company entered into an amended and restated four-year employment agreement with Arthur E. Abraham, replacing the former employment agreement dated September 1, 2021, to add the role of President. The terms of the revised agreement increases the amount of unvested stock options from 4,000,000 to 7,000,000 which shall vest incrementally over four years in the following manner: 1,500,000 stock options on September 1, 2022, 1,500,000 stock options on September 1, 2023, 2,000,000 stock options on September 1, 2024 and the final 2,000,000 stock options on September 1, 2025. All other terms of the former employment agreement remain the same.
Other Obligations and Commitments -
No new obligation or commitments during the period ending June 30, 2022.
NOTE 13. SUBSEQUENT EVENTS
During July, 2022, the Company entered into a promissory note with the CFO of the Company for principal amount of $15,500, bearing interest of 0%, repayable on or before August 31, 2022 . The maturity date of the three June 2022 promissory notes with the CFO of the Company for an aggregate principal amount of $55,300 has been extended to August 31, 2022.
| 22 |
FORWARD-LOOKING STATEMENTS
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures we make in this Quarterly Report on Form 10-Q, future Quarterly Reports on Form 10-Q, our Annual Report on Form 10-K and Current Reports on Form 8-K.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:
| • | our ability to efficiently manage and repay our debt obligations; |
| • | our inability to raise additional financing for working capital; |
| • | our ability to generate sufficient revenue in our targeted markets to support operations; |
| • | significant dilution resulting from our financing activities; |
| • | actions and initiatives taken by both current and potential competitors; |
| • | supply chain disruptions for components used in our products; |
| • | manufacturers inability to deliver components or products on time; |
| • | our ability to diversify our operations; |
| • | the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain; |
| • | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; |
| • | changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate; |
| • | deterioration in general or global economic, market and political conditions; |
| • | inability to efficiently manage our operations; |
| • | inability to achieve future operating results; |
| • | the unavailability of funds for capital expenditures; |
| • | our ability to recruit, hire and retain key employees; |
| • | the global impact of COVID-19 on the United States economy and out operations; |
| • | the inability of management to effectively implement our strategies and business plans; and |
| • | the other risks and uncertainties detailed in this report. |
In this form 10-Q references to “PCT LTD”, “the Company”, “we,” “us,” “our” and similar terms refer to PCT LTD and its wholly owned operating subsidiary, Paradigm Convergence Technologies Corporation (“Paradigm”).
| 23 |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Overview
On August 31, 2016, PCT LTD entered into a Securities Exchange Agreement (the “Exchange Agreement”) with Paradigm Convergence Technologies Corporation, a Nevada corporation (“Paradigm”). Pursuant to the terms of the Exchange Agreement, Paradigm became the wholly-owned subsidiary of PCT LTD after the exchange transaction. PCT LTD is a holding company, which through Paradigm is engaged in the business of marketing new products and technologies through licensing and joint ventures.
PCT LTD had not recorded revenues for the two fiscal years prior to its acquisition of Paradigm and was dependent upon financing to continue basic operations. Paradigm has recorded revenue since it initiated operations in 2012; however, those revenues have not been sufficient to finance operations. The Company recorded net income of $719,007 for the six-months ended June 30, 2022 and accumulated losses of $28,879,986 from inception through June 30, 2022.
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.
| 24 |
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 | June 30, 2022 | December 31, 2021 | ||||||
| Cash and cash equivalents | $ | 892 | $ | 116,497 | ||||
| Total current assets | 117,056 | 310,763 | ||||||
| Total assets | 4,209,934 | 4,254,258 | ||||||
| Total liabilities | 5,365,412 | 6,283,637 | ||||||
| Accumulated deficit | (28,879,986 | ) | (29,598,993 | ) | ||||
| Total stockholders' deficit | $ | (3,624,123 | ) | $ | (4,498,024 | ) | ||
For the six months ended June 30, 2022, the Company recorded a net income of $719,007 and at June 30, 2022, had a working capital deficit of $3,765,728. Since inception we had not established an ongoing source of revenue sufficient to cover our operating costs. During the six-months ended June 30, 2022, we primarily relied upon advances and loans from stockholders and third parties to fund our operations. The Company has relied on raising debt and equity capital in order to fund its ongoing day-to-day operations and its corporate overhead. We had $892 in cash at June 30, 2022, compared to $116,497 in cash at December 31, 2021. We had total liabilities of $5,365,412 at June 30, 2022 compared to $6,283,637 at December 31, 2021.
Our current cash flow is not sufficient to meet our monthly expenses of approximately $250,000 and to fund future research and development adequately. We intend to rely on additional debt financing, loans from existing stockholders and private placements of common stock for additional funding in addition to the increasing our recognized revenue from the leasing and/or sale of products; however, there is no assurance that additional funding will be available. We do not have material commitments for future capital expenditures. However, we cannot assure you that we will be able to obtain short-term financing, or that sources of such financing, if any, will continue to be available, and if available, that they will be on favorable terms.
During the next 12 months we anticipate incurring additional costs related to the filing of Exchange Act reports. We believe we will be able to meet these costs through funds provided by management, significant stockholders and/or third parties. We may also rely on the issuance of our common stock in lieu of cash to convert debt or pay for expenses.
Commitments and Obligations
At June 30, 2022 the Company recorded notes payable totaling approximately $2,462,359 (related, non-related and convertible, net of debt discount) compared to notes payable totaling $2,165,102 (related, non-related and convertible, net of debt discount) at December 31, 2021. These notes payable represent cash advances received and expenses paid from third parties and related parties. All of the notes payable carry effective interest from 0% to 87% 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 was $7,650. Effective July 1, 2022 through June 30, 2023, the monthly lease payment is $7,803. 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.
| 25 |
Results of Operations
Three Months Ended June 30, 2021
| SUMMARY OF OPERATIONS | Three-month
period ended June 30, | |||||||
| (Unaudited) | ||||||||
| 2022 | 2021 | |||||||
| Revenues | $ | 284,109 | $ | 469,143 | ||||
| Total operating expenses | 921,779 | 860,446 | ||||||
| Total other income (expense) | 888,628 | 4,463,090 | ||||||
| Net income | 250,958 | 4,071,787 | ||||||
| Net income attributable to common stockholders' | 250,958 | 4071,787 | ||||||
| Basic income per share | $ | 0.00 | $ | 0.01 | ||||
| Diluted income (loss) per share | $ | (0.00 | ) | $ | (0.00 | ) | ||
Revenues decreased to $284,109 for the three months ended June 30, 2022 (the "2022 second quarter") compared to $469,143 for the three months ended June 30, 2021 (the "2021 second quarter"). The revenue decrease for the period was 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 comes out of the COVID-19 pandemic.
Total operating expenses increased to $921,779 during the 2022 second quarter compared to $860,446 during the 2021 second quarter. The increase during the second quarter of 2022 was primarily due to an increase in general and administrative expenses and depreciation and amortization, offset by a decrease in cost of product, licensing, and equipment leases associated with decreased revenue.
General and administrative expenses increased to $742,468 for the 2022 second quarter compared to $658,616 during the 2021 second quarter. The increase during the second quarter of 2022 was primarily due to an increase in professional fees.
Depreciation and amortization expenses increased to $125,914 during the 2022 second quarter compared to $108,606 during the 2021 second quarter.
Total other income was $888,628 for the 2022 second quarter compared to other income of $4,463,090 during the 2021 second quarter. The overall change was a result of a decrease in gain on settlement of debt of $3,002,653 and a decrease in the gain on change in fair value of derivatives of $567,565 during the second quarter of 2022.
As a result of the changes described above, net income decreased to $250,958 during the 2022 second quarter compared to $4,071,787 during the 2021 second quarter.
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Six Months Ended June 30, 2022
| SUMMARY OF OPERATIONS | Six-month
period ended June 30, | |||||||
| (Unaudited) | ||||||||
| 2022 | 2021 | |||||||
| Revenues | $ | 584,575 | $ | 864,662 | ||||
| Total operating expense | $ | 1,769,362 | $ | 1,904,119 | ||||
| Total other income (expense) | $ | 1,903,794 | $ | 4,393,216 | ||||
| Net income | $ | 719,007 | $ | 3,353,759 | ||||
| Net income attributable to common stockholders' | $ | 719,007 | 3,353,759 | |||||
| Basic income per share | $ | 0.00 | $ | 0.00 | ||||
| Diluted income (loss) per share | $ | (0.00 | ) | $ | (0.00 | ) | ||
Revenues decreased to $584,575 for the six months ended June 30, 2022, compared to $864,662 for the six months ended June 30, 2021. The revenue decrease for the period was due to the decreased volume of fluids sold as a result of the country coming out of the COVID-19 pandemic.
Total operating expenses decreased to $1,769,362 during the six months ended June 30, 2022, compared to $1,904,119 during the six months ended June 30, 2021. The decrease during the period was primarily due to a decrease in general and administrative expenses and cost of product, licensing, and equipment leases associated with decreased revenue, offset by an increase in depreciation and amortization.
General and administrative expenses decreased to $1,456,861 for the six months ended June 30, 2022, compared to $1,552,067 during the six months ended June 30, 2021. General and administrative expenses were reduced due to effective cost controls.
Depreciation and amortization expenses increased to $232,385 during the six months ended June 30, 2022, compared to $196,728 during the six months ended June 30, 2021.
Total other income decreased to $1,903,794 for the six months ended June 30, 2022, compared to $4,393,216 of expenses during the six months ended June 30, 2021. The overall decrease in income was a result of a decrease in gain on the settlement of debt of $3,258,428 offset by the increase in gain on change in the fair value of derivatives of $718,605 during the second quarter of 2022.
As a result of the changes described above, a net income of $719,007 was realized during the six months ended June 30, 2022, compared to a net income of $3,353,759 during the six months ended June 30, 2021.
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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated to allow our management to make timely decisions regarding required disclosure. Gary Grieco, our Chief Executive Officer, who serves as our principal executive officer, and Arthur Abraham, our Chief Financial Officer, who serves as our principal accounting officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. The disclosure controls and procedures ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the SEC's rule and forms; and (ii) accumulated and communicated to our principal executive officer as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and principal accounting officers concluded that as of June 30, 2022, our disclosure controls and procedures were not effective.
Notwithstanding this finding of ineffective disclosure controls and procedures, we concluded that the consolidated financial statements included in this Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.
Changes in Internal Control Over Financial Reporting
During the quarter ended June 30, 2022, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).
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PART II - OTHER INFORMATION
ITEM 1. 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 and even though Auctus’s Managing Director signed the Mutual Release on January 19, 2022 Auctus continues to dispute its scope.
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:
| 1. | Breach of Contract; |
| 2. | Breach of Implied Covenant of Good Faith and Fair Dealing; |
| 3. | Reformation of Mutual Release; |
| 4. | Fraud; |
| 5. | Conversion; and |
| 6. | Unjust Enrichment. |
In June of 2022, Auctus filed its answers to the complaint and asserted counterclaims for Declaratory Judgment and Breach of Contract.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item. However, we detailed significant business risks in Item 1A to our Form 10-K for the year ended December 31, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On April 29, 2022, the Company sold 13,333,333 shares of common stock to accredited investors at a price of $0.015 for proceeds of $200,000. To date, these shares have not been issued.
On May 26, 2022, $12,500 of principal and interest of a Convertible Note dated November 4, 2021 was converted into 1,453,488 shares of the Company’s common stock.
On June 1, 2022, $12,500 of principal and interest of a Convertible Note dated November 4, 2021 was converted into 1,506,024 shares of the Company’s common stock.
On June 2, 2022, $15,000 of principal and interest of a Convertible Note dated November 4, 2021 was converted into 1,973,684 shares of the Company’s common stock.
On June 6, 2022, $20,000 of principal and interest of a Convertible Note dated November 4, 2021 was converted into 2,597,403 shares of the Company’s common stock.
On June 8, 2022, $30,000 of principal and interest of a Convertible Note dated November 4, 2021 was converted into 3,947,368 shares of the Company’s common stock.
On June 13, 2022, $20,000 of principal and interest of a Convertible Note dated November 4, 2021 was converted into 2,702,703 shares of the Company’s common stock.
On June 21, 2022, $15,520 of principal and interest of a Convertible Note dated November 4, 2021 was converted into 2,463,476 shares of the Company’s common stock.
All of the above-described issuances were exempt from registration pursuant to Section 4(a)(2) and/or Regulation D of the Securities Act as transactions not involving a public offering. With respect to each transaction listed above, no general solicitation was made by either the Company or any person acting on its behalf. All such securities issued pursuant to such exemptions are restricted securities as defined in Rule 144(a)(3) promulgated under the Securities Act, appropriate legends have been placed on the documents evidencing the securities and may not be offered or sold absent registration or pursuant to an exemption therefrom.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the quarter ended June 30, 2022.
| 28 |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We have entered into a number of promissory notes, some of which are in default as of June 30, 2022, or went into default before the filing of this Quarterly 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 June 30, 2022, we had cash and cash equivalents of $892 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 Common stock, Preferred C stock, the issuance of notes payable 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. However, there is no assurance that management will be successful in being able to continue to obtain additional funding or defend potential litigation by note holders.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Change of President
On April 1, 2022, Gary Grieco, the Company’s President resigned his position as President, with Arthur E. Abraham being appointed President. Gary Grieco remains Chief Executive Officer and Mr. Abraham serves as President and Chief Financial Officer. Mr. Grieco’s resignation was not the result of any disagreements with the Company
Abraham Amended and Restated Employment Agreement
On April 1, 2022, the Company entered into an amended and restated four-year employment agreement with Arthur E. Abraham in his role as President and Chief Financial Officer. The terms of the contract call for an annual salary of $75,000. The agreement allows for incentive cash bonus payments from $5,000 to $50,000 based on certain stock price and gross revenue targets. The employment agreement awards the CFO with stock options to acquire up to 9,000,000 shares of the Company’s common stock, which shall vest incrementally over four years in the following manner: 2,000,000 stock options on September 1, 2021, 1,500,000 stock options on September 1, 2022, 1,500,000 stock options on September 1, 2023, 2,000,000 stock options on September 1, 2024 and the final 2,000,000 stock options on September 1, 2025. A copy of Mr. Abraham’s amended and restated employment agreement is attached hereto as Exhibit 10.6.
| 29 |
ITEM 6. EXHIBITS
# Filed herewith.
‡ Furnished herewith.
† Indicates management contract or compensatory plan or arrangement.
** The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
| 30 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| PCT LTD | ||
| Date: August 15, 2022 | By: | /s/ Gary Grieco |
|
Gary Grieco Principal Executive Officer | ||
| Chief Executive Officer and Chairman |
| Date: August 15, 2022 | By: | /s/ Arthur Abraham |
| Arthur Abraham | ||
|
Chief Financial Officer Principal Financial Officer |
31
Exhibit 31.1
PRINCIPAL EXECUTIVE OFFICER CERTIFICATION
I, Gary Grieco, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of PCT LTD; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 15, 2022 |
/s/ Gary Grieco Gary Grieco, Principal Executive Officer, Chief Executive Officer and Chairman |
Exhibit 31.2
PRINCIPAL FINANCIAL OFFICER CERTIFICATION
I, Arthur Abraham, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of PCT LTD; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 15, 2022 |
/s/ Arthur Abraham Arthur Abraham Principal Financial Officer and Chief Financial Officer |
Exhibit 32.1
PCT LTD
CERTIFICATION OF PERIODIC REPORT
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
18 U.S.C. Section 1350
The undersigned executive officer of PCT LTD certifies pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
| a. | the quarterly report on Form 10-Q of PCT LTD for the period ended June 30, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| b. | the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of PCT LTD. |
|
Date: August 15, 2022 |
/s/ Gary Grieco Gary Grieco Chief Executive Officer, Principal Executive Officer |
Exhibit 32.2
PCT LTD
CERTIFICATION OF PERIODIC REPORT
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
18 U.S.C. Section 1350
The undersigned executive officer of PCT LTD certifies pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
| a. | the quarterly report on Form 10-Q of PCT LTD for the period ended June 30, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| b. | the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of PCT LTD. |
|
Date: August 15, 2022 |
/s/ Arthur Abraham Arthur Abraham Chief Financial Officer, Principal Financial Officer |
Exhibit 99.6
Paradigm Convergence Technologies Corporation’s Hydrolyte® can be used to kill Monkeypox virus
PCT Corp, a leader in the manufacture of Hypochlorous Acid, receives inclusion on EPA’s Disinfectants for Emerging Viral Pathogens (EVPs): List Q.
June 01, 2022 11:40 AM Eastern Daylight Time
LITTLE RIVER, S.C.--(BUSINESS WIRE)--PCT LTD (OTC Pink: PCTL).
“Hospitals and other healthcare facilities using PCT Corp’s Hydrolyte® Disinfectant are already prepared to keep their patients and staff safe against the Monkeypox virus as they continue to use Hydrolyte® against SARS-Cov-2, the virus that causes Covid-19, and other HAI pathogens including bacteria such as C. diff and MRSA.”
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On Monday, May 23, EPA triggered its emerging viral pathogen (EVP) guidance in response to recent cases of Monkeypox in the United States.
When rare or novel viruses cause outbreaks of disease, there may be few if any disinfectants that have been registered for use against that specific pathogen. To prepare for situations like these, in 2016 the United States Environmental Protection Agency (EPA) created the Emerging Viral Pathogen (EVP) guidance. EPA now considers Monkey Pox virus an emerging viral pathogen, only the third pathogen to be placed on this list behind SARS-Cov-2 and Rabbit Hemorrhagic Disease Virus (RHDV2).
Monkeypox is caused by the Monkeypox virus, an enveloped double-stranded DNA virus which belongs to a group of viruses that is more susceptible to disinfectants than other types of viruses. While there are no disinfectants registered for use against monkeypox, all products with EVP claims have been tested against viruses that are more difficult to kill than monkeypox. EPA expects products on its List of Disinfectants for Emerging Viral Pathogens to kill monkeypox when used according to the label directions. Initially, the CDC recommended using a disinfectant that is on the EPA’s List N for SARS-Cov-2. List N was compiled by the EPA for efficacy against SARS-Cov-2 from disinfectants that either already have a voluntary registration with an emerging viral pathogen claim since they show efficacy against difficult-to-inactivate viruses (such as large or small nonenveloped viruses), do not have a voluntary registration with an emerging viral pathogen, but do show eligibility since they have a large or small nonenveloped viruses claim, or they have shown efficacy against any member from the family of Corona Viruses.
On May 26, the EPA launched their Disinfectants for Emerging Viral Pathogens (EVPs): List Q. As the Monkey Pox virus is an enveloped virus that is more susceptible to disinfectants than other types of viruses, every disinfectant on List Q has shown efficacy against a hardier virus and meets the minimum threshold for efficacy against the Monkey Pox virus. As part of launching List Q, in addition to referring to the different categories of viruses as "enveloped”, “large, nonenveloped”, and “small, nonenveloped”, the EPA EVP guidance divides viruses into three categories:
Tier 1: Enveloped viruses are the easiest to inactivate. When disinfectants damage their lipid envelope, the virus is no longer infectious.
Tier 2: Large, nonenveloped viruses are encased in protein capsids that make them more difficult to inactivate compared to enveloped viruses.
Tier 3: Small, nonenveloped viruses are the hardest to inactivate. Both their protein capsids and their small size make them less vulnerable to disinfectants compared to other viruses.
Hydrolyte® meets the highest standard of being effective against many types of pathogenic families, including healthcare HAI pathogens of concern such as C. diff, MRSA, VREs, CREs, TB, HIV, and Norovirus. Hydrolyte® was one of the first disinfectants to be added to the EPA’s List N in March 2020. There are now 605 entries on List N. Hydrolyte® was automatically included as one of only 123 disinfectants on List O for Rabbit Hemorrhagic Disease Virus (RHDV2) in July 2020. The EPA’s new Disinfectants for Emerging Viral Pathogens (EVPs): List Q has 421 Tier 1 entries, 353 Tier 2 entries, and only 168 Tier 3 entries. Hydrolyte® is now on the EPA’s new EVP List Q and is in small company as a Tier 1, 2, and 3 EVP Disinfectant which is pre-vetted to be used on any future emerging viral pathogen including enveloped (Tier 1), large, nonenveloped (Tier 2), or small, nonenveloped (Tier 3) viruses as soon as it becomes declared an EVP by the EPA. As an EVP Disinfectant, PCT Corp can make the following off-label claims and statements about expected efficacy on technical literature distributed to health care facilities, physicians, nurses, and public health officials; non-label-related websites; consumer information services; and social media sites:
Monkeypox is caused by the Monkeypox virus. Hydrolyte® kills similar viruses and therefore can be used against Monkeypox virus when used in accordance with the directions for use against Norovirus and Rhinovirus type 16 on hard, non-porous surfaces. Refer to the CDC website at https://www.cdc.gov/poxvirus/monkeypox/index.html for additional information.
Daryl Patterson COO of PCT Corp and Vice President of PCT Corp Healthcare stated:
“Hospitals and other healthcare facilities using PCT Corp’s Hydrolyte® Disinfectant are already prepared to keep their patients and staff safe against the Monkeypox virus as they continue to use Hydrolyte® against SARS-Cov-2, the virus that causes Covid-19, and other HAI pathogens including bacteria such as C. diff and MRSA.”
Hydrolyte® is an activated aqueous solution of hypochlorous acid (HOCl) produced by passing weak salt brine through an electrolytic cell using Electro-Chemical Activation (ECA) technology to temporarily change the properties of dilute salt water into a powerful oxidizing agent exhibiting antimicrobial properties. Hydrolyte® is produced at a near neutral 6.5 pH where the predominant antimicrobial agent is hypochlorous acid, an efficient and efficacious specie of chlorine derived from naturally occurring salt minerals and water and rapidly breaks down entirely to salt water. Hypochlorous acid kills bacteria. When produced, Hydrolyte® (an anolyte solution), contains a minimum of 500 ppm free available chlorine (FAC).
Hydrolyte® has the EPA’s lowest Category IV Toxicity rating. It does not have any signal words such as “Danger,” “Warning”, or “Caution”, or any EPA Precautionary Statements like “Use in well ventilated area”, “Flush eyes …”, “Do not induce Vomiting”, “Wash hands before eating or drinking”, etc. other than the “Keep out of reach of children” required for all disinfectants. Hydrolyte® does not require the use of gloves, goggles, gowns, respirators, or other PPE for handling, although recommended, especially around transmittable pathogens. It was tested according to the AOAC Germicidal Spray Product Test for disinfectants and meets surface disinfection recommendations under OSHA’s Bloodborne Pathogens Standards. This makes it perfect to spray not only throughout healthcare visiting areas and patient rooms, but also hotel lobbies and shared areas, schools, day cares, airport passenger terminals, airplanes, transit vehicles, shuttle buses and retail venues without causing any health or exposure issues to the patients, visitors, customers, guests, passengers, or your employees while applying the product. Hydrolyte® is free of alcohol, dyes, fragrances, phenols, VOCs, harsh fumes, or harsh chemicals and leaves no sticky, greasy, flammable, harmful, harsh, chemical residual on surfaces after evaporation. Hydrolyte® kills Clostridium difficile in hospital and nursing home patient rooms and bathrooms yet is gently enough for use in neonatal intensive care units and gentle for use on neonatal incubators and baby toys.
Exhibit 99.7
PCT LTD Signs Memorandum of Understanding with International Energy Company Providing Cash Infusion and Ongoing Partnership
June 07, 2022 10:40 AM Eastern Daylight Time
LITTLE RIVER, S.C.--(BUSINESS WIRE)--PCT LTD (OTC Pink: PCTL). Paradigm Convergence Technologies Corporation, a company focused on acquiring, developing, and providing sustainable, environmentally safe disinfecting, cleaning, and tracking technologies announced today that it has signed a Memorandum of Understanding (MOU) with LeadGreen Energy Services Limited.
LeadGreen Energy Services Limited, an IADC member company, offers integrated services to the oil and gas industry in Nigeria, an OPEC member country. Services offered include procurement, drilling services, filtration service, consulting and training, and logistical support.
LeadGreen Energy Services Limited will provide a cash investment for the purpose of drilling a 7-spot pattern in the Grassy Creek, Missouri formation to be drilled and operated by Maverick Energy Services. The drilling will provide further demonstration and validation of Enhanced Oil Recovery methods utilizing PCT’s fluids and processes. Upon completion, likely during the next 60 days, the company can begin to finalize previous efforts with multiple energy companies to start initiating the Oil Recovery Process. This will commence large-scale revenue streams for PCT.
As a result of the cash infusion, LeadGreen Energy Services Limited will acquire the rights to utilize, market and distribute PCT’s Enhanced Oil Recovery technology and methodology for use in LeadGreen’s oil recovery projects in other areas of the world should they choose.
“We believe our pipeline for equipment is real and growing. We also believe the Oil & Gas and Agriculture Divisions will contribute significant revenues in the fourth quarter. Our forecasts call for $5-$10 million in revenue for just the Oil and Gas business over the next twelve months. While it has taken a significant amount of time to reach this point, we can now start to monetize this business very rapidly,” commented CEO Gary Greico.
Exhibit 99.8
PCT LTD Reports Progress In Healthcare/Oil & Gas
June 16, 2022 08:40 AM Eastern Daylight Time
LITTLE RIVER, S.C.--(BUSINESS WIRE)--PCT LTD (“PCTL”) (OTC Pink: PCTL), the parent holding company to Paradigm Convergence Technologies Corp., a company focused on acquiring, developing, and providing sustainable, environmentally safe disinfecting, cleaning, and tracking technologies, announced today progress in multiple segments of its business.
Based on recent discussions and commitments, PCT is confident its pipeline will grow quickly. Recent expansion into new geographic markets is anticipated to translate into additional contracts with healthcare facilities. There is active interest from several entities regarding the healthcare business. PCT expects to be able to provide further detail in the coming weeks.
“In order to more rapidly accelerate the monetization of our healthcare contracts, PCTL has formed a new wholly-owned subsidiary, '21st Century Healthcare.' We plan on transferring all healthcare related assets into this new subsidiary creating an entity that invites and allows for direct investment opportunities into the healthcare business. This structure is intended to allow us to focus additional financial resources in this sector which is already gaining long-anticipated momentum. Stockholder value should increase from much faster growth and a stronger balance sheet without additional dilution. They should also benefit from the fact that the individual businesses may be worth far more than the current combined value of the company and we look forward to unlocking this potential,” commented CEO Gary Grieco.
The near-term plan is to create something similar in Oil and Gas allowing us to capitalize on momentum in this sector as well. The recently signed Memorandum of Understanding with LeadGreen Energy Services should allow larger-scale drilling to commence later this month and be completed in July. We fully expect this to lead directly to additional opportunities as we move through the third quarter.
Exhibit 99.9
PCT Ltd. Unveils New E-Commerce Website to Meet Demand by Retail Consumers for Their New Generation Disinfectant & Cleaner
June 30, 2022 10:40 AM Eastern Daylight Time
LITTLE RIVER, S.C.--(BUSINESS WIRE)--PCT LTD (OTC Pink: PCTL ):
“The need for disinfectants that break down into saline solutions and are gentle enough for use in our homes, schools, daycares, and pet shops while being environmentally friendly, low toxicity solutions, is paramount to help make the world a safer place for our generation and the generations to come.”
Tweet this
PCT Corp., manufacturer of the Annihilyzer® Onsite Infection Control System used in businesses nationwide, announced today the launch of its new retail e-commerce store. The new e-commerce store will allow household consumers, small businesses, medical, dental and veterinarian offices, and smaller school systems to enjoy the same benefits as larger institutional customers by allowing them to order retail products on an as needed basis.
The e-commerce store will carry the company’s EPA registered Hydrolyte® hospital disinfectant/sanitizer, Catholyte-Zero® cleaner/degreaser along with various applicators. The store will also feature a subscription option for those customers that require products on a regular basis.
Key features of Hydrolyte® disinfectant/sanitizer:
EPA registered on List N (SARS-CoV-2) and EPA List Q (Monkeypox)
This product was tested according to the AOAC Germicidal Spray Product Test for disinfectants
Kills 99.9999% of labeled bacteria and 99.9% of viruses when used as directed
Meets criteria for EPA’s lowest Toxicity Category IV, Lowest toxicity rating allowed
Deodorizes by killing the bacteria that causes odors
Kills bacteria and viruses that lurk where you touch, breathe, work, play, and live
No VOC’s (Volatile Organic Compounds)
No harsh fumes; Breathe Easy, Fragrance Free
Quat free - leaves no residue, apply it, and let it dry
No PPE (personal protective equipment) required
Features of Catholyte Zero® Cleaner/Degreaser:
Industry Grade Cleaner/Degreaser
Removes dirt, grease, grime, and stains without leaving any residue
Non-Toxic and Non-Hazardous formulation
Eco-friendly and safe to use around people and pets
No PPE (personal protective equipment) required
Gary Grieco the CEO and founder of PCT Corp stated, “The need for disinfectants that break down into saline solutions and are gentle enough for use in our homes, schools, daycares, and pet shops while being environmentally friendly, low toxicity solutions, is paramount to help make the world a safer place for our generation and the generations to come.”
Please visit our website at www.pctl.com to find out more about our company, systems and products derived from naturally occurring minerals. Orders may be placed on-line at www.pctl.com by clicking the “Shop Now” button.
Cover - shares |
6 Months Ended | |
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Aug. 15, 2022 |
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| Cover [Abstract] | ||
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Quarterly Report | true | |
| Document Transition Report | false | |
| Document Period End Date | Jun. 30, 2022 | |
| Document Fiscal Period Focus | Q2 | |
| Document Fiscal Year Focus | 2022 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity File Number | 000-31549 | |
| Entity Registrant Name | PCT LTD | |
| Entity Central Index Key | 0001119897 | |
| Entity Tax Identification Number | 90-0578516 | |
| Entity Incorporation, State or Country Code | NV | |
| Entity Address, Address Line One | 4235 Commerce Street | |
| Entity Address, City or Town | Little River | |
| Entity Address, State or Province | SC | |
| Entity Address, Postal Zip Code | 29566 | |
| City Area Code | (843) | |
| Local Phone Number | 390-7900 | |
| Entity Current Reporting Status | Yes | |
| Entity Interactive Data Current | Yes | |
| Entity Filer Category | Non-accelerated Filer | |
| Entity Small Business | true | |
| Entity Emerging Growth Company | false | |
| Entity Shell Company | false | |
| Entity Common Stock, Shares Outstanding | 807,568,836 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
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| REVENUES | ||||
| Product | $ 6,408 | $ 81,596 | $ 72,270 | $ 170,859 |
| Licensing | 9,097 | 118,025 | 9,097 | 149,775 |
| Equipment leases | 268,604 | 269,522 | 503,208 | 544,028 |
| Total Revenues | 284,109 | 469,143 | 584,575 | 864,662 |
| OPERATING EXPENSES | ||||
| General and administrative | 742,468 | 658,616 | 1,456,861 | 1,552,067 |
| Research and development | 1,024 | 5,756 | 5,325 | 14,955 |
| Cost of product, licensing and equipment leases | 52,373 | 87,468 | 74,791 | 140,369 |
| Depreciation and amortization | 125,914 | 108,606 | 232,385 | 196,728 |
| Total operating expenses | 921,779 | 860,446 | 1,769,362 | 1,904,119 |
| Loss from operations | (637,670) | (391,303) | (1,184,787) | (1,039,457) |
| OTHER INCOME (EXPENSE) | ||||
| Gain on change in fair value of derivative liability | 982,515 | 1,550,080 | 2,010,766 | 1,292,161 |
| Gain on settlement of debt | 8,644 | 3,011,297 | 69,270 | 3,327,698 |
| Interest expense | (102,531) | (98,287) | (176,242) | (276,643) |
| Misc. income | 50,000 | |||
| Total other income (expense) | 888,628 | 4,463,090 | 1,903,794 | 4,393,216 |
| Income (loss) before income taxes | 250,958 | 4,071,787 | 719,007 | 3,353,759 |
| Income taxes | ||||
| NET (INCOME (LOSS) | $ 250,958 | $ 4,071,787 | $ 719,007 | $ 3,353,759 |
| Basic income (loss) per share | $ 0.00 | $ 0.01 | $ 0.00 | $ 0.00 |
| Diluted income (loss) per share | $ (0.00) | $ (0.00) | $ (0.00) | $ (0.00) |
| Basic weighted average shares outstanding | 795,141,735 | 761,250,542 | 793,044,862 | 756,501,281 |
| Diluted weighted average shares outstanding | 896,538,423 | 982,197,398 | 896,019,007 | 1,020,426,754 |
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim condensed consolidated financial statements of PCT LTD (the “Company”) have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of our balance sheet, statements of operations, stockholders’ equity (deficit), and cash flows for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative of the results to be expected for a full year.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2021 audited financial statements as reported in its Form 10-K, filed on March 31, 2022.
COVID-19
In December 2019 COVID-19 emerged in Wuhan, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to almost all other countries, including the United States, and infections have been reported globally. Because COVID-19 infections have been reported throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future.
The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak. Any resulting financial impact cannot be reasonably estimated at this time but may have a material impact on our business, financial condition and results of operations. The significance of the impact of the COVID-19 outbreak on the Company’s businesses and the duration for which it may have an impact cannot be determined at this time. At a minimum, the COVID-19 pandemic caused the Company to restrict travel of its personnel and to initiate distributor installations of certain of the Company’s equipment, as possible. The Company adapted to the immediate need for its US EPA registered disinfectant at the end of March and beginning of April, 2020, but installing greater storage reserves and by assembling more of it higher-volume equipment to produce the hospital grade disinfectant known as Hydrolyte®. There were hard costs associates with these adaptations to the Little River, SC facility, but the Company continues to benefit from its fluid production capacities over the longer term. As the Federal, state and other restrictions associated with the pandemic have lessened, the Company is able to act more effectively in obtaining new contracts for its healthcare equipment, the Annihilyzer®.
Nature of Operations
PCT LTD (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 53.75% interest in Disruptive in consideration for the assignment of certain patents to Disruptive and realized no gain or loss on the sale. On April 12, 2022, the Company incorporated two wholly-owned subsidiaries, 21st Century Healthcare, Inc. and 21st Century Energy, Inc., both in the State of Nevada, and neither have commenced operations to June 30, 2022.
Significant Accounting Policies
There have been no changes to the significant accounting policies of the Company from the information provided in Note 1 of the Notes to the Consolidated Financial Statements in the Company's most recent Form 10-K.
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 three months and six months ended June 30, 2022 and 2021, there were outstanding common share equivalents which amounted to 188,039,278 and 24,637,488 shares of common stock, respectively, 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.
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.
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NOTE 2. GOING CONCERN |
6 Months Ended |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| NOTE 2. GOING CONCERN | NOTE 2. GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has limited assets, has an accumulated deficit of $ and has negative cash flows from operations. As of June 30, 2022, the Company had a working capital deficit of $. The Company has relied on raising debt and equity capital in order to fund its ongoing day-to-day operations and its corporate overhead. The Company will require additional working capital from either cash flow from operations, from debt or equity financing, or from a combination of these sources. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 |
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| PROPERTY AND EQUIPMENT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 3. PROPERTY AND EQUIPMENT | NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 2022 and December 31, 2021 consisted of the following:
Depreciation expense was $82,624 and $44,484 for the six months ended June 30, 2022 and 2021, respectively. During the six months ended June 30, 2022, the Company added $292,228 of machinery and equipment not yet in service. |
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NOTE 4. INTANGIBLE ASSETS |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 4. INTANGIBLE ASSETS | NOTE 4. INTANGIBLE ASSETS
Intangible assets at June 30, 2022 and December 31, 2021 consisted of the following:
Amortization expense was $149,761 and $152,244 for the six months ended June 30, 2022 and 2021, respectively.
Estimated Future Amortization Expense:
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NOTE 5. LEASES |
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 5. LEASES | NOTE 5. LEASES
On August 26, 2020, the Company signed a new one-year lease for the Company headquarters and operations located in Little River, South Carolina. The lease was effective retroactively from July 1, 2020, ending on June 30, 2021, for $7,500 per month. The Company re-negotiated an annual lease on the Little River, SC facility for $7,500 per month, retroactive to July 1, 2020, which is renewable for an additional four years (with a 2% increase annually). The Company renewed the lease for another year, effective July 1, 2021, at $7,650/month. The Company renewed the lease for another year, effective July 1, 2022, at $7,803/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 $27,000 during the six month period ended June 30, 2022.
At June 30, 2022, the weighted average remaining operating lease term was 1.34 years and the weighted average discount rate associated with operating leases was 18.5%.
The components of lease expenses for the six month period ended June 30, 2022 and 2021 were as follows:
The following table provides supplemental cashflow and other information related to leases for the six month period ended June 30, 2022 and 2021:
Supplemental balance sheet information related to leases as of June 30, 2021 and 2020 are as below:
Future minimum lease payments related to lease obligations are as follows as of June 30, 2022:
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NOTE 6. Notes Payable |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 6. Notes Payable | NOTE 6. Notes Payable
The following tables summarize notes payable as of June 30, 2022 and December 31, 2021:
The following table summarizes notes payable, related parties as of June 30, 2022 and December 31, 2021:
The following table summarizes convertible notes payable as of June 30, 2022 and December 31, 2021:
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NOTE 7. DERIVATIVE LIABILITIES |
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note 7. Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 7. DERIVATIVE LIABILITIES | NOTE 7. DERIVATIVE LIABILITIES
The embedded conversion option of (1) the convertible debentures described in Note 6 and (2) warrants, containing conversion features that qualify for embedded derivative classification. The fair value of the liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.
Upon the issuance of the convertible notes payable described in Note 6, the Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible notes, warrants and options. The Company elected to reclassify contracts from equity with the earliest inception date first. As a result, none of the Company’s previously outstanding convertible instruments qualified for derivative reclassification, however, any convertible securities issued after the election, including the warrants described in Note 10, qualified for derivative classification. The Company reassesses the classification of the instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.
The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities.
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:
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NOTE 8. STOCKHOLDERS' DEFICIT |
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Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 8. STOCKHOLDERS' DEFICIT | NOTE 8. STOCKHOLDERS' DEFICIT
Preferred Stock Effective March 23, 2018, the Company amended the articles of incorporation and authorized shares of preferred stock with a par value of $per share. The preferred stock may be issued from time to time by the Board of Directors as shares of one or more classes or series, as summarized below.
Series A Preferred Shares On December 1, 2018, the Company’s Board of Directors authorized an offering for 1,000,000 Preferred Series “A” stock at $0.10 per share and with 100% regular or cashless exercise at $0.10 per share of common stock warrant coverage. At December 31, 2018, the Company received $60,000 of subscriptions for the issuance of shares of Preferred Series “A” stock to three accredited investors who are related parties. The Company was unable to issue the subscriber the preferred shares until the Company filed a Certificate of Designation and the Preferred Series “A” stock has been duly validly authorized. Resulting in a preferred stock liability related to the Company’s commitment to issue shares of Series A stock upon the designation.
On April 12, 2019, the Company filed a Certificate of Designation with the Nevada Secretary of State designating shares of its authorized preferred stock as Series A Convertible Preferred Stock. The principal terms of the Series A Preferred Shares are as follows: Issue Price The stated price for the Series A Preferred shall be $0.10 per share. Redemption This Company may at any time following the first anniversary date of issuance (the “Redemption Date”), at the option of the Board of Directors, redeem in whole or in part the Shares by paying in cash in exchange for the Shares to be redeemed a price equal to the Original Series A Issue Price ($0.10) (the “Redemption Price”). Any redemption affected pursuant to this provision shall be made on a pro rata basis among the holders of the Shares in proportion to the number of the shares then held by them. Dividends None. Preference of Liquidation In the event of any liquidation, dissolution or winding up of the Company, the holders of Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets of this Company, to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of (i) $0.10 for each outstanding Share (the “Original Series A Issue Price”) and (ii) an amount equal to 6% of the Original Series A Issue Price for each 12 months that has passed since the date of issuance of any Shares (such amount being referred to herein as the “Premium”). For purposes of this provision, a liquidation, dissolution or winding up of this Company shall be deemed to be occasioned by, or to include, (A) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (B) a sale of all or substantially all of the assets of the Company; unless the Company’s stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise), hold at least 50% of the voting power of the surviving or acquiring entity. If upon the occurrence of such liquidation, dissolution or winding up event, the assets and funds thus distributed among the holders of the Shares shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of series of preferred stock that may from time to time come into existence, the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the Shares in proportion to the preferential amount each such holder is otherwise entitled to receive. In any of such liquidation, dissolution or winding up event, if the consideration received by the Company is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:
Voting The holder of each Share shall not have any voting rights, except in the case of voting on a change in the preferences of Shares. Conversion Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.10 (1 Share converts into 1 share of Common Stock), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth day prior to the Redemption Date, if any, as may have been fixed in any Redemption Notice with respect to the Shares, at the office of this Company or any transfer agent for such stock. Each Share shall automatically be converted into shares of Common Stock on the first day of the thirty-sixth (36th) month following the original issue date of the shares at the Conversion Price per share. To date, the Shares have not yet been converted into Common Stock.
The Company was unable to issue the subscribers the preferred shares until the Company filed a Certificate of Designation and the Preferred Series “A” stock had been duly validly authorized. As the Company had not filed the Certificate of Designation and as the Company could not issue the preferred shares to settle the proceeds received, it was determined the subscriptions were settleable in cash. As a result, the Company classified the subscriptions received as a liability in accordance with ASC 480 Distinguishing Liabilities from Equity. The filing of the Certificate of Designation and issuance of the preferred shares in 2019 resulted in the reclassification of the Series A Preferred Shares from a liability to temporary equity or “mezzanine” because the preferred shares include the liquidation preferences described above. The fair value of the preferred series A stock on April 12, 2019 was $60,398 and was valued by using the Binomial Model based on various assumptions and was reclassified from a liability to mezzanine equity. As of June 30, 2022, and December 31, 2021, there were shares of Series A Convertible Preferred Stock issued and outstanding, respectively. The Series A Convertible Preferred Stock are currently in default as they were subject to automatic conversion to shares of Common Stock on April 19, 2022, which did not occur due to the Company not having the sufficient number of common shares available for conversion. The Company is continuing to negotiate an extension of the conversion date with the Series A Convertible Preferred Stock shareholders. Series B Preferred Shares
Effective August 13, 2019, the Company filed a Certificate of Designation with the Nevada Secretary of State thereby designating shares of its authorized preferred stock as Series B –Preferred Stock. The principal terms of the Series B Preferred Shares are as follows: Voting Rights Holders of the Series B Preferred Stock shall be entitled to cast five hundred (500) votes for each share held of the Series B Preferred Stock on all matters presented to the stockholders of the Corporation for stockholder vote which shall vote along with holders of the Corporation’s Common Stock on such matters. Redemption Rights The Series B Preferred Stock shall be redeemed by the Corporation upon the successful receipt by the Corporation of at least $1,000,000 in equity capital following the issuance of the Series B Preferred Stock. The Company has received in excess of $1,000,000 of equity capital during the year ended December 31, 2021, and the redemption right has been triggered. However, to date the Company has not exercised the redemption rights to redeem the Series B Preferred Stock and currently has no plans to do so. Conversion Rights The Series B Preferred Stock is not convertible into shares of Common Stock of the Corporation.
Protective Provisions So long as any shares of Series B Preferred Stock are outstanding, this Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the Holders of the Series B Preferred Stock which is entitled, other than solely by law, to vote with respect to the matter, and which Preferred Stock represents at least a majority of the voting power of the then outstanding shares of such Series B Preferred Stock:
Dividends None. Preference of Liquidation None.
Upon designation, the Company issued 500,000 shares of the Series B preferred stock to each of its current CEO/Chairman and COO/Director (1,000,000 shares in total) pursuant to their employment agreements. As the Series B Preferred Shares represent share-based payments that are not classified as liabilities but that could require the employer to redeem the equity instruments for cash or other assets, the Company classified the initial redemption amount of the shares of $158,247 as temporary equity or “mezzanine”.
As of June 30, 2022, and December 31, 2021, there were shares of Series B Preferred Stock issued and outstanding, respectively.
Series C Preferred Shares
Pursuant to the September 18, 2019, the Company filed a Certificate of Designation with the Nevada Secretary of State designating shares of its authorized preferred stock as Series C Convertible Preferred Stock. The Registrant is awaiting the file stamped Certificate of Designation from the Nevada Secretary of State. The rights and preferences of such preferred stock are as follows:
The number of shares constituting the Series C Convertible Preferred Stock shall be . Such number of shares may be increased or decreased by resolution of the Board of Directors, provided that no decrease shall reduce the number of shares of Series C Convertible Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series C Convertible Preferred Stock. Conversion Rights Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.01 (1 Share converts into 100 shares of Common Stock) (the “Conversion Price”), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth (5th) day prior to the redemption Date, if any, as may have been fixed in any redemption notice with respect to the Shares, at the office of this Company or any transfer agent for such stock. Voting Rights The holder of each Share shall not have any voting rights, except in the case of voting on a change in the preferences of Shares. Protective Provisions So long as any Shares are outstanding, this Company shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of Shares which is entitled, other than solely by law, to vote with respect to the matter, and which Shares represents at least a majority of the voting power of the then outstanding Shares:
Other Rights There are no other rights, privileges or preferences attendant or relating to in any way the Shares, including by way of illustration but not limitation, those concerning dividend, ranking, other conversion, other redemption, participation or anti-dilution rights or preferences.
As conversion of the Series C Preferred Shares is not within the control of the Company, and it is not certain that the Company could satisfy its obligation to deliver shares upon conversion, the Series C Preferred Shares were classified in temporary equity or “mezzanine”. On February 15, 2021, shares of preferred series C stock were converted into common stock (1 share converts into 100 shares of common stock), resulting in the issuance of shares of common stock. Effective December 1, 2021, the Company filed an Amended and Restated Certificate of Designation with the Nevada Secretary of State designating shares of its authorized preferred stock as Series C Convertible Preferred Stock. The revised rights and preferences of such preferred stock are as follows: The amended number of shares constituting the Series C Convertible Preferred Stock shall be . Such number of shares may be increased or decreased by resolution of the Board of Directors, provided that no decrease shall reduce the number of shares of Series C Convertible Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series C Convertible Preferred Stock. At June 30, 2022, the Company is in default of the terms of the Series C Convertible Preferred Stock due to not having enough reserved common shares available for conversion of all outstanding Series C Convertible Preferred Stock. Amended Conversion Rights
Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.015 (1 Share converts into 150 shares of Common Stock) (the “Conversion Price”), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth (5th) day prior to the redemption Date, if any, as may have been fixed in any redemption notice with respect to the Shares, at the office of this Company or any transfer agent for such stock.
During the year ended December 31, 2021, the Company sold shares of preferred series C stock at $1.50 per share for proceeds of $2,250,000.
As of June 30, 2022, and December 31, 2021, there were shares of Series C Preferred Stock issued and outstanding, respectively. The Company has sufficient shares of Common Stock reserved for any potential conversion of Series C Preferred Stock.
Common Stock
The authorized shares of common stock consists of shares with a par value of $ per share. The number of shares of common stock outstanding as of June 30, 2022 and December 31, 2021 was and , respectively.
On May 26, 2022, $12,500 of principal and interest of a convertible note payable was converted into shares of the Company’s common stock as further described in Note 6(h).
On June 1, 2022, $12,500 of principal and interest of a convertible note payable was converted into shares of the Company’s common stock as further described in Note 6(h).
On June 2, 2022, $15,000 of principal and interest of a convertible note payable was converted into shares of the Company’s common stock as further described in Note 6(h).
On June 6, 2022, $20,000 of principal and interest of a convertible note payable was converted into shares of the Company’s common stock as further described in Note 6(h).
On June 8, 2022, $30,000 of principal and interest of a convertible note payable was converted into shares of the Company’s common stock as further described in Note 6(h).
On June 13, 2022, $20,000 of principal and interest of a convertible note payable was converted into shares of the Company’s common stock as further described in Note 6(h).
On June 21, 2022, $15,520 of principal and interest of a convertible note payable was converted into shares of the Company’s common stock as further described in Note 6(h). |
NOTE 9. STOCK OPTIONS |
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| Note 9. Stock Options | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 9. STOCK OPTIONS | NOTE 9. STOCK OPTIONS
Below is a table summarizing the options issued and outstanding as of June 30, 2022:
As at June 30, 2022, the following share stock options were outstanding:
At June 30, 2022, the weighted average exercise prices are $ and $ for the options outstanding and exercisable, respectively. The intrinsic value of stock options outstanding at June 30, 2022 was $.
During the six months ended June 30, 2022, the Company revised the terms of an employment agreement with the CFO to increase the amount of unvested stock options from 4,000,000 to 7,000,000 which shall vest incrementally over four years in the following manner: 1,500,000 stock options on September 1, 2022, 1,500,000 stock options on September 1, 2023, 2,000,000 stock options on September 1, 2024 and the final 2,000,000 stock options on September 1, 2025. Upon modification of the stock options, the Company calculated the incremental compensation cost of $42,899, which will be amortized to expense over the vesting period. |
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NOTE 10. WARRANTS |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Note 10. Warrants | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 10. WARRANTS | NOTE 10. WARRANTS
The Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible instruments. The initial fair value of the warrants issued during the period was calculated using the Binomial Model as described in Note 7.
The following table summarizes the continuity of share purchase warrants:
As at June 30, 2022, the following share purchase warrants were outstanding:
*The number of warrants outstanding and exercisable is variable based on adjustments to the exercise price of the warrant due to dilutive issuances.
The intrinsic value of warrants outstanding at June 30, 2022 was $.
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NOTE 11. RELATED PARTY TRANSACTIONS |
6 Months Ended |
|---|---|
Jun. 30, 2022 | |
| Related Party Transactions [Abstract] | |
| NOTE 11. RELATED PARTY TRANSACTIONS | NOTE 11. RELATED PARTY TRANSACTIONS
The Company has agreements with related parties for consulting services, accrued rent, accrued interest, notes payable and stock options. See Notes to Financial Statements numbers 6, 8, and 9 for more details. |
NOTE 12. COMMITMENTS AND CONTINGENCIES |
6 Months Ended |
|---|---|
Jun. 30, 2022 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| NOTE 12. COMMITMENTS AND CONTINGENCIES | NOTE 12. COMMITMENTS AND CONTINGENCIES
Consulting Agreements -
On March 1, 2021, the Company entered into a consulting agreement. Pursuant to the agreement, the consultant will provide consulting services to the Company in various marketing and management matters for a period of three months. In consideration for the services performed by the consultant, the Company agreed to compensate the consultant $5,000 per month. The Company also granted stock options to purchase common shares exercisable at $per share for one year. The options expired in full without exercise on March 1, 2022.
The Company also uses the professional services of securities attorneys, a US EPA specialist, professional accountants, and other public-company specialists.
Employment Agreements -
On April 1, 2022, the Company entered into an amended and restated four-year employment agreement with Arthur E. Abraham, replacing the former employment agreement dated September 1, 2021, to add the role of President. The terms of the revised agreement increases the amount of unvested stock options from 4,000,000 to 7,000,000 which shall vest incrementally over four years in the following manner: 1,500,000 stock options on September 1, 2022, 1,500,000 stock options on September 1, 2023, 2,000,000 stock options on September 1, 2024 and the final 2,000,000 stock options on September 1, 2025. All other terms of the former employment agreement remain the same.
Other Obligations and Commitments -
No new obligation or commitments during the period ending June 30, 2022.
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NOTE 13. SUBSEQUENT EVENTS |
6 Months Ended |
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Jun. 30, 2022 | |
| Subsequent Events [Abstract] | |
| NOTE 13. SUBSEQUENT EVENTS | NOTE 13. SUBSEQUENT EVENTS
During July, 2022, the Company entered into a promissory note with the CFO of the Company for principal amount of $15,500, bearing interest of 0%, repayable on or before August 31, 2022 . The maturity date of the three June 2022 promissory notes with the CFO of the Company for an aggregate principal amount of $55,300 has been extended to August 31, 2022. |
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 three months and six months ended June 30, 2022 and 2021, there were outstanding common share equivalents which amounted to 188,039,278 and 24,637,488 shares of common stock, respectively, 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.
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| Recent Accounting Pronouncements | 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. |
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NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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NOTE 3. PROPERTY AND EQUIPMENT (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Property, Plant and Equipment [Table Text Block] |
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NOTE 4. INTANGIBLE ASSETS (Tables) |
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Intangible Assets and Goodwill [Table Text Block] |
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| Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block] |
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NOTE 5. LEASES (Tables) |
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease, Cost [Table Text Block] |
The following table provides supplemental cashflow and other information related to leases for the six month period ended June 30, 2022 and 2021:
Supplemental balance sheet information related to leases as of June 30, 2021 and 2020 are as below:
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| Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block] |
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NOTE 6. Notes Payable (Tables) |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Long-Term Debt Instruments [Table Text Block] |
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| Schedule of Debt [Table Text Block] |
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| Convertible Debt [Table Text Block] |
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NOTE 7. DERIVATIVE LIABILITIES (Tables) |
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note 7. Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Derivative Liabilities at Fair Value [Table Text Block] |
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| Schedule of Assumptions for Fair Value as of Balance Sheet Date of Assets or Liabilities that relate to Transferor's Continuing Involvement [Table Text Block] |
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NOTE 9. STOCK OPTIONS (Tables) |
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| Note 9. Stock Options | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement, Option, Activity [Table Text Block] |
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| Share-Based Compensation Arrangements by Share-Based Payment Award, Options, Vested and Expected to Vest, Outstanding [Table Text Block] |
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NOTE 10. WARRANTS (Tables) |
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| Note 10. Warrants | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block] |
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| [custom:ScheduleOfSharePurchaseWarrantsOutstandingTableTextBlock] |
*The number of warrants outstanding and exercisable is variable based on adjustments to the exercise price of the warrant due to dilutive issuances. |
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Basic and diluted income (loss) per share (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Numerator: | ||||
| Net income | $ 250,958 | $ 4,071,787 | $ 719,007 | $ 3,353,759 |
| (Gain) loss on change in fair value of derivative liability | (888,083) | (1,615,133) | (1,719,966) | (1,376,157) |
| Gain on settlement of debt | (8,644) | (2,932,588) | (69,270) | (3,248,989) |
| Interest expense | 8,358 | 21,866 | ||
| Adjusted net income (loss) | $ (645,769) | $ (467,576) | $ (1,070,229) | $ (1,249,581) |
| Denominator: Weighted average shares outstanding used in computing net income (loss) per share | ||||
| Basic | 795,141,735 | 761,250,542 | 793,044,862 | 756,501,281 |
| Effect of dilutive warrants | 101,347,630 | 162,292,350 | 102,194,814 | 105,465,610 |
| Effect of convertible note weighted shares | 49,058 | 58,654,506 | 779,331 | 158,459,863 |
| Diluted | 896,538,423 | 982,197,398 | 896,019,007 | 1,020,426,754 |
| Net income (loss) per share applicable to common shareholders: | ||||
| Basic | $ 0.00 | $ 0.01 | $ 0.00 | $ (0.00) |
| Diluted | $ (0.00) | $ (0.00) | $ (0.00) | $ (0.00) |
NOTE 2. GOING CONCERN (Details Narrative) - USD ($) |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Retained Earnings (Accumulated Deficit) | $ (28,879,986) | $ (29,598,993) |
| Banking Regulation, Total Capital, Actual | $ (3,765,728) |
Property and equipment (Details) - USD ($) |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| PROPERTY AND EQUIPMENT | ||
| Leasehold improvements | $ 61,846 | $ 61,580 |
| Machinery and leased equipment | 433,417 | 365,483 |
| Machinery and equipment not yet in service | 732,378 | 440,150 |
| Office equipment and furniture | 99,295 | 57,913 |
| Website | 2,760 | 2,760 |
| Total property and equipment | 1,329,696 | 927,886 |
| Less: Accumulated Depreciation | (248,456) | (165,832) |
| Property and equipment, net | $ 1,081,240 | $ 762,054 |
NOTE 3. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| PROPERTY AND EQUIPMENT | ||
| Depreciation | $ 82,624 | $ 44,484 |
| [custom:MachineryAndEquipmentNotYetInServiceAdded] | $ 292,228 | |
Intangible assets (Details) - USD ($) |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Patents | $ 4,505,489 | $ 4,505,489 |
| Technology rights | 200,000 | 200,000 |
| Intangibles, at cost | 4,705,489 | 4,705,489 |
| Less: Accumulated amortization | (1,757,229) | (1,607,468) |
| Net Carrying Amount | $ 2,948,260 | $ 3,098,021 |
Estimated future amortization expense (Details) |
Jun. 30, 2022
USD ($)
|
|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | |
| $ 151,003 | |
| 302,003 | |
| 302,003 | |
| 302,003 | |
| 302,003 | |
| 1,589,039 | |
| $ 2,948,260 |
NOTE 4. INTANGIBLE ASSETS (Details Narrative) - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Amortization of Intangible Assets | $ 149,761 | $ 152,244 |
Components of lease expenses (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Leases [Abstract] | ||
| Total operating lease cost | $ 27,000 | $ 38,000 |
| Lease payments | 72,900 | 83,000 |
| Cost | 123,614 | 176,213 |
| Accumulated amortization | (60,236) | (29,902) |
| Net carrying value | $ 63,378 | $ 146,311 |
Future minimum lease payments related to lease obligations (Details) - USD ($) |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Leases [Abstract] | ||
| 2022 | $ 27,000 | |
| 2023 | 45,000 | |
| Total minimum lease payments | 72,000 | |
| Less: amount of lease payments representing effects of discounting | (8,622) | |
| Present value of future minimum lease payments | 63,378 | |
| Less: current obligations under leases | (46,050) | |
| Lease liabilities, net of current portion | $ 17,328 | $ 41,408 |
NOTE 5. LEASES (Details Narrative) - USD ($) |
6 Months Ended | 12 Months Ended | 20 Months Ended | ||
|---|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
|
| Lease 1 [Member] | |||||
| Lessee, Lease, Description [Line Items] | |||||
| Operating Leases, Rent Expense, Net | $ 7,803 | $ 7,650 | $ 7,500 | ||
| Lease 2 [Member] | |||||
| Lessee, Lease, Description [Line Items] | |||||
| Operating Leases, Rent Expense, Net | $ 4,500 | ||||
| Operating Lease, Expense | $ 27,000 | ||||
Summary of changes in the fair value of the Company's Level 3 financial liabilities (Details) - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2022 |
Dec. 31, 2021 |
|
| Note 7. Derivative Liabilities | ||
| Balance at the beginning of period | $ 3,044,034 | $ 7,102,801 |
| Original discount limited to proceeds of notes | ||
| Settlement of derivative instruments | (69,270) | (4,035,906) |
| Change in fair value of embedded conversion option | (2,010,766) | (22,861) |
| Balance at the end of the period | $ 963,998 | $ 3,044,034 |
NOTE 9. STOCK OPTIONS (Details Narrative) - USD ($) |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Note 9. Stock Options | ||
| Share-Based Payment Arrangement, Option, Exercise Price Range, Outstanding, Weighted Average Exercise Price | $ 0.056 | $ 0.034 |
| Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercisable, Weighted Average Exercise Price | $ 0.015 | |
| Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Intrinsic Value | $ 0 |
NOTE 10. WARRANTS (Details Narrative) |
Jun. 30, 2022
USD ($)
|
|---|---|
| Note 10. Warrants | |
| Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Outstanding | $ 852,073 |
NOTE 12. COMMITMENTS AND CONTINGENCIES (Details Narrative) |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
$ / shares
shares
| |
| Commitments and Contingencies Disclosure [Abstract] | |
| [custom:ConsultingAgreementPeriodicPayment] | $ | $ 5,000 |
| [custom:ConsultingAgreementCommonStockIssuedShares] | shares | 2,500,000 |
| [custom:ConsultingAgreementCommonStockIssuedExercisePricePerShare] | $ / shares | $ 0.0001 |