10-Q 1 pctl1114form10q.htm FORM 10-Q
0001119897 false true Q3 2022 --12-31 true 29378449 4123267 0001119897 2022-01-01 2022-09-30 0001119897 2022-11-14 0001119897 2022-09-30 0001119897 2021-12-31 0001119897 us-gaap:SeriesAPreferredStockMember 2022-09-30 0001119897 us-gaap:SeriesAPreferredStockMember 2021-12-31 0001119897 us-gaap:SeriesBPreferredStockMember 2022-09-30 0001119897 us-gaap:SeriesBPreferredStockMember 2021-12-31 0001119897 us-gaap:SeriesCPreferredStockMember 2022-09-30 0001119897 us-gaap:SeriesCPreferredStockMember 2021-12-31 0001119897 2022-07-01 2022-09-30 0001119897 2021-07-01 2021-09-30 0001119897 2021-01-01 2021-09-30 0001119897 us-gaap:CommonStockMember 2020-12-31 0001119897 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001119897 us-gaap:RetainedEarningsMember 2020-12-31 0001119897 2020-12-31 0001119897 us-gaap:CommonStockMember 2021-12-31 0001119897 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001119897 us-gaap:RetainedEarningsMember 2021-12-31 0001119897 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001119897 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001119897 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001119897 2021-01-01 2021-03-31 0001119897 us-gaap:CommonStockMember 2021-04-01 2021-06-30 0001119897 us-gaap:AdditionalPaidInCapitalMember 2021-04-01 2021-06-30 0001119897 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30 0001119897 2021-04-01 2021-06-30 0001119897 us-gaap:CommonStockMember 2021-07-01 2021-09-30 0001119897 us-gaap:AdditionalPaidInCapitalMember 2021-07-01 2021-09-30 0001119897 us-gaap:RetainedEarningsMember 2021-07-01 2021-09-30 0001119897 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001119897 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001119897 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001119897 2022-01-01 2022-03-31 0001119897 us-gaap:CommonStockMember 2022-04-01 2022-06-30 0001119897 us-gaap:AdditionalPaidInCapitalMember 2022-04-01 2022-06-30 0001119897 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001119897 2022-04-01 2022-06-30 0001119897 us-gaap:CommonStockMember 2022-07-01 2022-09-30 0001119897 us-gaap:AdditionalPaidInCapitalMember 2022-07-01 2022-09-30 0001119897 us-gaap:RetainedEarningsMember 2022-07-01 2022-09-30 0001119897 us-gaap:CommonStockMember 2021-03-31 0001119897 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001119897 us-gaap:RetainedEarningsMember 2021-03-31 0001119897 2021-03-31 0001119897 us-gaap:CommonStockMember 2021-06-30 0001119897 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001119897 us-gaap:RetainedEarningsMember 2021-06-30 0001119897 2021-06-30 0001119897 us-gaap:CommonStockMember 2021-09-30 0001119897 us-gaap:AdditionalPaidInCapitalMember 2021-09-30 0001119897 us-gaap:RetainedEarningsMember 2021-09-30 0001119897 2021-09-30 0001119897 us-gaap:CommonStockMember 2022-03-31 0001119897 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001119897 us-gaap:RetainedEarningsMember 2022-03-31 0001119897 2022-03-31 0001119897 us-gaap:CommonStockMember 2022-06-30 0001119897 us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0001119897 us-gaap:RetainedEarningsMember 2022-06-30 0001119897 2022-06-30 0001119897 us-gaap:CommonStockMember 2022-09-30 0001119897 us-gaap:AdditionalPaidInCapitalMember 2022-09-30 0001119897 us-gaap:RetainedEarningsMember 2022-09-30 0001119897 PCTL:Lease1Member 2020-10-01 2021-09-30 0001119897 PCTL:Lease1Member 2021-10-01 2022-09-30 0001119897 PCTL:Lease1Member 2022-10-01 2023-09-30 0001119897 PCTL:Lease2Member 2021-02-01 2022-09-30 0001119897 PCTL:NotesPayable1Member 2022-09-30 0001119897 PCTL:NotesPayable1Member 2021-12-31 0001119897 PCTL:NotesPayable1Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayable3Member 2022-09-30 0001119897 PCTL:NotesPayable3Member 2021-12-31 0001119897 PCTL:NotesPayable3Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayable12Member 2022-09-30 0001119897 PCTL:NotesPayable12Member 2021-12-31 0001119897 PCTL:NotesPayable12Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayable13Member 2022-09-30 0001119897 PCTL:NotesPayable13Member 2021-12-31 0001119897 PCTL:NotesPayable13Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayable14Member 2022-09-30 0001119897 PCTL:NotesPayable14Member 2021-12-31 0001119897 PCTL:NotesPayable14Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayable15Member 2022-09-30 0001119897 PCTL:NotesPayable15Member 2021-12-31 0001119897 PCTL:NotesPayable15Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayable16Member 2022-09-30 0001119897 PCTL:NotesPayable16Member 2021-12-31 0001119897 PCTL:NotesPayable16Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayableTotalMember 2022-09-30 0001119897 PCTL:NotesPayableTotalMember 2021-12-31 0001119897 PCTL:NotesPayableRelatedParty10Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty10Member 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty11Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty14Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty15Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty16Member 2022-01-01 2022-09-30 0001119897 PCTL:ConvertibleNotePayable4Member 2022-01-01 2022-09-30 0001119897 PCTL:ConvertibleNotePayable4Member 2022-09-30 0001119897 PCTL:ConvertibleNotePayable5Member 2022-01-01 2022-09-30 0001119897 PCTL:ConvertibleNotePayable5Member 2022-09-30 0001119897 PCTL:ConvertibleNotePayable19Member 2022-01-01 2022-09-30 0001119897 PCTL:ConvertibleNotePayable19Member 2022-09-30 0001119897 PCTL:ConvertibleNotePayable21Member 2022-01-01 2022-09-30 0001119897 PCTL:ConvertibleNotePayable22Member 2022-01-01 2022-09-30 0001119897 PCTL:ConvertibleNotePayable23Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty4Member 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty4Member 2021-12-31 0001119897 PCTL:NotesPayableRelatedParty4Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty5Member 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty5Member 2021-12-31 0001119897 PCTL:NotesPayableRelatedParty5Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty8Member 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty8Member 2021-12-31 0001119897 PCTL:NotesPayableRelatedParty8Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty10Member 2021-12-31 0001119897 PCTL:NotesPayableRelatedParty11Member 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty11Member 2021-12-31 0001119897 PCTL:NotesPayableRelatedParty12Member 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty12Member 2021-12-31 0001119897 PCTL:NotesPayableRelatedParty12Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty13Member 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty13Member 2021-12-31 0001119897 PCTL:NotesPayableRelatedParty13Member 2022-01-01 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty14Member 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty14Member 2021-12-31 0001119897 PCTL:NotesPayableRelatedParty15Member 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty15Member 2021-12-31 0001119897 PCTL:NotesPayableRelatedParty16Member 2022-09-30 0001119897 PCTL:NotesPayableRelatedParty16Member 2021-12-31 0001119897 PCTL:NotesPayableRelatedPartyTotalMember 2022-09-30 0001119897 PCTL:NotesPayableRelatedPartyTotalMember 2021-12-31 0001119897 PCTL:ConvertibleNotePayable4Member 2021-12-31 0001119897 PCTL:ConvertibleNotePayable5Member 2021-12-31 0001119897 PCTL:ConvertibleNotePayable19Member 2021-12-31 0001119897 PCTL:ConvertibleNotePayable20Member 2022-09-30 0001119897 PCTL:ConvertibleNotePayable20Member 2021-12-31 0001119897 PCTL:ConvertibleNotePayable20Member 2022-01-01 2022-09-30 0001119897 PCTL:ConvertibleNotePayable21Member 2022-09-30 0001119897 PCTL:ConvertibleNotePayable21Member 2021-12-31 0001119897 PCTL:ConvertibleNotePayable22Member 2022-09-30 0001119897 PCTL:ConvertibleNotePayable22Member 2021-12-31 0001119897 PCTL:ConvertibleNotePayable23Member 2022-09-30 0001119897 PCTL:ConvertibleNotePayable23Member 2021-12-31 0001119897 PCTL:ConvertibleNotePayableTotalMember 2022-09-30 0001119897 PCTL:ConvertibleNotePayableTotalMember 2021-12-31 0001119897 2021-01-01 2021-12-31 0001119897 us-gaap:TradingLiabilitiesMember 2022-01-01 2022-09-30 0001119897 2018-03-23 0001119897 2018-12-01 2018-12-31 0001119897 us-gaap:SeriesAPreferredStockMember 2019-04-12 0001119897 us-gaap:SeriesBPreferredStockMember 2019-08-13 0001119897 srt:ChiefFinancialOfficerMember 2019-01-01 2020-09-30 0001119897 2019-01-01 2020-09-30 0001119897 us-gaap:SeriesCPreferredStockMember 2019-09-18 0001119897 us-gaap:SeriesCPreferredStockMember 2021-01-01 2021-09-30 0001119897 us-gaap:CommonStockMember 2021-01-01 2021-09-30 0001119897 us-gaap:SeriesCPreferredStockMember 2021-12-02 0001119897 us-gaap:SeriesCPreferredStockMember 2021-01-01 2021-12-31 0001119897 PCTL:CommonStock1Member 2022-01-01 2022-09-30 0001119897 PCTL:CommonStock2Member 2022-01-01 2022-09-30 0001119897 PCTL:CommonStock3Member 2022-01-01 2022-09-30 0001119897 PCTL:CommonStock4Member 2022-01-01 2022-09-30 0001119897 PCTL:CommonStock5Member 2022-01-01 2022-09-30 0001119897 PCTL:CommonStock6Member 2022-01-01 2022-09-30 0001119897 PCTL:CommonStock7Member 2022-01-01 2022-09-30 0001119897 PCTL:CommonStock8Member 2022-01-01 2022-09-30 0001119897 PCTL:StockOption2Member 2022-09-30 0001119897 PCTL:StockOption2Member 2022-01-01 2022-09-30 0001119897 PCTL:StockOption3Member 2022-09-30 0001119897 PCTL:StockOption3Member 2022-01-01 2022-09-30 0001119897 PCTL:StockOption4Member 2022-09-30 0001119897 PCTL:StockOption4Member 2022-01-01 2022-09-30 0001119897 PCTL:StockOption5Member 2022-09-30 0001119897 PCTL:StockOption5Member 2022-01-01 2022-09-30 0001119897 PCTL:StockOption6Member 2022-09-30 0001119897 PCTL:StockOption6Member 2022-01-01 2022-09-30 0001119897 us-gaap:WarrantMember 2022-09-30 0001119897 us-gaap:WarrantMember 2022-01-01 2022-09-30 0001119897 PCTL:Warrant1Member 2022-09-30 0001119897 PCTL:Warrant1Member 2022-01-01 2022-09-30 0001119897 PCTL:Warrant2Member 2022-09-30 0001119897 PCTL:Warrant2Member 2022-01-01 2022-09-30 0001119897 PCTL:SubsequentEvent1Member 2022-10-01 2022-10-04 0001119897 PCTL:SubsequentEvent2Member 2022-10-01 2022-11-07 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2022

or 

 

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

 

Commission file number: 000-31549

 

PCT LTD

(Exact name of registrant as specified in its charter)

 

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

4235 Commerce Street

Little River, South Carolina

 

29566

(Address of principal executive offices) (Zip Code)

 

(843) 390-7900

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: 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. Yes No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 

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

Large accelerated filer

Non-accelerated filer

Accelerated filer

Smaller reporting company

Emerging growth company

 

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

 

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

 

The number of shares outstanding of the registrant's common stock as of November 14, 2022 was 805,596,961 which does not include 192,431,164 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 25
     
Item 3.  Quantitative and Qualitative Disclosures About Market Risk  28
     
Item 4. Controls and Procedures 29
     
Part II - Other Information  
     
Item 1.  Legal Proceedings  30
     
Item 1A.  Risk Factors  30
     
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds  31
     
Item 3.   Defaults Upon Senior Securities  31
     
Item 4.  Mine Safety Disclosures  31
     
Item 5. Other Information 31
     
Item 6. Exhibits 32
     
  Signatures 33

  

 

 

 

 

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 nine-month periods ended September 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 nine-month periods ended September 30, 2022 and 2021 are not necessarily indicative of results to be expected for any subsequent period.

 

 

 

 2 

 

PCT LTD

Condensed Consolidated Balance Sheets 

           
  

September 30,

2022

  December 31,
2021
    (Unaudited)      
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $31,458   $116,497 
Accounts receivable, net   24,714    96,022 
Inventory   38,614    36,954 
Prepaid expenses         53,090 
Other current assets   7,200    8,200 
Total current assets   101,986    310,763 
           
PROPERTY AND EQUIPMENT          
Property and equipment, net   1,032,143    762,054 
           
OTHER ASSETS          
Intangible assets, net   2,872,138    3,098,021 
Operating lease right-of-use asset   52,645    83,420 
Total other assets   2,924,783    3,181,441 
           
TOTAL ASSETS  $4,058,912   $4,254,258 
           
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT          
CURRENT LIABILITIES          
Accounts payable  $561,664   $72,873 
Accrued expenses - related parties   230,492    226,844 
Accrued expenses   845,913    691,364 
Advances payable   500,000       
Operating lease liability   48,213    42,012 
Current portion of notes payable – related parties, net   177,650    85,850 
Current portion of notes payable, net   404,049    133,144 
Current portion of convertible notes payable, net   430,934    480,808 
Derivative liability   1,026,338    3,044,034 
Total current liabilities   4,225,253    4,776,929 
           
LONG-TERM LIABILITIES          
   Convertible notes payable, net of current portion and discounts   1,465,300    1,465,300 
   Operating lease liability, net of current portion   4,432    41,408 
TOTAL LIABILITIES  $5,694,985    6,283,637 
           
MEZZANINE EQUITY          
Preferred series A stock, $0.001 par value; 1,000,000 authorized; 500,000 issued and outstanding at September 30, 2022 and December 31, 2021, respectively   60,398    60,398 
Preferred series B stock, $0.001 par value; 1,000,000 authorized; 1,000,000 issued and outstanding at September 30, 2022 and December 31, 2021, respectively   158,247    158,247 
Preferred series C stock, $0.001 par value; 1,500,000 authorized; 1,500,000 issued and outstanding at September 30, 2022 and December 31, 2021, respectively   2,250,000    2,250,000 
TOTAL MEZZANINE EQUITY   2,468,645    2,468,645 
           
STOCKHOLDERS' DEFICIT          
Common stock, $0.001 par value; 1,000,000,000 authorized; 805,596,961 and 790,924,690 issued and outstanding at September 30, 2022 and December 31, 2021, respectively   805,596    790,924 
Additional paid-in-capital   24,468,135    24,310,045 
Accumulated deficit   (29,378,449)   (29,598,993)
TOTAL STOCKHOLDERS' DEFICIT   (4,104,718)   (4,498,024)
           
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT  $4,058,912   $4,254,258 

 

 

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 

September 30,

 

For the Nine Months Ended

September 30,

   2022  2021  2022  2021
REVENUES            
Product  $38,893   $33,279   $111,163   $204,138 
Licensing   9,000    75,347    18,097    225,122 
Equipment leases   241,604    258,104    744,812    802,132 
Total Revenues   289,497    366,730    874,072    1,231,392 
                     
OPERATING EXPENSES                    
General and administrative   551,921    1,031,072    2,008,782    2,583,139 
Research and development   119    14,783    5,444    29,738 
Cost of product, licensing and equipment leases   6,321    85,591    81,112    225,960 
Depreciation and amortization   125,414    98,364    357,799    295,092 
Total operating expenses   683,775    1,229,810    2,453,137    3,133,929 
                     
Loss from operations   (394,278)   (863,080)   (1,579,065)   (1,902,537)
                     
OTHER INCOME (EXPENSE)                    
Gain on change in fair value of derivative liability   51,008    457,116    2,061,774    1,749,277 
Gain on settlement of debt   (1,011)   361,357    68,259    3,689,055 
Interest expense   (154,182)   (101,580)   (330,424)   (378,223)
Misc. income                     50,000 
Total other income (expense)   (104,185)   716,893    1,799,609    5,110,109 
                     
Income (loss) before income taxes   (498,463)   (146,187)   220,544    3,207,572 
                     
Income taxes                        
                     
NET (INCOME (LOSS)  $(498,463)  $(146,187)  $220,544   $3,207,572 
                     
Basic income (loss) per share  $(0.00)  $(0.00)  $0.00   $0.00 
Diluted income (loss) per share  $(0.00)  $(0.00)  $(0.00)  $(0.00)
                     
Basic weighted average shares outstanding   806,882,966    773,082,751    797,708,252    760,229,694 
Diluted weighted average shares outstanding   806,882,966    773,082,751    899,948,629    1,024,432,537 

 

 

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 Nine Months Ended September 30, 2022 and 2021

(Unaudited)

                
         Additional     Total Stockholders'
   Common Stock  Paid-in  Accumulated  Equity
   Shares  Amount  Capital  Deficit  (Deficit)
Balance - December 31, 2020   722,487,846   $722,488   $23,202,933   $(30,587,612)  $(6,662,191)
Common stock issued for services   2,500,000    2,500    74,276          76,776 
Common stock issued in settlement of debt   4,466,508    4,466    648,844          653,310 
Common stock issued in conversion of convertible notes payable   25,000,000    25,000                25,000 
Conversion of preferred series C stock   4,000,000    4,000    36,000          40,000 
Net loss for the three-months ended March 31, 2020   —                  (718,028)   (718,028)
Balance - March 31, 2021   758,454,354   $758,454   $23,962,053   $(31,305,640)  $(6,585,133)
Common stock issued for cash   8,750,000    8,750    166,250    —      175,000 
Common stock issued for services   1,000,000    1,000    32,174          33,174 
Common stock issued in cashless exercise of warrants   1,921,875    1,922    32,672          34,594 
Net income for the three-months ended June 30, 2021   —                  4,071,787    4,071,787 
Balance - June 30, 2021   770,126,229   $770,126   $24,193,149   $(27,233,853)  $(2,270,578)
Common stock issued for services   2,000,000    2,000    40,737          42,737 
Common stock issued in conversion of convertible notes payable   8,000,000    8,000    116,000          124,000 
Net loss for the three-months ended September 30, 2021   —                  (146,187)   (146,187 
Balance - September 30, 2021   780,126,229   $780,126   $24,349,886   $(27,380,040)   (2,250,028)
                          
Balance - December 31, 2021   790,924,690   $790,924   $24,310,045   $(29,598,993)  $(4,498,024)
Stock-based compensation   —            7,952          7,952 
Net income for the three-months ended March 31, 2022   —                  468,049    468,049)
Balance – March 31, 2022   790,924,690   $790,924   $24,317,997   $(29,130,944)  $(4,022,023)
Common stock issued in conversion of convertible notes payable   16,644,146    16,644    108,876          125,520 
Stock-based compensation   —            21,422          21,422 
Net income for the three-months ended June 30, 2021   —                  250,958    250,958 
Balance - June 30, 2022   807,568,836   $807,568   $24,448,295   $(28,879,986)  $(3,624,123)
Return and cancellation of common shares   (1,971,875)   (1,972)   1,972             
Stock-based compensation   —            17,868          17,868 
Net loss for the three-months ended September 30, 2022   —                  (498,463)   (498,463)
Balance – September 30, 2022   805,596,961   $805,596   $24,468,135   $(29,378,449)  $(4,104,718)

 

 

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 Nine Months Ended

September 30,

   2022  2021
Cash Flows from Operating Activities          
Net income  $220,544   $3,207,572 
Adjustments to reconcile net income to net cash used in operating activities:          
Depreciation and amortization   357,799    295,092 
Amortization of debt discount   133,596    240,413 
Common stock issued for services         267,830 
(Gain) loss on change in fair value of derivative liability   (2,061,774)   (1,749,277)
Amortization of right of use asset   30,775    39,182 
(Gain) loss on settlement of debt   (68,259)   (3,689,055)
Default penalties on convertible notes         15,172 
Stock-based compensation   47,242       
Bad debt expense   —      182,700 
Changes in operating assets and liabilities:          
Accounts receivable   71,308    3,679 
Inventory   (1,660)   (6,130)
Prepaid expenses   53,090    (8,543 
Deposits         9,726 
Other assets   1,000    (16,740)
Operating lease liability   (30,775)   (39,182)
Accounts payable   488,791    (212,125)
Accrued expenses - related party   3,648    14,887 
Accrued expenses   166,989    165,479 
Net cash used in operating activities   (587,686)   (1,279,320)
           
Cash Flows from Investing Activities          
Purchase of equipment   (402,005)   (28,138)
Net cash used for by investing activities   (402,005)   (28,138)
           
Cash Flows from Financing Activities          
Proceeds from advances payable   500,000    1,450,000 
Proceeds from notes payable   463,965    410,377 
Proceeds from notes payable - related parties   96,800       
Proceeds from convertible notes payable   225,000    920,000 
Proceeds from sale of common stock         175,000 
Repayment of convertible notes payable   (120,465)   (673,989)
Repayment of notes payable   (255,648)   (796,036)
Repayment of notes payable - related parties   (5,000)   (53,763)
Net cash provided by financing activities   904,652    1,431,589 
           
Net change in cash   (85,039)   124,131 
Cash and cash equivalents at beginning of period   116,497    115,196 
Cash and cash equivalents at end of period  $31,458   $239,327 
           
Supplemental Cash Flow Information          
Cash paid for interest  $122,054   $72,763 
Cash paid for income taxes  $     $   
           
Non-cash investing and financing activities:          
Original debt discount against convertible notes  $9,000   $12,000 
Original debt discount against notes payable  $82,435   $174,435 
Initial derivative on convertible note  $113,348   $   
Cancellation of common stock  $1,972   $   
Note payable settled for non-cash consideration  $122,900   $   
Common stock issued for services  $     $81,740 
Common stock issued in conversion of convertible notes payable  $125,250   $149,000 
Common stock issued in settlement of notes payable to related parties  $     $653,310 
Common stock issued in cashless exercise of warrants  $     $34,594 
Common stock issued in conversion of preferred series C stock  $     $40,000 

 

  

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

September 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.

 

 7 

 

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 September 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 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 nine months ended September 30, 2022, there were outstanding common share equivalents which amounted to 331,667,447 and 231,733,160 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 September 30, 2022
$
  Three months ended September 30, 2021
$
  Nine months
ended September 30, 2022
$
  Nine months
ended September 30, 2021
$
Numerator:                    
Net income (loss)   (498,463)   (146,187)   220,544    3,207,572 
(Gain) loss on change in fair value of derivative liability               (1,835,014)   (1,641,616)
Gain on settlement of debt               (69,270)   (3,792,104)
Interest expense                     30,617 
Adjusted net income (loss)   (498,463)   (146,187)   (1,683,740)   (2,195,531)
                     
Denominator: Weighted average shares outstanding used in computing net income (loss) per share                    
Basic   806,882,966    773,082,751    797,708,252    760,229,694 
                     
Effect of dilutive warrants               101,723,677    203,745,854 
Effect of convertible note weighted shares               516,700    60,456,989 
Diluted   806,882,966    773,082,751    899,948,629    1,024,432,537 
                     
Net income (loss) per share applicable to common shareholders:                    
Basic  $(0.00)  $(0.00)  $0.00   $0.00 
Diluted  $(0.00)  $(0.00)  $(0.00)  $(0.00)

 

 

 

 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 $29,378,449 and has negative cash flows from operations. As of September 30, 2022, the Company had a working capital deficit of $4,123,267. 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 September 30, 2022 and December 31, 2021 consisted of the following: 

 

   September 30, 2022  December 31, 2021
Leasehold improvements  $61,846   $61,580 
Machinery and leased equipment   433,417    365,483 
Machinery and equipment not yet in service   732,572    440,150 
Office equipment and furniture   99,296    57,913 
Website   2,760    2,760 
           
Total property and equipment  $1,329,891   $927,886 
Less: Accumulated Depreciation   (297,748)   (165,832)
           
Property and equipment, net  $1,032,143   $762,054 

 

 9 

 

Depreciation expense was $131,916 and $66,726 for the nine months ended September 30, 2022 and 2021, respectively. During the nine months ended September 30, 2022, the Company added $292,422 of machinery and equipment not yet in service.

 

 

NOTE 4. INTANGIBLE ASSETS

 

Intangible assets at September 30, 2022 and December 31, 2021 consisted of the following:

 

   September 30, 2022  December 31, 2021
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   (1,833,351)   (1,607,468)
Net Carrying Amount  $2,872,138   $3,098,021 

 

Amortization expense was $225,883 and $228,366 for the nine months ended September 30, 2022 and 2021, respectively.

 

Estimated Future Amortization Expense:

 

    $
  For year ending December 31, 2022       75,501  
  For year ending December 31, 2023       302,003  
  For year ending December 31, 2024       302,003  
  For year ending December 31, 2025       302,003  
  For year ending December 31, 2026       302,003  
  Thereafter       1,588,625  
  Total       2,872,138  

  

 

 

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 $13,500 during the nine-month period ended September 30, 2022.

 

At September 30, 2022, the weighted average remaining operating lease term was 1.08 years and the weighted average discount rate associated with operating leases was 18.5%.

 

The components of lease expenses for the nine-month period ended September 30, 2022 and 2021 were as follows:

 

    2022
$
 

2021

$

         
Total operating lease cost     40,500       59,750   
                 

  

 10 

 

 

The following table provides supplemental cashflow and other information related to leases for the nine-month period ended September 30, 2022 and 2021:

 

    2022
$
 

2021

$

         
Lease payments     109,809       127,700  
                 

  

Supplemental balance sheet information related to leases as of September 30, 2022 and 2021 are as below:

 

    2022
$
 

2021

$

         
Cost     123,614       176,213  
Accumulated amortization     (70,969 )     (44,411
Impairment           (39,030
Net carrying value     52,645       92,772  

  

Future minimum lease payments related to lease obligations are as follows as of September 30, 2022:

 

    $
2022     13,500  
2023     45,000  
Total minimum lease payments     58,500  
         
Less: amount of lease payments representing effects of discounting     (5,855 )
         
Present value of future minimum lease payments     52,645  
         
Less: current obligations under leases     (48,213 )
         
Lease liabilities, net of current portion     4,432  

  

  

 11 

 

NOTE 6. Notes Payable

 

The following tables summarize notes payable as of September 30, 2022 and December 31, 2021:

 

Type  Original Amount 

Origination

Date

 

Maturity

Date

 

Effective Annual

Interest

Rate

 

Balance at

September 30, 2022

 

Balance at

December 31, 2021

Note Payable **  $25,000   05/08/2017  06/30/2018  0%  $20,000   $22,500 
Note Payable **  $118,644   05/05/2020  05/05/2021   8%  $110,644   $110,644 
Note Payable (a)  $199,000   02/04/2022  02/03/2023  0%  $    $   
Note Payable (b)  $131,100   03/04/2022  12/16/2022  83%  $40,457   $   
Note Payable (c)  $81,600   04/13/2022  01/05/2023   87%  $32,063       
Note Payable (d)  $200,000   7/13/2022  7/11/2023   70%  $177,439       
Note Payable (e)  $57,600   8/15/2022  2/13/2023   171%  $44,308       
Sub-total                  $424,911   $133,144 
Debt discount                  $(20,862)  $   
Balance, net                  $404,049   $133,144 
Less current portion                  $(404,049)  $(133,144)
Total long-term                  $     $   
                           
** Currently in default

   

  a) On February 4, 2022, the Company entered into a loan agreement with a non-related party for $199,000, of which $2,985 was an original issue discount resulting in cash proceeds to the Company of $196,015. The loan is to be repaid through fifty-two weekly payments of $5,013. On July 13, 2022, the Company entered into a second loan agreement with the non-related party (Note 6 (d)) whereby $122,900 of the new loan was to be paid through the extinguishment of the February 4, 2022 loan. As at July 13, 2022, $2,985 of the discount was amortized to expense, $117,312 was repaid in cash, and $122,900 was repaid through the issuance of a new loan, which resulted in a gain on settlement of debt of $1,011 and a note balance of $0.

 

  b) On March 4, 2022, the Company sold future receivables with a non-related party for $131,100, of which $36,100 was loan fees and original issue discount resulting in cash proceeds to the Company of $95,000. The advance is to be repaid through weekly payments of $3,121. In connection with the advance, the Company granted the lender a security interest and all past, present and future assets of the Company. During the nine months ended September 30, 2022, $32,518 of the discount was amortized to expense, and $90,643 was repaid leaving a note balance of $40,457 (discount balance of $3,582).

 

  c) On April 13, 2022, the Company sold future receivables with a non-related party for $81,600, of which $21,600 was loan fees and original issue discount resulting in cash proceeds to the Company of $60,000. The advance is to be repaid through weekly payments of $2,147. In connection with the advance, the Company granted the lender a security interest and all past, present and future assets of the Company. During the nine months ended September 30, 2022, $18,133 of the discount was amortized to expense, and $49,537 was repaid leaving a note balance of $32,063 (discount balance of $3,467).

 

  d) On July 13, 2022, the Company entered into a loan agreement with a non-related party for $200,000, of which $2,500 was an original issue discount and $122,900 was paid through the extinguishment of a prior loan (Note 6 (a)) resulting in cash proceeds to the Company of $74,600. The loan is to be repaid through fifty-two weekly payments of $5,308. During the nine months ended September 30, 2022, $878 of the discount was amortized to expense, and $42,462 was repaid leaving a note balance of $177,439 (discount balance of $1,622).

 

 12 

 

  e) On August 15, 2022, the Company sold future receivables with a non-related party for $57,600, of which $17,600 was loan fees and original issue discount resulting in cash proceeds to the Company of $40,000. The advance is to be repaid through weekly payments of $2,215. In connection with the advance, the Company granted the lender a security interest and all past, present and future assets of the Company. During the nine months ended September 30, 2022, $8,113 of the discount was amortized to expense, and $13,292 was repaid leaving a note balance of $44,308 (discount balance of $12,191).

  

The following table summarizes notes payable, related parties as of September 30, 2022 and December 31, 2021:

 

Type  Original Amount 

Origination

Date

 

Maturity

Date

 

Annual

Interest

Rate

 

Balance at

September 30, 2022

 

Balance at

December 31, 2021

Note Payable, RP **  $17,000   06/20/2018  01/02/2020   5%  $10,000   $10,000 
Note Payable, RP **  $50,000   07/27/2018  11/30/2018   8%  $10,850   $10,850 
Note Payable, RP **  $15,000   08/16/2019  02/16/2020   8%  $15,000   $15,000 
Note Payable, RP (f)  $84,034   02/16/2021  Demand   5%  $45,000   $50,000 
Note Payable, RP (g)  $9,000   06/15/2022  12/31/2022   0%  $9,000   $   
Note Payable, RP (g)  $5,000   06/24/2022  12/31/2022   0%  $5,000   $   
Note Payable, RP (g)  $41,300   06/29/2022  12/31/2022   0%  $41,300   $   
Note Payable, RP (h)  $15,500   07/07/2022  12/31/2022   0%   15,500       
Note Payable, RP (i)  $3,500   08/19/2022  12/31/2022   0%   3,500       
Note Payable, RP (j)  $22,500   09/02/2022  12/31/2022   0%   22,500       
Subtotal                  $177,650   $85,850 
Debt discount                  $     $   
Balance, net                  $177,650   $85,850 
Less current portion                  $(177,650)  $(85,850)
Total long-term                  $     $   
                           
** Currently in default

  

  f) On March 7, 2022, the Company repaid the principal amount of $5,000 leaving a note principal balance of $45,000.

 

  g) During June 2022, the Company entered into three promissory notes with the CFO of the Company for an aggregate principal amount of $55,300, bearing interest of 0%, repayable on or before July 31, 2022. Subsequently, the maturity date was extended to December 31, 2022.

 

  h) On July 7, 2022, the Company entered into a promissory note with the CFO of the Company for a principal amount of $15,500, bearing interest of 0%, repayable on or before August 31, 2022. Subsequently, the maturity date was extended to December 31, 2022.

 

i) On August 19, 2022, the Company entered into a promissory note with the CFO of the Company for a principal amount of $3,500, bearing interest of 0%, repayable on or before September 30, 2022. Subsequently, the maturity date was extended to December 31, 2022.

 

j) On September 2, 2022, the Company entered into a promissory note with the CFO of the Company for a principal amount of $22,500, bearing interest of 0%, repayable on or before September 30, 2022. Subsequently, the maturity date was extended to December 31, 2022.

 

 

 13 

 

The following table summarizes convertible notes payable as of September 30, 2022 and December 31, 2021:

 

Type  Original Amount 

Origination

Date

 

Maturity Date

 

Annual

Interest

Rate

 

Balance at

September 30,

2022

 

Balance at

December 31, 2021

Convertible Note Payable (k) * **  $150,000   04/10/2020  04/09/2021   12%  $     $25,000 
Convertible Note Payable (l) **  $300,000   08/27/2020  07/31/2021   12%  $265,000   $270,000 
Convertible Note Payable (m)  $226,162   11/04/2021  11/04/2022   19%  $     $203,546 
Convertible Note Payable  $1,465,300   11/30/2021  11/30/2023   5%  $1,465,300   $1,465,300 
Convertible Note Payable (n) **  $128,000   03/29/2022  03/29/2023   12%  $128,000   $   
Convertible Note Payable (o)  $53,000   06/01/2022  06/01/2023   12%  $53,000   $   
Convertible Note Payable (p)  $53,000   06/14/2022  06/14/2023   12%  $53,000   $   
Subtotal                  $1,964,300   $1,963,846 
Debt discount                  $(68,066)  $(17,738)
Balance, net                  $1,896,234   $1,946,108 
Less current portion                  $(430,934)  $(480,808)
Total long-term                  $1,465,300   $1,465,300 
 

* Embedded conversion feature accounted for as a derivative liability at period end

** Currently in default

  

  k) During the nine months ended September 30, 2022, the Company repaid $25,000 of the note, leaving a note principal balance of $0.

 

  l) During the nine months ended September 30, 2022, the Company repaid $5,000 of the note, leaving a note principal balance of $265,000.

 

  m) During the nine months ended September 30, 2022, $17,738 of the discount was amortized to expense, and $90,465 was repaid.  During the nine months ended September 30, 2022, the Company issued 16,644,146 common shares upon the conversion of the remaining balance of the convertible note and unpaid interest, leaving a note principal balance of $0.

 

  n) On March 29, 2022, the Company entered into a convertible promissory note with a non-related party for $128,000, of which $500 was an original issue discount and $2,500 was issue costs resulting in cash proceeds to the Company of $125,000. The Company received the cash proceeds on April 4, 2022. The note is due on March 29, 2023 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note's term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. On September 25, 2022 the Note became convertible and the Company recognized a further discount of $113,348 relating to the initial fair value of the derivative conversion feature. During the nine months ended September 30, 2022, $52,436 of the discount was amortized to expense.

 

  o) On June 1, 2022, the Company entered into a convertible promissory note with a non-related party for $53,000, of which $500 was an original issue discount and $2,500 was issue costs resulting in cash proceeds to the Company of $50,000. The note is due on June 1, 2023 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note's term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. During the six months ended September 30, 2022, $976 of the discount was amortized to expense.

 

 14 

 

  p) On June 14, 2022, the Company entered into a convertible promissory note with a non-related party for $53,000, of which $500 was an original issue discount and $2,500 was issue costs resulting in cash proceeds to the Company of $50,000. The note is due on June 14, 2023 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note's term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. During the six months ended September 30, 2022, $870 of the discount was amortized to expense.

  

 

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.

 

   September 30,
2022
  December 31,
2021
Balance at the beginning of period  $3,044,034   $7,102,801 
Discount upon recognition of conversion feature   113,348       
Settlement of derivative instruments   (69,270)   (4,035,906)
Change in fair value of embedded conversion option   (2,061,774)   (22,861)
Balance at the end of the period  $1,026,338   $3,044,034 

 

The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option and warrant liabilities as their fair values were determined by using the Binomial Model based on various assumptions. 

 

Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:

 

    Expected Volatility   Risk-free Interest Rate   Expected Dividend Yield   Expected Life (in years)
At September 30, 2022   108-199%   3.92-4.25%     0 %     0.49-2.91  

  

 

NOTE 8. STOCKHOLDERS' DEFICIT

 

Preferred Stock

Effective March 23, 2018, the Company amended the articles of incorporation and authorized 10,000,000 shares of preferred stock with a par value of $0.001 per share. The preferred stock may be issued from time to time by the Board of Directors as shares of one or more classes or series, as summarized below.

 

 15 

 

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 600,000 shares of Preferred Series “A” stock to three accredited investors who are related parties. The Company was unable to issue the subscriber the preferred shares until the Company filed a Certificate of Designation and the Preferred Series “A” stock has been duly validly authorized. Resulting in a preferred stock liability related to the Company’s commitment to issue shares of Series A stock upon the designation.

 

On April 12, 2019, the Company filed a Certificate of Designation with the Nevada Secretary of State designating 1,000,000 shares of its authorized preferred stock as Series A Convertible Preferred Stock. The principal terms of the Series A Preferred Shares are as follows:

Issue Price

The stated price for the Series A Preferred shall be $0.10 per share.

Redemption

This Company may at any time following the first anniversary date of issuance (the “Redemption Date”), at the option of the Board of Directors, redeem in whole or in part the Shares by paying in cash in exchange for the Shares to be redeemed a price equal to the Original Series A Issue Price ($0.10) (the “Redemption Price”). Any redemption affected pursuant to this provision shall be made on a pro rata basis among the holders of the Shares in proportion to the number of the shares then held by them.

Dividends

None.

Preference of Liquidation

In the event of any liquidation, dissolution or winding up of the Company, the holders of Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets of this Company, to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of (i) $0.10 for each outstanding Share (the “Original Series A Issue Price”) and (ii) an amount equal to 6% of the Original Series A Issue Price for each 12 months that has passed since the date of issuance of any Shares (such amount being referred to herein as the “Premium”).

For purposes of this provision, a liquidation, dissolution or winding up of this Company shall be deemed to be occasioned by, or to include, (A) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (B) a sale of all or substantially all of the assets of the Company; unless the Company’s stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise), hold at least 50% of the voting power of the surviving or acquiring entity.

If upon the occurrence of such liquidation, dissolution or winding up event, the assets and funds thus distributed among the holders of the Shares shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of series of preferred stock that may from time to time come into existence, the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the Shares in proportion to the preferential amount each such holder is otherwise entitled to receive.

In any of such liquidation, dissolution or winding up event, if the consideration received by the Company is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:

  A. Securities not subject to investment letter or other similar restrictions on free marketability (covered by (B) below):

 

  1) If traded on a securities exchange (NASDAQ, AMEX, NYSE, etc.), the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty-day period ending three (3) days prior to the closing;

 

  2) If traded on a quotation system, such as the OTC:QX, OTC:QB or OTC Pink Sheets, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty-day period ending three (3) days prior to the closing; and

 

 16 

 

  3) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding shares of Preferred Stock.

 

  B. The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding shares of such Preferred Stock:

 

Voting

The holder of each Share shall not have any voting rights, except in the case of voting on a change in the preferences of Shares.

Conversion

Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.10 (1 Share converts into 1 share of Common Stock), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth day prior to the Redemption Date, if any, as may have been fixed in any Redemption Notice with respect to the Shares, at the office of this Company or any transfer agent for such stock. Each Share shall automatically be converted into shares of Common Stock on the first day of the thirty-sixth (36th) month following the original issue date of the shares at the Conversion Price per share. 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 September 30, 2022, and December 31, 2021, there were 500,000 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 1,000,000 shares of its authorized preferred stock as Series B –Preferred Stock. The principal terms of the Series B Preferred Shares are as follows:

Voting Rights

Holders of the Series B Preferred Stock shall be entitled to cast five hundred (500) votes for each share held of the Series B Preferred Stock on all matters presented to the stockholders of the Corporation for stockholder vote which shall vote along with holders of the Corporation’s Common Stock on such matters.

Redemption Rights

The Series B Preferred Stock shall be redeemed by the Corporation upon the successful receipt by the Corporation of at least $1,000,000 in equity capital following the issuance of the Series B Preferred Stock. 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.

 17 

 

Conversion Rights

The Series B Preferred Stock is not convertible into shares of Common Stock of the Corporation.

 

Protective Provisions

So long as any shares of Series B Preferred Stock are outstanding, this Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the Holders of the Series B Preferred Stock which is entitled, other than solely by law, to vote with respect to the matter, and which Preferred Stock represents at least a majority of the voting power of the then outstanding shares of such Series B Preferred Stock:

  a) sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Corporation is disposed of; 

 

  b) alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock so as to affect adversely the shares;

 

  c) increase or decrease (other than by redemption or conversion) the total number of authorized shares of preferred stock;

 

  d) authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security (i) having a preference over, or being on a parity with, the Series B Preferred Stock with respect to dividends or upon liquidation, or (ii) having rights similar to any of the rights of the Series B Preferred Stock; or

 

  e) amend the Corporation’s Articles of Incorporation or bylaws.

Dividends

None.

Preference of Liquidation

None.

 

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

 

As of September 30, 2022, and December 31, 2021, there were 1,000,000 shares of Series B Preferred Stock issued and outstanding, respectively.

 

Series C Preferred Shares

 

Pursuant to the September 18, 2019, the Company filed a Certificate of Designation with the Nevada Secretary of State designating 5,500,000 shares of its authorized preferred stock as Series C Convertible Preferred Stock. The Registrant is awaiting the file stamped Certificate of Designation from the Nevada Secretary of State. The rights and preferences of such preferred stock are as follows:

 

The number of shares constituting the Series C Convertible Preferred Stock shall be 5,500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors, provided that no decrease shall reduce the number of shares of Series C Convertible Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series C Convertible Preferred Stock.

 18 

 

Conversion Rights

Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.01 (1 Share converts into 100 shares of Common Stock) (the “Conversion Price”), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth (5th) day prior to the redemption Date, if any, as may have been fixed in any redemption notice with respect to the Shares, at the office of this Company or any transfer agent for such stock.

Voting Rights

The holder of each Share shall not have any voting rights, except in the case of voting on a change in the preferences of Shares.

Protective Provisions

So long as any Shares are outstanding, this Company shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of Shares which is entitled, other than solely by law, to vote with respect to the matter, and which Shares represents at least a majority of the voting power of the then outstanding Shares:

  a) sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company is disposed of;

 

  b) alter or change the rights, preferences or privileges of the Shares so as to affect adversely the Shares;

 

  c) increase or decrease (other than by redemption or conversion) the total number of authorized shares of preferred stock;

 

  d) authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security (i) having a preference over, or being on a parity with, the Shares with respect to liquidation, or (ii) having rights similar to any of the rights of the Preferred Stock; or

 

  e) amend the Company’s Articles of Incorporation or bylaws.

Other Rights

There are no other rights, privileges or preferences attendant or relating to in any way the Shares, including by way of illustration but not limitation, those concerning dividend, ranking, other conversion, other redemption, participation or anti-dilution rights or preferences. 

As conversion of the Series C Preferred Shares is not within the control of the Company, and it is not certain that the Company could satisfy its obligation to deliver shares upon conversion, the Series C Preferred Shares were classified in temporary equity or “mezzanine”.

On February 15, 2021, 40,000 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 4,000,000 shares of common stock.

 19 

 

Effective December 1, 2021, the Company filed an Amended and Restated Certificate of Designation with the Nevada Secretary of State designating 1,500,000 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 1,500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors, provided that no decrease shall reduce the number of shares of Series C Convertible Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series C Convertible Preferred Stock. At September 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 1,500,000 shares of preferred series C stock at $1.50 per share for proceeds of $2,250,000.

 

As of September 30, 2022, and December 31, 2021, there were 1,500,000 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 1,000,000,000 shares with a par value of $0.001 per share. The number of shares of common stock outstanding as of September 30, 2022 and December 31, 2021 was 805,596,961 and 790,924,690, respectively.

 

On May 26, 2022, $12,500 of principal and interest of a convertible note payable was converted into 1,453,488 shares of the Company’s common stock as further described in Note 6(m).

 

On June 1, 2022, $12,500 of principal and interest of a convertible note payable was converted into 1,506,024 shares of the Company’s common stock as further described in Note 6(m).

 

On June 2, 2022, $15,000 of principal and interest of a convertible note payable was converted into 1,973,684 shares of the Company’s common stock as further described in Note 6(m).

 

On June 6, 2022, $20,000 of principal and interest of a convertible note payable was converted into 2,597,403 shares of the Company’s common stock as further described in Note 6(m).

 

On June 8, 2022, $30,000 of principal and interest of a convertible note payable was converted into 3,947,368 shares of the Company’s common stock as further described in Note 6(m).

 

On June 13, 2022, $20,000 of principal and interest of a convertible note payable was converted into 2,702,703 shares of the Company’s common stock as further described in Note 6(m).

 

On June 21, 2022, $15,520 of principal and interest of a convertible note payable was converted into 2,463,476 shares of the Company’s common stock as further described in Note 6(m).

 

On August 31, 2022, 1,971,875 shares of the Company’s common stock were returned for cancellation as a result of an SEC court order.

 

 20 

 

NOTE 9. STOCK OPTIONS

 

Below is a table summarizing the options issued and outstanding as of September 30, 2022:

 

   Number of options  Weighted average exercise price
$
 Balance, December 31, 2021    8,500,000    0.034 
 Granted    7,000,000    0.067 
 Expired/Cancelled    (6,500,000)   0.039 
 Settled             
 Balance, September 30, 2022    9,000,000    0.056 
 Exercisable    3,500,000    0.021 

 

As at September 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       2,000,000       2,000,000       0.015       3.92       08/31/2026       30,000  
  04/01/2021       1,500,000       1,500,000       0.03       4.92       08/31/2027       45,000  
  04/01/2021       1,500,000                0.05       5.92       08/31/2028       75,000  
  04/01/2021       2,000,000                0.075       6.92       08/31/2029       150,000  
  04/01/2021       2,000,000                0.10       7.92       08/31/2030       200,000  
          9,000,000       3,500,000                             $ 500,000  

 

At September 30, 2022, the weighted average exercise prices are $0.056 and $0.021 for the options outstanding and exercisable, respectively. The intrinsic value of stock options outstanding at September 30, 2022 was $0.

 

During the nine months ended September 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.

 

 

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    115,048,858    0.00597 
 Cancelled             
 Granted             
 Exercised             
 Balance, September 30, 2022    115,048,858    0.00597 

 

 21 

 

As at September 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    500,000    500,000   0.10    1.18    12/3/2023    50,000 
 3/31/2019    104,548,858*   104,548,858*   0.00035*   1.45    03/13/2024    36,592 
 8/26/2020    10,000,000    10,000,000   0.06   2.91    8/26/2025    600,000 
      115,048,858    115,048,858                  $686,592 

 

*The number of warrants outstanding and exercisable is variable based on adjustments to the exercise price of the warrant due to dilutive issuances.

 

The intrinsic value of warrants outstanding at September 30, 2022 was $737,069.

 

 

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

 

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 2,500,000 common shares exercisable at $0.0001 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 September 30, 2022.

 

 

 22 

 

NOTE 13. SUBSEQUENT EVENTS

 

On October 4, 2022, the Company entered into a convertible promissory note with a non-related party for $50,000. The note is due on October 4, 2024 and bears interest on the unpaid principal balance at a rate of 7% per annum. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to $0.05 per share.

 

On November 7, 2022, the Company entered into a promissory note with a non-related party for $250,000. The note is due on January 30, 2023 and bears interest on the unpaid principal balance at a rate of 8% per annum. The Note is repayable by four bi-monthly payments of $67,500 on the 15th and 30th of every month beginning on December 15, 2022. The Note is secured by 75,000,000 shares of restricted common stock, which will not be issued until ten days after the due date of the loan has passed and payment has not been received by the lender. If the Company fails to make a payment due within ten days after the due date, a late payment fee of 10% of the principal amount due or $25,000 is applicable.

 

 

 

 23 

 

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”) and recently formed subsidiaries 21st Century Energy Solutions, Inc. and 21st Century Healthcare, Inc.

 

 

 24 

 

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 $220,544 for the nine-months ended September 30, 2022 and accumulated losses of $29,378,449 from inception through September 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;

 

  general and administrative operating costs.

 

Management projects these costs to total approximately $2,580,000 in 2023. 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 current personnel, 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 second quarter of 2023.

 

In August of 2022, we announced that we are in the process of segregating te Healthcare and Oil & Gas technologies into separate wholly-owned subsidiaries to capitalize on marketing opportunities. The PCT Healthcare division is being rebranded with assets transferred into 21st Century Healthcare, Inc. while the PCT Oil & Gas division will be rebranded with assets transferred into 21st Century Energy Solutions, Inc. 21st Century Healthcare, Inc. intends to build and market equipment and fluids specifically to the healthcare industry. 21st Century Energy Solutions, Inc. intends to market oil and gas technologies and services to the Oil & Gas industry. Both new entities anticipate marketing directly to their customer base and form strategic partnerships with companies that are heavily engaged in both Healthcare and Oil & Gas, respectively.

 

 25 

 

PCT believes that this will open additional investment and strategic alliance opportunities. PCT has found there is much more opportunity to attract the necessary investment and alliances to assure the funds will be used in the areas of investment interest while each company focuses on their specific market.

 

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  September 30,
2022
  December 31,
2021
Cash and cash equivalents  $31,458   $116,497 
Total current assets   101,986    310,763 
Total assets   4,058,912    4,254,258 
Total liabilities   5,694,985    6,283,637 
Accumulated deficit   (29,378,449)   (29,598,993)
Total stockholders' deficit  $(4,104,718)  $(4,498,024)

 

For the nine months ended September 30, 2022, the Company recorded a net income of $220,544 and at September 30, 2022, had a working capital deficit of $4,123,267. Since inception we had not established an ongoing source of revenue sufficient to cover our operating costs. During the nine-months ended September 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 $31,458 in cash at September 30, 2022, compared to $116,497 in cash at December 31, 2021. We had total liabilities of $5,694,985 at September 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 September 30, 2022 the Company recorded notes payable totaling approximately $2,477,933 (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 171% 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.   

 

 26 

 

Results of Operations

 

Three Months Ended September 30, 2022

 

SUMMARY OF OPERATIONS   Three-month period ended
September 30,
    (Unaudited)
    2022   2021
Revenues   $ 289,497     $ 366,730  
Total operating expenses     683,775       1,229,810  
Total other income (expense)     (104,185     716,893  
Net income (loss)     (498,463     (146,187  )
Net income (loss) attributable to common stockholders'     (498,463     (146,187
Basic income per share   $ (0.00   $ (0.00
Diluted income (loss) per share   $ (0.00   $ (0.00 )

 

Revenues decreased to $289,497 for the three months ended September 30, 2022 (the "2022 third quarter") compared to $366,730 for the three months ended September 30, 2021 (the "2021 third 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 decreased to $683,775 during the 2022 third quarter compared to $1,229,810 during the 2021 third quarter. The decrease during the third quarter of 2022 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 $551,921 for the 2022 third quarter compared to $1,031,072 during the 2021 third quarter. The decrease during the third quarter of 2022 was primarily due to a decrease in payroll expenses and professional fees and due to effective cost controls.

 

Depreciation and amortization expenses increased to $125,414 during the 2022 third quarter compared to $98,364 during the 2021 third quarter.

 

Total other expense was $104,185 for the 2022 third quarter compared to other income of $716,893 during the 2021 third quarter. The overall change was a result of a decrease in gain on settlement of debt of $362,368 and a decrease in the gain on change in fair value of derivatives of $406,108 when compared to the third quarter of 2022.

 

As a result of the changes described above, net loss increased to $498,463 during the 2022 third quarter compared to $146,187 during the 2021 third quarter.

 

Nine Months Ended September 30, 2022

 

SUMMARY OF OPERATIONS<