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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, 2021

or 

 

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

 

Commission file number: 000-31549

 

PCT LTD

(Exact name of registrant as specified in its charter)

 

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

4235 Commerce Street

Little River, South Carolina

 

29566

(Address of principal executive offices) (Zip Code)

(843) 390-7900

(Registrant's telephone number, including area code)

 

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

 

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

 

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

 

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

 

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

Large accelerated filer ☐

Non-accelerated filer

Accelerated filer ☐

Smaller reporting company

Emerging growth company

 

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

 

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

 

The number of shares outstanding of the registrant's common stock as of November 15, 2021 was 795,501,229 which does not include 204,123,771 shares of common stock reserved against default on convertible debt and 750,000 shares for vesting of executive shares.

 

 
 

 

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 26
     
Item 3.  Quantitative and Qualitative Disclosures About Market Risk  29
     
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  30
     
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, 2021 and 2020 is unaudited. This financial information, in the opinion of management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the three and nine-month periods ended September 30, 2021 and 2020 are not necessarily indicative of results to be expected for any subsequent period.

 

 3 

 

PCT LTD

Condensed Consolidated Balance Sheets

 

  

September 30,

2021

  December 31,
2020
    (Unaudited)      
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $239,327   $115,196 
Accounts receivable, net   163,147    349,526 
Inventory   12,318    6,188 
Prepaid expenses   168,136    274,736 
Other current assets   18,850    2,110 
Total current assets   601,778    747,756 
           
PROPERTY AND EQUIPMENT          
Property and equipment, net   320,131    358,719 
           
OTHER ASSETS          
Intangible assets, net   3,171,658    3,400,024 
Operating lease right-of-use asset   92,772    118,385 
Deposits   -    9,726 
Total other assets   3,264,430    3,528,135 
           
TOTAL ASSETS  $4,186,339   $4,634,610 
           
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT          
CURRENT LIABILITIES          
Accounts payable  $60,854   $272,978 
Accrued expenses - related parties   82,038    139,280 
Accrued expenses   707,450    622,040 
Deferred revenue   1,075    1,075 
Advances payable   1,450,000    - 
Current portion of operating lease liability   40,127    34,965 
Current portion of notes payable - related parties, net   154,271    789,214 
Current portion of notes payable, net   231,504    384,380 
Current portion of convertible notes payable, net   1,876,338    1,554,503 
Derivative liability   1,561,420    7,102,801 
Total current liabilities   6,165,077    10,901,236 
           
LONG-TERM LIABILITIES          
 Convertible notes payable, net of current portion and discounts   -    53,500 
 Operating lease liability, net of current portion   52,645    83,420 
           
TOTAL LIABILITIES  $6,217,722    11,038,156 
           
MEZZANINE EQUITY          
Preferred series A stock, $0.001 par value; 1,000,000 authorized; 500,000 and 500,000 issued and outstanding at September 30, 2021 and December 31, 2020, respectively   60,398    60,398 
Preferred series B stock, $0.001 par value; 1,000,000 authorized; 1,000,000 and 1,000,000 issued and outstanding at September 30, 2021 and December 31, 2020, respectively   158,247    158,247 
Preferred series C stock, $0.001 par value; 5,500,000 authorized; nil and 40,000 issued and outstanding at September 30, 2021 and December 31, 2020, respectively   -    40,000 
TOTAL MEZZANINE EQUITY   218,645    258,645 
           
STOCKHOLDERS' DEFICIT          
CCommon stock, $0.001 par value; 1,000,000,000 authorized; 780,126,229 and 722,487,846 issued and outstanding at September 30, 2021 and December 31, 2020, respectively   780,126    722,488 
Additional paid-in-capital   24,349,886    23,202,933 
Accumulated deficit   (27,380,040)   (30,587,612)
TOTAL STOCKHOLDERS' DEFICIT   (2,250,028)   (6,662,191)
           
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT  $4,186,339   $4,634,610 

 

 

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

 

 4 

 

PCT LTD

Condensed Consolidated Statements of Operations

(Unaudited)

        
  

For the Three Months Ended 

September 30,

 

For the Nine Months Ended

September 30,

   2021  2020  2021  2020
REVENUES            
Product  $33,279   $488,021   $204,138   $1,233,058 
Licensing   75,347    119,000    225,122    203,000 
Equipment leases   258,104    177,067    802,132    501,384 
Total Revenues   366,730    784,088    1,231,392    1,937,442 
                     
OPERATING EXPENSES                    
General and administrative   1,031,072    614,667    2,583,139    1,755,495 
Research and development   14,783    15,547    29,738    20,547 
Cost of product, licensing and equipment leases   85,591    54,901    225,960    619,606 
Depreciation and amortization   98,364    90,999    295,092    255,368 
Total operating expenses   1,229,810    776,114    3,133,929    2,651,016 
                     
Income (loss) from operations   (863,080)   7,974    (1,902,537)   (713,574)
                     
OTHER INCOME (EXPENSE)                    
Gain (loss) on change in fair value of derivative liability   457,116    57,054    1,749,277    (15,253,543)
Gain (loss) on settlement of debt   361,357    (3,670,393)   3,689,055    9,993,528 
Interest expense   (101,580)   (200,593)   (378,223)   (1,094,934)
Miscellaneous income   -    -    50,000    - 
Total other income (expense)   716,893    (3,813,932)   5,110,109    (6,354,949)
                     
Income (loss) before Income taxes   (146,187   (3,805,958)   3,207,572    (7,068,523)
                     
Income taxes   -    -    -    - 
                     
NET INCOME (LOSS)  $(146,187  $(3,805,958)  $3,207,572   $(7,068,523)
Preferred series C stock deemed dividends   -    -    -    (270,000)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS'  $(146,187  $(3,805,958)  $3,207,572   $(7,338,523)
                     
Basic income (loss) per share  $(0.00  $(0.01)  $0.00   $(0.01)
Diluted income (loss) per share  $(0.00)  $(0.01)  $(0.00)  $(0.01)
                     
Basic weighted average shares outstanding   773,082,751    608,601,357    760,229,694    575,094,639 
Diluted weighted average shares outstanding   773,082,751    608,601,357    1,024,432,537    575,094,639 

 

 

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

 

 5 

 

PCT LTD

Condensed Consolidated Statements of Stockholders' Equity (Deficit)

For the Three and Nine Months Ended September 30, 2021 and 2020

(Unaudited)   

                
         Additional     Total Stockholders'
   Common Stock  Paid-in  Accumulated  Equity
   Shares  Amount  Capital  Deficit  (Deficit)
Balance - December 31, 2019   498,880,300   $498,881   $15,872,330   $(26,505,567)  $(10,134,356)
Common stock issued for services   15,525,000    15,525    103,538    -    119,063 
Common stock issued in settlement of debt   250,000    250    7,975    -    8,225 
Common stock issued in conversion of convertible notes payable   36,050,000    36,050    360,660    -    396,710 
Beneficial conversion feature on preferred series C stock   -    -    270,000    (270,000)   - 
Net loss for the three-months ended March 31, 2020   -    -    -    (10,281,648)   (10,281,648)
Balance - March 31, 2020   550,705,300   $550,706   $16,614,503   $(37,057,215)  $(19,892,006)
Common stock issued for cash   4,250,000    4,250    135,750    -    140,000 
Common stock issued in settlement of debt   15,000,000    15,000    826,500    -    841,500 
Common stock issued in cashless exercise of warrants   9,246,186    9,246    420,702    -    429,948 
Common stock issued in conversion of preferred series C stock   5,000,000    5,000    45,000    -    50,000 
Stock-based compensation   -    -    14,182    -    14,182 
Net income for the three-months ended June 30, 2020   -    -    -    7,019,083    7,019,083 
Balance - June 30, 2020   584,201,486   $584,202   $18,056,637   $(30,038,132)  $(11,397,293)
Common stock issued for services   10,000,000    10,000    384,038    -    394,038 
Common stock issued in conversion of convertible notes payable   45,736,360    45,736    497,222    -    542,958 
Common stock issued in conversion of preferred series C stock   35,000,000    35,000    359,000    -    394,000 
Premium related to conversion feature on note payable   -    -    4,160,685    -    4,160,685 
Net loss for the three-months ended September 30, 2020   -    -    -    (3,805,958)   (3,805,958)
Balance - September 30, 2020   674,937,846   $674,938   $23,457,582   $(33,844,090)  $(9,711,570)
                          
                          
         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 
Common stock issued in conversion of preferred series C stock   4,000,000    4,000    36,000    -    40,000 
Net loss for the three-months ended March 31, 2021   -    -    -    (718,028)   (718,028)
Balance - March 31, 2021   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)

 

 

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

 

 6 

 

PCT LTD

Condensed Consolidated Statements of Cash Flows

(Unaudited)

    
  

For the Nine Months Ended

September 30,

   2021  2020
Cash Flows from Operating Activities          
Net loss  $3,207,572   $(7,068,523)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   295,092    255,368 
Amortization of debt discounts   240,413    353,012 
Amortization of operating lease right-of-use asset   39,182    - 
Common stock issued for services   267,830    527,283 
Loss on change in fair value of derivative liability   (1,749,277)   15,253,543 
(Gain) loss on settlement of debt   (3,689,055)   (9,993,528)
Default penalties on convertible notes payable   15,172    13,762 
Bad debt expense   182,700    - 
Changes in operating assets and liabilities:          
Accounts receivable   3,679    (157,076)
Inventory   (6,130)   26,669 
Prepaid expenses   (8,543)   (241,764)
Other assets   (16,740)   (3,853)
Deposits   9,726      
Operating lease liability   (39,182)   - 
Accounts payable   (212,125)   (87,369)
Accrued expenses - related party   14,887    27,071 
Accrued expenses   165,479    807,049 
Net cash used in operating activities   (1,279,320)   (288,356)
           
Cash Flows from Investing Activities          
Purchases of property and equipment   (28,138)   (127,212)
Net cash provided by investing activities   (28,138)   (127,212)
           
Cash Flows from Financing Activities          
Proceeds from notes payable - related parties   -    3,500 
Proceeds from notes payable   410,377    428,030 
Proceeds from convertible notes payable   920,000    613,000 
Proceeds from advances payable   1,450,000    - 
Proceeds from sale of common stock   175,000    140,000 
Proceeds from preferred series C stock subscriptions   -    270,000 
Repayments of notes payable - related parties   (53,763)   (32,286)
Repayments of notes payable   (796,036)   (556,153)
Repayments of convertible notes payable   (673,989)   (356,888)
Net cash provided by financing activities   1,431,589    509,203 
           
Net change in cash   124,131    93,635 
Cash and cash equivalents at beginning of period   115,196    67,613 
Cash and cash equivalents at end of period  $239,327   $161,248 
           
Supplemental Cash Flow Information          
Cash paid for interest  $72,763   $77,687 
Cash paid for income taxes  $-   $- 
           
Non-Cash Investing and Financing Activities:          
Preferred series C stock deemed dividend  $-   $270,000 
Original debt discounts against notes payable  $174,435   $95,562 
Original debt discounts against convertible notes payable  $12,000   $201,388 
Common stock issued for services  $81,740   $- 
Common stock issued in conversion of convertible notes payable  $149,000   $939,668 
Common stock issued in settlement of notes payable to related parties   653,310    - 
Common stock issued in cashless exercise of warrants  $34,594   $429,948 
Common stock issued in conversion of preferred series C stock  $40,000   $444,000 
Property plant and equipment transferred to inventory  $-   $26,669 

 

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

 7 

 

PCT LTD

Notes to the Unaudited

Condensed Consolidated Financial Statements

September 30, 2021

 

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

 

The unaudited interim condensed consolidated financial statements of PCT LTD (the "Company") have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of our balance sheets, statements of operations, stockholders' equity (deficit), and cash flows for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative of the results to be expected for a full year.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2020 audited financial statements as reported in its Form 10-K/A filed on September 10, 2021.

 

COVID-19

 

In December 2019 COVID-19 emerged in Wuhan, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to almost all other countries, including the United States, and infections have been reported globally. Because COVID-19 infections have been reported throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future.

 

The ultimate impact of the COVID-19 pandemic on the Company's operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak. Any resulting financial impact cannot be reasonably estimated at this time but may have a material impact on our business, financial condition and results of operations. The significance of the impact of the COVID-19 outbreak on the Company's businesses and the duration for which it may have an impact cannot be determined at this time. At a minimum, the COVID-19 pandemic caused the Company to restrict travel of its personnel and to initiate distributor installations of certain of the Company's equipment, as possible. The Company adapted to the immediate need for its US EPA registered disinfectant at the end of March and beginning of April, 2020, by installing greater storage reserves and by assembling more of it higher-volume equipment to produce the hospital grade disinfectant known as Hydrolyte®. There were hard costs associated with these adaptations to the Little River, SC facility, but the Company continues to benefit from its fluid production capacities over the longer term. As the Federal, state and other restrictions associated with the pandemic have lessened, the Company is able to act more effectively in obtaining new contracts for its healthcare equipment, the Annihilyzer® and other equipment.

 

Nature of Operations

 

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

 

Paradigm is located in Little River, SC and was formed June 6, 2012 under the name of EUR-ECA, Ltd. On September 11, 2015, its Board of Directors authorized EUR-ECA Ltd to file with the Nevada Secretary of State to change its name to Paradigm Convergence Technologies Corp. Paradigm is a technology licensing company specializing in environmentally safe solutions for global sustainability. The company holds a patent, intellectual property and/or distribution rights to innovative products and technologies. Paradigm provides innovative products and technologies for eliminating biocidal contamination from water supplies, industrial fluids, hard surfaces, food processing equipment, and medical devices. Paradigm's overall strategy is to market new products and technologies through the use of equipment leasing, joint ventures, licensing, distributor agreements and partnerships.

 

Effective on February 29, 2018, the Company changed its name from Bingham Canyon Corporation to PCT LTD to more accurately identify the Company's direction and to develop the complimentary relationship and association with its wholly-owned operating company, Paradigm Convergence Technologies Corporation ("Paradigm" or "PCT Corp.").

 8 

 

 

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.

 

Fair Value Measurements

 

The Company follows ASC 820, "Fair Value Measurements and Disclosures", which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, is used to measure fair value:

 

  Level 1 - Valuations for assets and liabilities traded in active markets from readily available pricing sources such as quoted prices in active markets for identical assets or liabilities.

 

  Level 2 - Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

 

  Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

 

The carrying values of our financial instruments, including, cash and cash equivalents, accounts receivable, inventory, prepaid expenses, accounts payable and accrued expenses approximate their fair value due to the short maturities of these financial instruments.

 

Derivative liabilities are determined based on "Level 3" inputs, which are significant and unobservable and have the lowest priority. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

 

Our financial assets and liabilities carried at fair value measured on a recurring basis as of September 30, 2021, consisted of the following:

 

   Total fair value at
September 30,
2021
$
  Quoted prices in active markets
(Level 1)
$
  Significant other observable inputs
(Level 2)
$
  Significant unobservable inputs
(Level 3)
$
Description:                    
Derivative liability (1)   1,561,420    -    -    1,561,420 
Total   1,561,420    -    -    1,561,420 

 

Our financial assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2020, consisted of the following:

 

   Total fair value at
December 31,
2020
$
  Quoted prices in active markets
(Level 1)
$
  Significant other observable inputs
(Level 2)
$
  Significant unobservable inputs
(Level 3)
$
Description:                    
Derivative liability (1)   7,102,801    -    -    7,102,801 
Total   7,102,801    -    -    7,102,801 

 

(1) The Company has estimated the fair value of these liabilities using the Binomial Model.

 

 9 

 

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 nine months ended September 30, 2021, there were outstanding common share equivalents which amounted to 18,902,412 shares of common stock that were not included in the calculation as their effect is anti-dilutive. For fiscal periods with net losses, these common share equivalents were not included in the computation of diluted loss per share as their effect would have been anti-dilutive.

 

   Three months ended September 30, 2021
$
  Three months ended September 30, 2020
$
  Nine months
ended September 30, 2021
$
  Nine months
ended September 30, 2020
$
Numerator:                    
Net income (loss)   (146,187   (3,805,958)   3,207,572    (7,338,523)
(Gain) loss on change in fair value of derivative liability   -   -    (1,641,616)   - 
Gain on settlement of debt   -   -    (3,792,104)   - 
Interest expense   -    -    30,617    - 
Adjusted net income (loss)   (146,187)   (3,805,958)   (2,195,531)   (7,338,523)
                     
Denominator: Weighted average shares outstanding used in computing net income (loss) per share                    
Basic   773,082,751    608,601,357    760,229,694    575,094,639 
                     
Effect of dilutive warrants   -    -    203,745,854    - 
Effect of convertible note weighted shares   -    -    60,456,989    - 
Diluted   773,082,751    608,601,357    1,024,432,537    575,094,639 
                     
Net income (loss) per share applicable to common shareholders:                    
Basic   (0.00   (0.01)   (0.00   (0.01)
Diluted   (0.00)   (0.01)   (0.00)   (0.01)

 

 

Recent Accounting Pronouncements 

 

ASU 2019-12 amends the requirements related to the accounting for "hybrid" tax regimes. Such regimes are tax jurisdictions that impose the greater of two taxes - one based on income, or one based on items other than income. Although ASC 740 does not apply to taxes based on items other than income, ASC 740-10-15-4(a) originally specified that if there is a tax based on income that is greater than a franchise tax based on capital, only that excess is subject to the guidance in ASC 740. In feedback to the FASB, stakeholders indicated that the guidance on hybrid tax regimes increased the cost and complexity of applying ASC 740, particularly when the tax amount deemed to be a non-income tax was insignificant. Further, such guidance made it more difficult for entities to determine the appropriate tax rate to use when recording deferred taxes.

 

Accordingly, the FASB amended ASC 740-10-15-4(a) to state that an entity should include the amount of tax based on income in the tax provision and should record any incremental amount recorded as a tax not based on income. This amendment effectively reverses the order in which an entity determines the type of tax under current U.S. GAAP. In addition, the ASU amends the illustrative examples referred to and included in ASC 740-10-55-26 and ASC 740-10-55-139 through 55-144. The FASB notes that such amendments are consistent with the accounting for other incremental taxes, such as the base erosion anti-abuse tax. Moreover, in paragraph BC12 of the ASU, the FASB concluded that subjecting these taxes to the disclosure requirements in ASC 740 will result in greater transparency of franchise tax amounts.

 

 10 

 

In August 2020, the FASB issued ASU 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815- 40)" ("ASU 2020-06"). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. The ASU is part of the FASB's simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU's amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU 2020-06 will have on its financial statements. 

 

 

NOTE 2. GOING CONCERN

 

The accompanying consolidated condensed financial statements have been prepared assuming that the Company will continue as a going concern. The Company has an accumulated deficit of $27,380,040 and has negative cash flows from operations. As of September 30, 2021, the Company had a working capital deficit of $5,563,299. The Company has relied on raising debt and equity capital in order to fund its ongoing day-to-day operations and its corporate overhead. The Company will require additional working capital from either cash flow from operations, from debt or equity financing, or from a combination of these sources. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

NOTE 3. PROPERTY AND EQUIPMENT

 

Property and equipment at September 30, 2021 and December 31, 2020 consisted of the following: 

 

   September 30, 2021  December 31, 2020
Leasehold improvements  $33,770   $18,840 
Machinery and leased equipment   365,483    365,483 
Machinery and equipment not yet in service   32,580    32,580 
Office equipment and furniture   52,566    39,357 
Website   2,760    2,760 
           
Total property and equipment  $487,159   $459,020 
Less: Accumulated Depreciation   (167,028)   (100,301)
           
Property and equipment, net   320,131    358,719 

 

Depreciation expense was $66,726 and $27,085 for the nine-months ended September 30, 2021 and 2020, respectively.

 

 

NOTE 4. INTANGIBLE ASSETS

 

Intangible assets at September 30, 2021 and December 31, 2020 consisted of the following:

 

   September 30, 2021  December 31, 2020
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   (1,533,831)   (1,305,465)
Net Carrying Amount  $3,171,658   $3,400,024 

 

Amortization expense was $228,366 and $228,283 for the nine-months ended September 30, 2021 and 2020, respectively.

 

Estimated Future Amortization Expense:

 

    $  
For year ending December 31, 2021 - remaining     76,122  
For year ending December 31, 2022     304,488  
For year ending December 31, 2023     304,488  
For year ending December 31, 2024     304,488  
For year ending December 31, 2025     304,488  
Thereafter     1,877,584  
Total     3,171,658  

 

 

 11 

 

NOTE 5. LEASES

 

On August 26, 2020, the Company signed a new one-year lease for the Company headquarters and operations located in Little River, South Carolina. The lease was effective retroactively from July 1, 2020, ending on June 30, 2021, for $7,500 per month. The Company re-negotiated an annual lease on the Little River, SC facility for $7,500 per month, retroactive to July 1, 2020, which is renewable for an additional four years (with a 2% increase annually). The Company renewed the lease for another year, effective July 1, 2021, at $7,650 per month.

 

On October 19, 2020, the Company entered into a building lease with a three-year term and an effective date of November 1, 2020. The lease requires the Company to make payments of $4,500 per month. The Company recognized operating lease expense of $40,500 during the nine-month period ended September 30, 2021.

 

On March 15, 2021, the Company entered into a building lease with a two-year term and an effective date of April 1, 2021. The lease requires the Company to make payments of $2,750 per month. The Company recognized operating lease expense of $19,250 during the nine-month period ended September 30, 2021. The Company terminated the lease effective October 14, 2021 and recognized an impairment of $39,030 during the nine-month period ended September 30, 2021.

 

At September 30, 2021, the weighted average remaining operating lease term was 2.07 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, 2021 and 2020 were as follows:

 

  

2021

$

 

2020

$

Total operating lease cost   59,750    - 

The following table provides supplemental cashflow and other information related to leases for the nine-month period ended September 30, 2021 and 2020:

 

  

2021

$

 

2020

$

Lease payments   127,700    40,440 

Supplemental balance sheet information related to leases as of September 30, 2021 and 2020 are as below:

 

  

2021

$

 

2020

$

Cost   176,213    - 
Accumulated amortization   (44,411)   - 
Impairment   (39,030)     
Net carrying value   92,772    - 

 

Future minimum lease payments related to lease obligations are as follows as of September 30, 2021:

 

   $
2021   13,500 
2022   54,000 
2023   45,000 
Total minimum lease payments   112,500 
      
Less: amount of lease payments representing effects of discounting   (19,728)
      
Present value of future minimum lease payments   92,772 
      
Less: current obligations under leases   (40,127)
      
Lease liabilities, net of current portion   52,645 

 

 12 

 

 

NOTE 6. NOTES PAYABLE 

 

The following tables summarize notes payable as of September 30, 2021 and December 31, 2020:

 

Type  Original Amount 

Origination

Date

 

Maturity

Date

 

Effective Annual

Interest

Rate

 

Balance at

September 30, 2021

 

Balance at

December 31, 2020

Note Payable (a)**  $25,000   05/08/2017  06/30/2018   0%  $22,500   $27,500 
Note Payable (b)  $8,700   11/15/2018  06/30/2019   10%  $-     $8,700 
Note Payable **  $118,644   05/05/2020  05/05/2021   8%  $110,644   $110,644 
Note Payable (c)  $199,500   10/01/2020  09/28/2021   66%  $-     $149,573 
Note Payable (d)  $126,000   11/03/2020  04/23/2021   166%  $-     $85,050 
Note Payable (e)  $113,980   11/04/2020  03/15/2021   210%  $-     $65,988 
Note Payable (f)  $177,800   01/02/2021  07/12/2021   116%  $-     $-   
Note Payable (g)  $111,920   03/09/2021  05/21/2021   220%  $-     $-   
Note Payable (h)  $29,686   03/09/2021  Demand   34%  $-     $-   
Note Payable (i)  $222,400   06/01/2021  Demand   181%  $76,985   $-   
Note Payable (j)  $87,000   06/29/2021  Demand   211%  $31,320   $-   
Sub-total                  $241,449   $447,455 
Debt discount                  $(9,945)  $(63,075)
Balance, net                  $231,504   $384,380 
Less current portion                  $(231,504)  $(384,380)
Total long-term                  $    $  
                           
** Currently in default

 

  a) On July 19, 2021, the Company repaid the principal amount of $5,000 leaving a note balance of $22,500.

 

  b) On July 19, 2021, the Company repaid the principal amount of $8,700 leaving a note balance of $0.

 

  c) On October 1, 2020, the Company sold future receivables with a non-related party for $199,500, of which $53,250 was loan fees and original issue discount resulting in cash proceeds to the Company of $146,250. The advance is to be repaid through weekly payments of $3,841. In connection with the advance, the Company granted the lender a security interest and all past, present and future assets of the Company. During the nine months ended September 30, 2021, $30,642 of the discount was amortized to expense, and the note was repaid leaving a note balance of $0.

 

  d) On November 3, 2020, the Company sold future receivables with a non-related party for $126,000, of which $39,650 was loan fees and original issue discount resulting in cash proceeds to the Company of $86,350. The advance is to be repaid through $1,050 daily payments. In connection with the advance, the Company granted the lender a security interest and all past, present and future assets of the Company. During the nine months ended September 30, 2021, $18,944 of the discount was amortized to expense, and the remaining $85,050 was repaid leaving a note balance of $0.

 

  e) On November 4, 2020, the Company sold future receivables with a non-related party for $113,980, of which $34,440 was loan fees and original issue discount resulting in cash proceeds to the Company of $79,540. The advance is to be repaid through $5,999 weekly payments. In connection with the advance, the Company granted the lender a security interest and all past, present and future assets of the Company. During the nine months ended September 30, 2021, $13,489 of the discount was amortized to expense, and the remaining $65,988 was repaid leaving a note balance of $0.

 

  f) On January 2, 2021, the Company sold future receivables with a non-related party for $177,800, of which $39,795 was loan fees and original issue discount resulting, and $35,994 was paid to settle the loan described in Note (d) in cash proceeds to the Company of $102,011. The advance is to be repaid through $7,730 weekly payments. In connection with the advance, the Company granted the lender a security interest and all past, present and future assets of the Company. During the nine months ended September 30, 2021, $39,795 of the discount was amortized to expense, and the remaining $46,383 was settled through a payment of $43,600 resulting in a gain on settlement of debt of $2,783 and a note balance of $0.

 

 13 

 

  g) On March 9, 2021, the Company sold future receivables with a non-related party for $111,920, of which $35,120 was loan fees and original issue discount resulting in cash proceeds to the Company of $76,800. The advance is to be repaid through $1,399 weekly payments. In connection with the advance, the Company granted the lender a security interest and all past, present and future assets of the Company. During the nine months ended September 30, 2021, $35,120 of the discount was amortized to expense, and $111,920 was repaid leaving a note balance of $0.

 

h) On March 9, 2021, the Company sold future receivables with a non-related party for $29,686, of which $10,120 was loan fees and original issue discount resulting in cash proceeds to the Company of $19,566. During the six months ended September 30, 2021, $10,120 of the discount was amortized to expense and $29,686 was repaid, leaving a note balance of $0.

 

i) On June 1, 2021, the Company sold future receivables with a non-related party for $222,400, of which $8,000 was attributable to loan fees and $62,400 to original issue discount resulting in cash proceeds to the Company of $152,000. The advance is to be repaid through weekly payments of $8,554. In connection with the advance, the Company granted the lender a security interest and all past, present, and future assets of the Company. During the nine months ended September 30, 2021, $64,414 of the discount was amortized to expense, and $145,415 was repaid leaving a net note balance of $70,999 (discount balance of $5,986).

 

j) On June 29, 2021, the Company sold future receivables with a non-related party for $87,000, of which $27,000 was loan fees and original issue discount resulting in cash proceeds to the Company of $60,000. During the nine months ended September 30, 2021, $23,041 of the discount was amortized to expense, and $55,680 was repaid leaving a net note balance of $27,361 (discount balance of $3,959).

 

The following table summarizes notes payable, related parties as of September 30, 2021 and December 31, 2020:

 

Type  Original Amount 

Origination

Date

 

Maturity

Date

 

Annual

Interest

Rate

 

Balance at

September 30,

2021

 

Balance at

December 31, 2020

Note Payable, RP (k)  $30,000   04/10/2018  01/15/2019   3%  $-     $30,000 
Note Payable, RP (l)  $380,000   06/20/2018  01/02/2020   8%  $-     $380,000 
Note Payable, RP (m)  $350,000   06/20/2018  01/02/2020   5%  $-     $285,214 
Note Payable, RP (n)**  $17,000   06/20/2018  01/02/2020   5%  $15,000   $17,000 
Note Payable, RP **  $50,000   07/27/2018  11/30/2018   8%  $50,000   $50,000 
Note Payable, RP (o)  $5,000   10/09/2018  Demand   0%  $-     $5,000 
Note Payable, RP (p)  $5,000   10/19/2018  Demand   0%  $4,237   $5,000 
Note Payable, RP **  $15,000   08/16/2019  02/16/2020   8%  $15,000   $15,000 
Note Payable, RP (q)  $2,000   02/11/2020  Demand   0%  $-     $2,000 
Note Payable, RP (m)  $84,034   02/16/2021  Demand   5%  $70,034   $-   
Subtotal                  $154,271   $789,214 
Debt discount                  $    $  
Balance, net                  $154,271   $789,214 
Less current portion                  $(154,271)  $(789,214)
Total long-term                  $    $  
                           
** Currently in default

 

  k) During the nine-months ended September 30, 2021, the Company made several payments to repay the principal amount of $30,000 leaving a note balance of $0.

 

  l) On February 16, 2021, the Company issued 2,663,299 shares of common stock to settle a June 20, 2018, note payable of $380,000 and accrued interest of $26,153 owed to the current COO and Director of the Company.  The Company recognized the fair value of the shares issued of $74,572 and due to the related party nature of the transaction no gain was recognized for the difference between the fair value of the shares and the extinguished debt. The resulting difference was recorded as Additional Paid-in Capital in the amount of $328,919.

 

 14 

 

  m) On February 16, 2021, the Company issued 1,803,279 shares of common stock to settle $247,270 from a $275,000 note payable dated June 20, 2018, which has a balance of $331,304, including interest, to the current Chairman and CEO of the Company. The Company also agreed to issue a new note for the remaining balance owed to the Chairman and CEO of $84,034, dated February 16, 2021. The note will bear interest at 5% per annum and is due on June 30, 2021. The Company recognized the fair value of the shares issued of $50,492 and due to the related party nature of the transaction no gain was recognized for the difference between the fair value of the shares and the extinguished debt. The resulting difference was recorded as Additional Paid-in Capital in the amount of $194,861. On July 15, 2021, and September 23, 2021, the Company repaid the principal amount of $14,000 leaving a note balance of $70,034.

 

  n) On July 15, 2021, the Company repaid the principal amount of $2,000 leaving a note balance of $15,000.

 

  o) On September 23, 2021, the Company repaid the principal amount of $5,000 leaving a note balance of $0.

 

  p) On September 23, 2021, the Company repaid the principal amount of $763 leaving a note balance of $4,237.

 

  q) On September 23, 2021, the Company repaid the principal amount of $2,000 leaving a note balance of $0.

 

 

The following table summarizes convertible notes payable as of September 30, 2021 and December 31, 2020:

 

Type  Original Amount 

Origination

Date

 

Maturity

Date

 

Annual

Interest

Rate

 

Balance at

September 30,

2021

 

Balance at

December 31, 2020

Convertible Note Payable* **  $65,000   12/06/2018  12/06/2019   12%  $46   $46 
Convertible Note Payable (r)  $75,000   03/18/2019  12/13/2019   24%  $-     $177,795 
Convertible Note Payable (s)  $30,000   03/06/2020  03/05/2021   12%  $-     $21,662 
Convertible Note Payable (t)* ** $150,000   04/10/2020  04/09/2021   12%  $65,000   $165,000 
Convertible Note Payable (u) **  $300,000   08/27/2020  07/31/2021   12%  $270,000   $300,000 
Convertible Note Payable (v)  $53,500   09/22/2020  03/21/2022   12%  $-     $53,500 
Convertible Note Payable (w)  $87,500   09/24/2020  Demand   8%  $15,000   $40,000 
Convertible Note Payable (x)  $200,000   10/07/2020  10/06/2021   5%  $200,000   $200,000 
Convertible Note Payable (y)  $200,000   10/16/2020  10/15/2021   5%  $200,000   $200,000 
Convertible Note Payable (z)  $300,000   11/11/2020  11/10/2021   5%  $300,000   $300,000 
Convertible Note Payable (aa)  $150,000   12/29/2020  12/28/2021   5%  $150,000   $150,000 
Convertible Note Payable (bb)  $150,000   01/27/2021  01/27/2022   5%  $150,000   $-   
Convertible Note Payable (cc)  $128,000   02/22/2021  02/22/2022   12%  $-     $-   
Convertible Note Payable (dd)  $200,000   03/18/2021  03/18/2022   5%  $200,000   $-   
Convertible Note Payable (ee)  $83,000   03/26/2021  03/26/2022   12%  $-     $-   
Convertible Note Payable (ff)  $43,000   04/05/2021  04/05/2022   12%  $-     $-   
Convertible Note Payable (gg)  $200,000   04/14/2021  04/14/2022   5%  $200,000   $-   
Convertible Note Payable (hh)  $128,000   05/03/2021  05/03/2022   12%  $128,000   $-   
Subtotal                  $1,876,046   $1,608,003 
Debt discount                  $(1,708)  $  
Balance, net                  $1,876,338   $1,608,003 
Less current portion                  $(1,876,338)  $(1,554,503)
Total long-term                        53,500  
* Embedded conversion feature accounted for as a derivative liability at period end
** Currently in default

 

 15 

 

  r) During the nine months ended September 30, 2021, the Company repaid $70,000 of the convertible note payable and settled the remaining outstanding debt of $107,795 and accrued interest of $76,569 through a cash payment of $40,000 and the issuance of 8,000,000 shares of common stock at a fair value of $124,000 resulting in a gain on settlement of debt of $20,364.

 

  s) On May 7, 2021, the Company deemed in the best interest to settle the convertible debt with a non-related party and allow for the cashless exercise to purchase 1,921,875 shares of the Company's common stock at the rate of $0.032 per share. In addition, the non-related party shall release 60,072,853 shares to the agreed upon payment terms of $36,994 cash. During the nine months ended September 30, 2021, the Company incurred additional default penalties of $15,174 on the convertible note and settled the outstanding debt of $36,836 and accrued interest of $3,657 through a cash payment of $36,994 and the cashless exercise to purchase 1,921,875 shares of the Company's common stock with a fair value of $34,594 resulting in a loss on settlement of debt of $31,095.

 

  t)

On April 10, 2020, the Company entered into a convertible promissory note with a non-related party for $150,000, of which $18,000 was an original issue discount resulting in cash proceeds to the Company of $132,000. The note is due on April 9, 2021 and bears interest on the unpaid principal balance at a rate of 12% per annum. The Note may be converted by the Lender at any time into shares of Company's common stock at a conversion price equal to 65% of the lowest trading price during the 25-trading day period prior to the conversion date. Further, if at any time the stock price is less than $0.30, an additional 20% discount is applied and if at any time the conversion price is less than $0.01 an additional 10% is applied. Further, an additional 15% is applied if the Company fails to comply with its reporting requirements. During the period, all these additional discounts were triggered.

 

The embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15. The initial fair value of the conversion feature was $507,847 and resulted in a discount to the note payable of $132,000 and an initial derivative expense of $375,847. During the year ended December 31, 2020, the Company incurred $15,000 of penalties which increased the principal amount of the note to $165,000. During the nine months ended September 30, 2021, the Company repaid $100,000 of the note, leaving a note balance of $65,000.

 

  u) During the nine months ended September 30, 2021, the Company repaid $30,000 of the note, leaving a note balance of $270,000.

 

  v) On September 22, 2020, the Company entered into a convertible promissory note with a non-related party for $53,500, of which $3,500 was an original issue discount resulting in cash proceeds to the Company of $50,000. The note is due on March 21, 2022 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note's term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. During the nine months ended September 30, 2021 the Company repaid the $53,500 note as well as $25,882 of interest and prepayment penalties. As the note was repaid prior to becoming convertible no derivative liability was recognized.

 

  w) During the nine months ended September 30, 2021 the Company issued 25,000,000 common shares upon the conversion of $25,000 of the convertible note payable, leaving a note balance of $15,000. On October 11, 2021, the Company issued 15,000,000 common shares upon the conversion of the remaining $15,000 of the convertible note payable. Refer to Note 12(a).

 

  x) On October 7, 2020, the Company entered into a convertible promissory note with a non-related party for $200,000. The note is due on October 6, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price of $0.20. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.

 

  y) On October 16, 2020, the Company entered into a convertible promissory note with a non-related party for $200,000. The note is due on October 15, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price of $0.20. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.

 

 16 

 

  z) On November 11, 2020, the Company entered into a convertible promissory note with a non-related party for $300,000. The note is due on November 10, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price of $0.15. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.

 

  aa) On December 29, 2020, the Company entered into a convertible promissory note with a non-related party for $150,000. The note is due on December 28, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price of $0.10. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.

 

  bb) On January 27, 2021, the Company entered into a convertible promissory note with a non-related party for $150,000. The note is due on January 26, 2022 and bears interest on the unpaid principal balance at a rate of 5% per annum. The note may be converted by the lender at any time before 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to $0.10. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.

 

  cc) On February 22, 2021, the Company entered into a convertible promissory note with a non-related party for $128,000, of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $125,000. The note is due on February 22, 2022 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note's term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. During the nine months ended September 30, 2021 the Company repaid the $128,000 note as well as $51,000 of interest and prepayment penalties. As the note was repaid prior to becoming convertible no derivative liability was recognized.

 

  dd) On March 18, 2021, the Company entered into a convertible promissory note with a non-related party for $200,000. The note is due on March 17, 2022 and bears interest on the unpaid principal balance at a rate of 5% per annum. The note may be converted by the lender at any time before 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to $0.10. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.

 

  ee) On March 26, 2021, the Company entered into a convertible promissory note with a non-related party for $83,000, of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $80,000. The note is due on March 24, 2022 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note's term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. During the nine months ended September 30, 2021 the Company repaid the $83,000 note as well as $39,694 of interest and prepayment penalties. As the note was repaid prior to becoming convertible no derivative liability was recognized.

 

  ff) On April 5, 2021, the Company entered into a convertible promissory note with a non-related party for $43,000, of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $40,000. The note is due on April 5, 2022 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note's term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. During the nine months ended September 30, 2021 the Company repaid the $43,000 note as well as $12,270 of interest and prepayment penalties. As the note was repaid prior to becoming convertible no derivative liability was recognized.

 

 17 

 

  gg) On April 14, 2021, the Company entered into a convertible promissory note with a non-related party for $200,000. The note is due on April 14, 2022 and bears interest on the unpaid principal balance at a rate of 5% per annum. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price of $0.10. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. As the note is not convertible until 180 days following issuance, no derivative liability was recognized as of September 30, 2021.

 

  hh) On May 3, 2021, the Company entered into a convertible promissory note with a non-related party for $128,000, of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $125,000. The note is due on May 3, 2022 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note's term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company's common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. As the stock price at the issuance date was lesser than the effective conversion price, it was determined that no beneficial conversion feature exists. As the note is not convertible until 180 days following issuance, no derivative liability was recognized as of September 30, 2021. On November 5, 2021, the Company repaid the $128,000 note as well as $61,952 of interest and prepayment penalties.

 

 

NOTE 7. DERIVATIVE LIABILITIES

 

The embedded conversion option of (1) the convertible notes payable described in Note 5; (2) warrants; contain conversion features that qualify for embedded derivative classification. The fair value of the liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.

 

Upon the issuance of the convertible notes payable described in Note 6, the Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible notes, warrants and options. The Company elected to reclassify contracts from equity with the earliest inception date first. As a result, none of the Company's previously outstanding convertible instruments qualified for derivative reclassification, however, any convertible securities issued after the election, including the warrants described in Note 10, qualified for derivative classification. The Company reassesses the classification of the instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

 

The table below sets forth a summary of changes in the fair value of the Company's Level 3 financial liabilities.

 

   September 30,
2021
  December 31,
2020
Balance at the beginning of period  $7,102,801   $10,517,873 
Original discount limited to proceeds of notes   -    166,000 
Settlement of derivative instruments   (3,792,104)   (16,824,669)
Change in fair value of embedded conversion option   (1,749,277)   13,243,597 
Balance at the end of the period  $1,561,420   $7,102,801 

 

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

 

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

 

    Expected Volatility     Risk-free Interest Rate     Expected Dividend Yield     Expected Life (in years)  
At September 30, 2021     113 - 249 %     0.09-0.76 %     0 %     1.00-3.91  

 

The Company uses Level 3 inputs for its valuation methodology for the preferred series A stock liability as their fair values were determined by using the Binomial Model based on various assumptions. 

 

 

 18 

 

NOTE 8. STOCKHOLDERS' DEFICIT

 

Preferred Stock

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

 

Series A Preferred Shares

Effective March 23, 2018, the Company amended the articles of incorporation and authorized 10,000,000 shares of preferred stock with a par value of $0.001 per share, of which 1,000,000 shares were designated as Series A Convertible Preferred Stock as of December 31, 2019. The preferred stock may be issued from time to time by the Board of Directors as shares of one or more classes or series.

 

On December 1, 2018, the Company's Board of Directors authorized an offering for 1,000,000 Preferred Series "A" stock at $0.10 per share and with 100% regular or cashless exercise at $0.10 per share of common stock warrant coverage. At December 31, 2018, the Company received $60,000 of subscriptions for the issuance of 600,000 shares of Preferred Series "A" stock to three accredited investors who are related parties. The Company was unable to issue the subscriber the preferred shares until the Company filed a Certificate of Designation and the Preferred Series "A" stock has been duly validly authorized. Resulting in a preferred stock liability related to the Company's commitment to issue shares of Series A stock upon the designation.

 

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

Issue Price

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

Redemption

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

Dividends

None.

Preference of Liquidation

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

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

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

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

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

 

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

 

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

 

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

 

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

Voting

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

Conversion

Each Share shall be convertible into shares of the Company's Common Stock at a price per share of $0.10 (1 Share converts into 1 share of Common Stock), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth day prior to the Redemption Date, if any, as may have been fixed in any Redemption Notice with respect to the Shares, at the office of this Company or any transfer agent for such stock. Each Share shall automatically be converted into shares of Common Stock on the first day of the thirty-sixth (36th) month following the original issue date of the shares at the Conversion Price per share.

 

The Company was unable to issue the subscribers the preferred shares until the Company filed a Certificate of Designation and the Preferred Series "A" stock had been duly validly authorized. As the Company had not filed the Certificate of Designation and as the Company could not issue the preferred shares to settle the proceeds received, it was determined the subscriptions were settleable in cash. As a result, the Company classified the subscriptions received as a liability in accordance with ASC 480 Distinguishing Liabilities from Equity. The filing of the Certificate of Designation and issuance of the preferred shares resulted in the reclassification of the Series A Preferred Shares from a liability to temporary equity or "mezzanine" because the preferred shares include the liquidation preferences described above. The fair value of the preferred series A stock on April 12, 2019 was $60,398 and was valued by using the Binomial Model based on various assumptions and was reclassified from a liability to mezzanine equity.

As of September 30, 2021, and December 31, 2020, there were 500,000 shares of Series A Convertible Preferred Stock issued and outstanding, respectively.

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.

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Redemption Rights

The Series B Preferred Stock shall be redeemed by the Corporation upon the successful receipt by the Corporation of at least $1,000,000 in equity capital following the issuance of the Series B Preferred Stock. To date the Company has received $500,500 of equity capital, and upon the receipt of an additional $499,500 in equity capital the redemption right will be triggered.

Conversion Rights

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

Protective Provisions

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

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

 

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

 

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

 

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

 

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

Dividends

None.

Preference of Liquidation

None

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

 

As of September 30, 2021, and December 31, 2020, 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 majority consent of stockholders in lieu of an annual meeting (including the consent of the Series A Convertible Preferred Stockholders), the Registrant filed a Certificate of Designation with the Nevada Secretary of State designating 5,500,000 shares of its authorized preferred stock as Series C Convertible Preferred Stock. The Registrant is awaiting the file stamped Certificate of Designation from the Nevada Secretary of State. The rights and preferences of such preferred stock are as follows:

 

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

Conversion Rights

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

Voting Rights

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

Protective Provisions

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

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

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

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

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

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

Other Rights

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

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

At December 31, 2020, there were 40,000 Series C Preferred Shares issued and outstanding, valued at $1 per share or $40,000.

On February 15, 2021, 40,000 shares of preferred series C stock was converted into common stock (1 share converts into 100 shares of common stock), resulting in the issuance of 4,000,000 shares of common stock. At September 30, 2021, no Series C Preferred Shares were outstanding.

 

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Common Stock

 

Effective March 23, 2018, the Company amended the Articles of Incorporation and increased the authorized shares of common stock with a par value of $0.001 per share from 100,000,000 to 300,000,000 shares. Effective October 4, 2019, the Company amended the Articles of Incorporation and increased the authorized shares of common stock with a par value of $0.001 per share from 300,000,000 to 1,000,000,000 shares. The number of shares outstanding of the registrant's common stock as of September 30, 2021 and December 31, 2020 was 780,126,229 and 722,487,846, respectively.

 

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

 

On February 15, 2021, 40,000 shares of preferred series C stock was converted into common stock (1 share converts into 100 shares of common stock), resulting in the issuance of 4,000,000 shares of common stock.

 

On February 16, 2021, the Company issued 1,803,279 shares of common stock to settle $247,270 from a $275,000 note payable dated June 20, 2018, which has a balance of $331,304, including interest, to the current Chairman and CEO of the Company.

 

On February 16, 2021, the Company issued 2,663,299 shares of common stock to settle a June 20, 2018 note payable of $380,000 and accrued interest of $26,153 owed to the current COO and Director of the Company.

 

On March 1, 2021, the Company entered into a consulting agreement. Pursuant to the agreement, the consultant will provide advisory services through May 31, 2021 in consideration of 2,500,000 shares of common stock. The fair value of the common stock was $62,750 which has been recognized in consulting expense during the six months ended June 30, 2021.

 

On May 7, 2021, the Company issued 1,921,875 common shares pursuant to a cashless exercise of warrants as described in Note 6(l).

 

On May 27, 2021, the Company issued 1,000,000 common shares pursuant to an employment agreement dated May 5, 2021 with an officer of the Company. The fair value of the common stock was $18,990.

 

On June 2, 2021, the Company issued 3,750,000 common shares for cash proceeds of $75,000.

 

On June 30, 2021, the Company issued 5,000,000 common shares for cash proceeds of $100,000.

 

On September 1, 2021, the Company issued 8,000,000 common shares and paid $21,000 to settle the remaining outstanding principal on a convertible note payable of $88,795 and accrued interest of $26,153 resulting in a gain on settlement of debt of $20,364.

 

On September 10, 2021, the Company issued 2,000,000 common shares pursuant to a general release agreement dated July 23, 2021 with a former employee of the Company. The fair value of the common stock was $28,400.

 

 

NOTE 9. STOCK OPTIONS

 

Below is a table summarizing the options issued and outstanding as of September 30, 2021:

 

   Number of
options
  Weighted average exercise price
$
 Balance, December 31, 2020    200,000    2.00 
 Granted           
 Expired           
 Settled           
 Balance, September 30, 2021    200,000    2.00 

 

As at September 30, 2021, the following share stock options were outstanding:

 

Date   Number   Number   Exercise   Weighted Average Remaining Contractual   Expiration   Proceeds to Company if
Issued   Outstanding   Exercisable   Price $   Life (Years)   Date   Exercised
  01/26/2017       200,000       200,000       2.00       0.32       01/26/2022       400,000  
          200,000       200,000                             $ 400,000  

 

The weighted average exercise prices are $2.00 for the options outstanding and exercisable, respectively. The intrinsic value of stock options outstanding at September 30, 2021 was $nil.

 

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NOTE 10. WARRANTS

 

The Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible instruments. The initial fair value of the warrants issued during the period was calculated using the Binomial Model as described in Note 6.

 

The following table summarizes the continuity of share purchase warrants:

 

   Number of
warrants
  Weighted average exercise price
$
 Balance, December 31, 2020    260,500,000    0.00283 
 Settled           
 Granted           
 Exercised    (142,857,143)   0.00035 
 Balance, September 30, 2021    117,642,857    0.00584 

 

As at September 30, 2021, the following share purchase warrants were outstanding:

 

Date  Number  Number  Exercise  Weighted Average Remaining Contractual  Expiration  Proceeds to Company if
Issued  Outstanding  Exercisable  Price $  Life (Years)  Date  Exercised
 12/3/2018    500,000    500,000    0.10    2.18    12/3/2023    50,000 
 3/31/2019    107,142,857   107,142,857*   0.00035*   2.45    03/13/2024    37,500 
 8/26/2020    10,000,000   10,000,000*   0.06*   3.91    8/26/2025    600,000 
      117,642,857    117,642,857                  $687,500 

  

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

 

The intrinsic value of warrants outstanding at September 30, 2021 was $1,237,500.

 

 

NOTE 11. RELATED PARTY TRANSACTIONS

 

The Company has agreements with related parties for consulting services, accrued rent, accrued interest, notes payable and stock options. See Notes to Financial Statements numbers 6, 8, 9 and 11 for more details.

 

 

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

 

Employment Agreements -

 

On May 5, 2021, the Company entered into an employment agreement with a recently appointed officer, for an initial term of three years. The terms of the contract call for an annual salary of $70,000 and the issuance of 1,000,000 shares of common stock. The fair value of the common stock was $18,990. On July 16, 2021, the officer resigned.

 

Other Obligations and Commitments -

 

The Company has a commitment to acquire inventory for a total cost of $61,150, of which $30,575 was paid prior to September 30, 2021.

 

Other than the above, there are no new obligation or commitments during the period ending September 30, 2021.

 

 

NOTE 13. SUBSEQUENT EVENTS

 

a)On October 11, 2011, the Company issued 15,000,000 common shares upon the conversion of the remaining $15,000 of the convertible note payable, leaving a note balance of $0. Refer to Note 6(w).

 

b)Effective October 14, 2021, the Company terminated a building lease with an original expiry date of March 31, 2023. Refer to Note 5.

 

3)On November 5, 2021, the Company repaid a $128,000 convertible note as well as $61,952 of interest and prepayment penalties. Refer to Note 6(hh).

 

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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 comp