NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2017 AND 2016
NOTE
1
–
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of Operations
– PCT Ltd (formerly Bingham Canyon Corporation (the “Company” or “Bingham”),
a Delaware corporation, was formed on August 27, 1986. Bingham changed its domicile to Nevada on August 26, 1999.
On
August 31, 2016, the Company entered into a Securities Exchange Agreement with Paradigm Convergence Technologies Corporation (“Paradigm”)
to affect the acquisition of Paradigm as a wholly-owned subsidiary. Under the terms of the agreement, Bingham issued 16,790,625
restricted common shares of Bingham stock to the shareholders of Paradigm in exchange for all 22,387,500 outstanding common shares
of Paradigm stock. In addition, Bingham issued options exercisable into 2,040,000 shares of the Bingham’s common stock (with
exercise prices ranging between $0.133 and $0.333) in exchange for 2,720,000 outstanding Paradigm stock options (with exercise
prices ranging between $0.10 and $0.25). These 2,040,000 options have been adjusted at the same exchange rate of 75% that the
outstanding common shares were exchanged. As a result of this share exchange agreement, Paradigm, the operating company, is considered
the accounting acquirer.
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.
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” and/or “PCT Corp.”).
Principles
of Consolidations
– The accompanying consolidated financial statements include the accounts of PCT LTD (“Company”
or “Parent”) and its wholly owned subsidiary, Paradigm Convergence Technologies Corporation (“Paradigm, “PCT
Corp.” or “Subsidiary”). All intercompany accounts have been eliminated upon consolidation.
Use
of Estimates –
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of
the consolidated financial statements and the amounts of revenue and expenses during the reporting periods. Actual results
could differ from those estimates.
Cash
and Cash Equivalents –
Cash and cash equivalents are considered to be cash and highly liquid securities with original
maturities of three months or less. The cash of $7,838 and $21,078 at December 31, 2017 and 2016, respectively, represents cash
on deposit in various bank accounts. There were no cash equivalents at December 31, 2017 and December 31, 2016 respectively.
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.
There were no financial assets or liabilities that are measured at fair value on a recurring basis as of December 31, 2017 and
2016, respectively.
Accounts
Receivable –
Trade accounts receivable are recorded at the time product is shipped or services are provided including
any shipping and handling fees. The Company provided allowances for uncollectible accounts receivable equal to the estimated collection
losses that will be incurred in collection of all receivables. Accounts receivable is periodically evaluated for collectability
bases on past credit history with customers and their current financial condition. The Company’s management determines which
accounts are past due and if deemed uncollectible, the Company charges off the receivable in the period the determination is made.
Based on management’s evaluation, the Company provided an allowance for doubtful accounts of $12,000 and $12,000 for the
years ending December 31, 2017 and 2016, respectively.
Inventories
–
Inventories are stated at the lower of cost or market. Cost is determined by using the first in, first out (FIFO)
method. We record the value of our inventory for estimated obsolescence or unmarketable inventory equal to the difference between
the cost of inventory and the estimated market value based upon assumptions about future demand, future pricing and market conditions.
As of December 31, 2017, and 2016, the inventory consisted of parts for equipment sold as replacement parts to existing customers
or sold to new customers. The Company has recorded a reserve allowance of $0 and $35,914 for the years ended December 31, 2017
and 2016, respectively. The Company wrote off the inventory previously reserved against during 2017. The Company has determined
that some of the supplies inventory is necessary to be placed into service, after assembly into equipment to be used in product
manufacturing and classified as Machines and Equipment. The balance at December 31, 2017 and 2016 of such supplies and equipment
not yet placed in service amounted to $269,382 and $0, respectively. During the 4
th
quarter of 2017, management determined
that $193,344 of supplies inventory as of the 3
rd
quarter of 2017 be reclassified to property and equipment.
Property
and Equipment–
Property and equipment are stated at purchased cost and depreciated utilizing a straight-line method
over estimated useful lives ranging from 3 to 7 years after the asset has been placed in service. Upon selling equipment
that had been under a lease agreement, the company discontinues the depreciation on that piece of equipment, as it transfers ownership
to another entity. Additions and major improvements that extend the useful lives of property and equipment are capitalized. Maintenance
and repairs are charged to operations as incurred. Upon trade-in, sale or retirement of property and equipment, the related
cost and accumulated depreciation are removed from the accounts and any related gains or losses are recorded in the results of
operations. Accumulated depreciation was $46,725 and $30,479 as of December 31, 2017 and 2016, respectively.
Impairment
of Long-lived Assets
– The carrying values of the Company’s long-lived assets are reviewed for impairment
annually and whenever events or changes in circumstances indicate that they may not be recoverable. When projections indicate
that the carrying value of the long-lived asset is not recoverable, the carrying value is reduced by the estimated excess of the
carrying value over the projected discounted cash flows. Under similar analysis no impairment was recorded during the years ended
December 31, 2017 and 2016. Impairment tests are conducted on an annual basis and, should they indicate a carrying value in excess
of fair value, additional impairment charges may be required.
Intangible
Assets
– Costs to obtain or develop patents are capitalized and amortized over the remaining life of the patents,
and technology rights are amortized over their estimated useful lives. The Company currently has the right to several patents
and proprietary technology. Patents and technology are amortized from the date the Company acquires or is awarded the patent
or technology right, over their estimated useful lives, which range from 1 to 15 years. An impairment charge is recognized
if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined
by projected discounted net future cash flows. The recorded impairment expense was nil for the years ended December 31, 2017 and
2016, respectively. Accumulated amortization was $380,392 and $107,582 as of December 31, 2017 and 2016, respectively.
Research
and Development
– Research and development costs are recognized as an expense during the period incurred, which
is until the conceptual formulation, design, and testing of a process is completed and the process has been determined to be commercially
viable.
Revenue
Recognition –
Revenue is recognized when persuasive evidence of an arrangement exists, services have been provided
or goods shipped (F.O.B.), the price to the buyer is fixed or determinable and collectability is reasonably assured. Revenue from
the sale of products is recorded at the time of shipment to the customers. The Company has structured its revenues as 1) product
(sales of equipment and/or fluid solutions); 2) licensing (contract-based use of the Company’s US EPA Product Registration,
returning revenue in licensing fees and/or royalties from minimum fluid sales); and 3) Equipment Leases (system service agreements,
usually 3- year contracts for the provision of the Company’s equipment, under contract to customers, with renewable terms).
Revenue from contracts to license technology and from the sale of fluid solutions to others is immediately recognized since
these are non-refundable deposits and payments.
Basic
and Diluted Loss Per Share –
Basic loss per share is computed by dividing net loss by the weighted-average number
of common shares outstanding during the period. Diluted loss per share is computed by dividing net loss by the weighted-average
number of common shares and dilutive potential common shares outstanding during the period. As of December 31, 2017, there were
outstanding common share equivalents (options) which amounted to 1,880,125 of common stock. These common share equivalents were
not included in the computation of diluted loss per share as their effect would have been anti-dilutive.
Reclassification
–
Certain balances in previously issued financial statements have been reclassified to be consistent with the current
period presentation.
Recent
Accounting Pronouncements
– In January, 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805):
Clarifying the Definition of a Business.” ASU 2017-01 issues an initial required screen that, if met, eliminates the need
for further assessment. Under the new guidance, when substantially all of the fair value of gross assets acquired is concentrated
in a single asset, or group of similar assets, the assets acquired would not represent a business. The Company adopted ASU 2017-01
effective January 1, 2017.
In
January 2017, the FASB issued ASU 2017-04, “Intangible, Goodwill & Other.” ASU 2017-04 simplifies how all entities
assess impairment by implementing a one-step test. As amended, the impairment test will compare the fair value with its carrying
amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds fair value. The Company
adopted ASU 2017-04 effective January 1, 2017. ASU 2017-04 has no material effect in the Company’s financial statements.
The
Company has reviewed the FASB ASU 2014-09 “Topic 606 Revenue Recognition from Contracts with Customers,” originally
issued on May 28, 2014, which the FASB has issued a few clarifying ASU’s regarding this update. The standard was effective
for public companies with annual periods beginning after December 15, 2017. We have begun evaluating the impact this standard
will have on our revenue recognition and we do not believe it will have a material impact on our business. The new standard requires
companies to identify contracts with customers, performance obligations within those contracts, and the transaction price. The
Company will continue to monitor its placement of equipment at customers’ locations to ensure compliance with the definition
of this accounting pronouncement.
The
Company has reviewed all other FASB issued ASU accounting pronouncements and interpretations thereof that have effective dates
during the period reported and in future periods. The Company has carefully considered the new pronouncements that alter the previous
GAAP and do not believe that any new or modified principles will have a material impact on the Company’s reported financial
position or operations in the near term.
NOTE
2
–
Going Concern
The
accompanying audited condensed consolidated financial statements have been prepared assuming that the Company will continue as
a going concern. The Company has limited assets, has incurred losses since inception of $6,744,520 and has negative cash flows
from operations. As of December 31, 2017, the Company had a working capital deficit of $1,415,877, as compared to $273,890 at
December 31, 2016. 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. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
NOTE
3
–
INCOME TAXES
There
was no provision for, or benefit from, income tax during the years ended December 31, 2017 and 2016 respectively. The components
of the net deferred tax asset as of December 31, 2017, and 2016:
December 31,
|
|
2017
|
|
2016
|
Net operating loss carry forwards
|
|
$
|
2,293,137
|
|
|
$
|
1,367,815
|
|
Stock/options issued for services
|
|
|
(74,875
|
)
|
|
|
(74,875
|
)
|
Stock/option issued for acquisitions
|
|
|
(162,766
|
)
|
|
|
(16,559
|
)
|
Contributed services
|
|
|
(126,287
|
)
|
|
|
—
|
|
Depreciation and Amortization
|
|
|
(142,563
|
)
|
|
|
(43,423
|
)
|
Meals & Entertainment
|
|
|
(338
|
)
|
|
|
(131
|
)
|
Valuation allowance
|
|
$
|
(1,786,307
|
)
|
|
$
|
(1,232,827
|
)
|
Federal
and state net operating loss carry forwards at December 31, 2017 were $5,253,845. The net operating loss carry forwards expire
between 2033 and 2037.
The
following is a reconciliation of the amount of benefit that would result from applying the federal statutory rate to pretax loss
with the provision for income taxes for the years ended December 31, 2017 and 2016, respectively:
|
|
|
|
|
For the Years Ended December 31,
|
|
2017
|
|
2016
|
Book income (loss) from operations
|
|
$
|
(925,322
|
)
|
|
$
|
(764,882
|
)
|
Stock/options issued for services
|
|
|
—
|
|
|
|
6,800
|
|
Stock/options issued for acquisition
|
|
|
146,207
|
|
|
|
16,559
|
|
Contributed services
|
|
|
126,287
|
|
|
|
—
|
|
Depreciation & Amortization
|
|
|
99,141
|
|
|
|
13,096
|
|
Meals & Entertainment
|
|
|
208
|
|
|
|
131
|
|
Change in valuation allowance
|
|
|
553,480
|
|
|
|
728,296
|
|
Provision for Income Taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
In
June 2006, FASB issued FASB ASC 740-10-05-6. The Company adopted FASB ASC 740-10-05-6 on January 1, 2013. Under FASB ASC 740-10-05-6,
tax benefits are recognized only for the tax positions that are more likely than not to be sustained upon examination by tax authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon
ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the company's tax return that do not meet these recognition
and measurement standards.
Upon
the adoption of FASB ASC 740-10-05-6, the Company had no liabilities for unrecognized tax benefits and, as such, the adoption
had no impact on its financial statements, and the Company has recorded no additional interest or penalties. The Adoption of FASB
ASC 740-10-05-6 did not impact the Company's effective tax rates.
The
Company's policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits with the income
tax expense. For the years ended December 31, 2017, and 2016, the Company did not recognize any interest or penalties in its Statement
of Operations, nor did it have any interest or penalties accrued in its Balance Sheet at December 31, 2017 and 2016 relating to
unrecognized benefits.
The
tax years 2017 and 2016 remain open to examination for federal income tax purposes and by other major taxing jurisdictions to
which the Company is subject.
NOTE
4 – PROPERTY AND EQUIPMENT
Depreciation
is computed using the straight-line method and is recognized over the estimated useful lives of the property and equipment, which
range from 3 to 7 years once placed into service. Depreciation expense does not begin until documentation of equipment placed
in service is provided. Machinery and leased equipment is not intended to be sold to the customer at the end of the lease term.
Depreciation expense was $18,790 for the year ended December 31, 2017, of which $12,191 relates to product costs and $422 relates
to leased equipment costs. No impairment was recognized during the twelve months ended December 31, 2017. Property and equipment
at December 31, 2017 and 2016 consisted of the following:
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
Machinery and leased equipment
|
|
$
|
129,076
|
|
|
$
|
85,336
|
|
Machinery and equipment not yet in service
|
|
|
278,079
|
|
|
|
—
|
|
Office equipment and furniture
|
|
|
20,064
|
|
|
|
17,765
|
|
Website
|
|
|
2,760
|
|
|
|
3,228
|
|
Leasehold improvements
|
|
|
—
|
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
|
Total Property and equipment
|
|
$
|
429,979
|
|
|
$
|
108,729
|
|
Less: Accumulated depreciation
|
|
|
(46,725
|
)
|
|
|
(30,479
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
383,254
|
|
|
$
|
78,250
|
|
NOTE
5 – INTANGIBLE ASSETS
Amortization
is computed using the straight-line method and is recognized over the estimated useful lives of the intangible assets, which range
from 1 to 15 years. Amortization expense was $272,800 for the year ended December 31, 2017, of which $13,681 relates to
product costs, $3,029 relates to licensing costs and 1,477 relates to leased equipment costs. No impairment was recognized during
the twelve months ended December 31, 2017. Intangible assets at December 31, 2017 and 2016 consisted of the following:
The
components of intangible assets at December 31, 2017 and December 31, 2016 were as follows:
|
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
Patents
|
|
$
|
4,505,489
|
|
|
$
|
100,439
|
|
Technology rights
|
|
|
200,000
|
|
|
|
50,000
|
|
Intangibles, at Cost
|
|
|
4,705,489
|
|
|
|
150,439
|
|
Less Accumulated Amortization
|
|
|
(380,382
|
)
|
|
|
(107,582
|
)
|
Net Carrying Amount
|
|
$
|
4,325,107
|
|
|
$
|
42,857
|
|
On
March 10, 2017, the Company entered into a three-year Efficacy Test Data License Agreement and Efficacy Test Data Assignment Agreement
(the “Agreement”) with a third party for $25,000. Under the Agreement, the Company can use certain Efficacy Test Data
and purchases the rights to other Efficacy Test Data to be added to its EPA Registration number 83241-4. The Company paid $25,000
for the use of certain Efficacy Test Data and purchase of other Efficacy Test Data.
On
March 13, 2017, the Company entered into a Registration Transfer Agreement (“Transfer Agreement”) and a Data License
and Assignment Agreement (“Data Agreement”) with a third party. Pursuant to the Transfer Agreement, the Company received
United States Environmental Protection Agency’s (“EPA”) Registration number 82341-4 for Excelyte® VET for
a one-time fee of $125,000.
On
April 6, 2017, the Company acquired intangible assets by issuing 2,250,000 shares of common stock at a deemed value of $1.96 per
share ($4,405,050) to Annihilyzer Inc. in order to close on the amended agreement dated April 6, 2017. Pursuant to the terms of
the Agreement, as amended, the Company acquired an Annihilyzer patent and all associated intellectual property. In addition, Paradigm
granted Annihilyzer Inc, a three-year license and sub-registration under Paradigm’s EPA Product Registration #82341-4. Annihilyzer,
Inc. had no activity under this sub-registration agreement as of December 31, 2017.
NOTE
6 – NOTES PAYABLE
Type
|
|
Original Amount
|
|
Issuance Date
|
|
Maturity Date
|
|
Interest Rate
|
|
Balance 12/31/2017
|
|
Balance 12/31/2016
|
Notes Payable
|
|
$
|
25,000
|
|
|
12/10/2015
|
|
6/10/2016
|
|
|
5.0
|
%
|
|
$
|
—
|
|
|
$
|
8,000
|
|
Notes Payable
|
|
|
7,500
|
|
|
3/11/2016
|
|
9/11/2016
|
|
|
5.0
|
%
|
|
|
—
|
|
|
|
7,500
|
|
Notes Payable, Related Party
|
|
|
297,500
|
|
|
4/11/2016
|
|
11/30/2017
|
|
|
5.0
|
%
|
|
|
—
|
|
|
|
293,302
|
|
Notes Payable
|
|
|
150,000
|
|
|
5/18/2016
|
|
6/1/2018
|
|
|
13.0
|
%
|
|
|
150,000
|
|
|
|
150,000
|
|
Notes Payable, Related Party
|
|
|
50,000
|
|
|
10/18/2016
|
|
8/18/2017
|
|
|
5.0
|
%
|
|
|
50,000
|
|
|
|
50,000
|
|
Notes Payable, Related Party
|
|
|
293,302
|
|
|
1/1/2017
|
|
1/1/2018
|
|
|
3.5
|
%
|
|
|
—
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
25,000
|
|
|
4/12/2017
|
|
10/12/2017
|
|
|
5.0
|
%
|
|
|
25,000
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
25,000
|
|
|
4/27/2017
|
|
4/27/2018
|
|
|
3.0
|
%
|
|
|
17,500
|
|
|
|
—
|
|
Notes Payable
|
|
|
25,000
|
|
|
5/8/2017
|
|
10/10/2017
|
|
|
0.0
|
%
|
|
|
25,000
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
15,000
|
|
|
5/15/2017
|
|
5/15/2018
|
|
|
5.0
|
%
|
|
|
15,000
|
|
|
|
—
|
|
Notes Payable
|
|
|
125,000
|
|
|
5/15/2017
|
|
8/31/2017
|
|
|
10.0
|
%
|
|
|
—
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
10,000
|
|
|
6/12/2017
|
|
6/12/2018
|
|
|
3.0
|
%
|
|
|
10,000
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
25,000
|
|
|
6/13/2017
|
|
7/31/2017
|
|
|
3.0
|
%
|
|
|
—
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
112
|
|
|
7/1/2017
|
|
6/30/2018
|
|
|
3.0
|
%
|
|
|
—
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
5,500
|
|
|
7/3/2017
|
|
6/30/2018
|
|
|
3.0
|
%
|
|
|
5,500
|
|
|
|
—
|
|
Notes Payable
|
|
|
25,000
|
|
|
7/3/2017
|
|
8/31/2017
|
|
|
8.0
|
%
|
|
|
—
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
2,000
|
|
|
7/5/2017
|
|
6/30/2018
|
|
|
3.0
|
%
|
|
|
2,000
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
3,000
|
|
|
7/6/2017
|
|
6/30/2018
|
|
|
3.0
|
%
|
|
|
3,000
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
2,500
|
|
|
7/10/2017
|
|
6/30/2018
|
|
|
3.0
|
%
|
|
|
2,500
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
2,500
|
|
|
7/12/2017
|
|
6/30/2018
|
|
|
3.0
|
%
|
|
|
2,500
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
25,000
|
|
|
7/13/2017
|
|
6/30/2018
|
|
|
3.0
|
%
|
|
|
25,000
|
|
|
|
—
|
|
Notes Payable
|
|
|
10,000
|
|
|
7/14/2017
|
|
8/31/2017
|
|
|
8.0
|
%
|
|
|
—
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
25,000
|
|
|
7/25/2017
|
|
9/25/2017
|
|
|
5.0
|
%
|
|
|
25,000
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
5,000
|
|
|
8/14/2017
|
|
6/30/2018
|
|
|
3.0
|
%
|
|
|
5,000
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
50,000
|
|
|
8/25/2017
|
|
10/1/2018
|
|
|
7.5
|
%
|
|
|
—
|
|
|
|
—
|
|
Notes Payable
|
|
|
15,000
|
|
|
8/30/2017
|
|
9/1/2017
|
|
|
8.0
|
%
|
|
|
—
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
200,000
|
|
|
8/31/2017
|
|
10/1/2018
|
|
|
7.5
|
%
|
|
|
—
|
|
|
|
—
|
|
Notes Payable
|
|
|
50,000
|
|
|
9/1/2017
|
|
12/31/2017
|
|
|
8.0
|
%
|
|
|
50,000
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
275,000
|
|
|
9/27/2017
|
|
10/1/2018
|
|
|
7.5
|
%
|
|
|
275,000
|
|
|
|
—
|
|
Notes Payable
|
|
|
25,000
|
|
|
9/27/2017
|
|
12/31/2017
|
|
|
8.0
|
%
|
|
|
25,000
|
|
|
|
—
|
|
Notes Payable
|
|
|
37,500
|
|
|
10/11/2017
|
|
10/11/2018
|
|
|
8.0
|
%
|
|
|
37,500
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
20,000
|
|
|
10/24/2017
|
|
4/24/2018
|
|
|
5.0
|
%
|
|
|
20,000
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
250,000
|
|
|
11/15/2017
|
|
12/15/2018
|
|
|
1.0
|
%
|
|
|
250,000
|
|
|
|
—
|
|
Notes Payable, Related Party
|
|
|
100,000
|
|
|
11/15/2017
|
|
10/1/2018
|
|
|
7.5
|
%
|
|
|
100,000
|
|
|
|
—
|
|
Notes Payable
|
|
|
56,000
|
|
|
12/1/2017
|
|
1/10/2018
|
|
|
8.0
|
%
|
|
|
20,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,140,500
|
|
|
|
508,802
|
|
Debt Discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,283
|
)
|
|
|
(20,549
|
)
|
Total Notes Payable, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,134,217
|
|
|
$
|
488,253
|
|
Notes
Payable
On
May 15, 2017, the Company entered into a 45-day promissory note for $125,000 with an unrelated individual. The note is secured
personally by the CEO of the Company and bears an interest rate of 10% per annum and a default rate of 16%. On December 1, 2017,
the Company modified and consolidated the remaining balance and accrued interest of this outstanding promissory note and entered
into a new promissory note, with the same party, totaling $56,000. The new note bears an interest rate of 8% per annum and is
due on January 10, 2018. As of December 31, 2017, the note had a remaining balance of $20,000.
On
May 8, 2017, the Company entered into a loan agreement for $25,000 with an unrelated individual. The note was due on July 10,
2017. The note bears interest expense of $2,500. During Q3 of 2017 the Company extended his note to October 10, 2017 and added
an additional 2,500 of interest. As of December 31, 2017, the note had a remaining balance of $25,000 and is currently in default.
From
July 3, 2017 through August 30, 2017, the Company entered into three promissory notes totaling $50,000 with an unrelated party
to be used in operations. The notes were due September 1, 2017, are unsecured and bears an interest rate of 8% per annum. On September
1, 2017, the Company consolidated the three promissory notes into one promissory note totaling $50,000. The new note was due on
December 31, 2017. As of December 31, 2017, the note had a remaining balance of $50,000 and is currently in default.
On
September 27, 2017, the Company entered into a promissory note for $25,000 with an unrelated party to be used in operations. The
note was due on December 31, 2017, is unsecured and bears an interest rate of 8% per annum. As of December 31, 2017, the note
had a remaining balance of $25,000 and is currently in default.
On
October 11, 2017, the Company entered into a promissory note for $37,500 with an unrelated party to be used in operations. The
note is due on October 11, 2018, is unsecured and bears an interest rate of 8% per annum. As of December 31, 2017, the note had
a remaining balance of $37,500.
Notes
Payable – Related Parties
On
January 1, 2017, the Company modified and consolidated its outstanding promissory notes with the Company’s CEO into one
promissory note totaling $293,302. The note is unsecured and bears an interest rate of 3.5% per annum. On November 15, 2017, the
Company modified and consolidated the remaining balance of this outstanding promissory note with the Company’s CEO into
a promissory note totaling $250,000. The new note bears an interest rate of 1% per annum and is due on December 15, 2018. As of
December 31, 2017, the note had a remaining balance of $250,000.
From
April 12, 2017 through October 24, 2017, the Company entered into three promissory notes totaling $70,000 with a related party
to be used in operations. The notes are due 6-10 months from the date of issuance, are unsecured and bear an interest rate of
5% per annum. As of December 31, 2017, the notes had a remaining balance totaling $70,000.
From
April 27, 2017 through August 14, 2017, the Company entered into ten additional promissory notes totaling $80,612 with the Company’s
CEO to be used in operations. The notes are due 10-12 months from the date of issuance, are unsecured and bear an interest rate
of 3% per annum. As of December 31, 2017, the notes had a remaining balance totaling $73,000.
On
May 15, 2017 the Company entered into a promissory note for $15,000 with a related party to be used in operations. The note is
due on May 15, 2018, is unsecured and bears an interest rate of 5% per annum. As of December 31, 2017, the note had a remaining
balance of $15,000.
From
June 13, 2017 through August 31, 2017, the Company entered into three promissory notes totaling $275,000 with a related party
to be used in operations. The notes are due 2-13 months from the date of issuance, are unsecured and bear an interest rate of
3-7.5% per annum. On September 27, 2017, the Company modified and consolidated the remaining balance of these outstanding promissory
note and entered into a new promissory note, with the same party, totaling $275,000. The new note bears an interest rate of 7.5%
per annum and is due on October 1, 2018. As of December 31, 2017, the note had a remaining balance of $275,000.
On
November 15, 2017 the Company entered into a promissory note for $100,000 with a related party to be used in operations. The note
is due on October 1, 2018, is unsecured and bears an interest rate of 7.5% per annum. As of December 31, 2017, the note had a
remaining balance of $100,000.
NOTE
7 - 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. During the years ended December 31, 2017 and 2016 there were nil shares of preferred stock issued,
respectively.
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.
During
2017, the Company issued 1,474,000 shares of common stock between $0.50 to $1.25 per share for total cash proceeds of $1,090,000.
Of this amount 510,000 shares were issued to related parties cash proceeds of $512,500.
In
April 2017, the Company acquired intangible assets by issuing 2,250,000 shares of common stock at valued at $1.96 per share ($4,405,050)
to Annihilyzer Inc. (see also Note 5).
In
October 2017, the Company issued 337,666 shares of common stock to revise the share price relating to shares sold from September
1, 2016 through October 30, 2017, down to $0.75 per share, resulting in $371,433 of other expense. Of this amount 191,667 shares
were issued to related parties.
NOTE
8 – STOCK OPTIONS
On
January 1, 2017 the Company issued 30,000 stock options to a related party with an exercise price of $2.00 per share. The options
vest on January 1, 2018. The Company used the Black-Scholes methodology to value the stock-based compensation expense for options.
Compensation expense is recognized on a straight-line basis over the vesting period. As of December 31, 2017, the Company recognized
$56,220 in compensation expense, leaving $0 to be recognized in remaining compensation expense.
On
January 26, 2017, the Company issued 200,000 stock options to a related party with an exercise price of $2.00 per share. The options
vested immediately. The Company used the Black-Scholes methodology to value the stock-based compensation expense for options.
As of December 31, 2017, the Company recognized $373,800 in compensation expense, leaving $0 to be recognized in remaining compensation
expense.
In
applying the Black-Scholes methodology to the options granted through December 31, 2017, the fair value of our stock-based awards
was estimated using the following assumptions ranging from:
Risk-free
interest rate
|
1.22
- 1.95%
|
Expected
option life
|
2
- 5 years
|
Expected
dividend yield
|
0.00%
|
Expected
price volatility
|
165.72
- 199.94%
|
Below
is a table summarizing the options issued and outstanding as of December 31, 2017:
Date
|
|
Number
|
|
Number
|
|
Exercise
|
|
Weighted
Average Remaining Contractual
|
|
Expiration
|
|
Proceeds
to Company if
|
Issued
|
|
Outstanding
|
|
Exercisable
|
|
Price
$
|
|
Life
(Years)
|
|
Date
|
|
Exercised
|
|
05/21/2014
|
|
|
|
1,875,000
|
|
|
|
1,875,000
|
|
|
|
0.13
|
|
|
|
1.38
|
|
|
|
05/20/2019
|
|
|
$
|
250,000
|
|
|
01/01/2016
|
|
|
|
90,000
|
|
|
|
90,000
|
|
|
|
0.33
|
|
|
|
2.00
|
|
|
|
12/31/2019
|
|
|
|
30,000
|
|
|
01/01/2016
|
|
|
|
75,000
|
|
|
|
75,000
|
|
|
|
0.33
|
|
|
|
2.00
|
|
|
|
12/31/2019
|
|
|
|
25,000
|
|
|
09/15/2016
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
1.00
|
|
|
|
2.00
|
|
|
|
12/31/2019
|
|
|
|
10,000
|
|
|
10/01/2016
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
1.00
|
|
|
|
2.00
|
|
|
|
12/31/2019
|
|
|
|
7,500
|
|
|
01/01/2017
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
2.00
|
|
|
|
1.00
|
|
|
|
01/01/2019
|
|
|
|
60,000
|
|
|
01/26/2017
|
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
2.00
|
|
|
|
4.07
|
|
|
|
01/26/2022
|
|
|
|
400,000
|
|
|
|
|
|
|
2,287,500
|
|
|
|
2,257,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
782,500
|
|
The
weighted average exercise prices are $0.34 and $0.32 for the options outstanding and exercisable, respectively.
NOTE
9 – RELATED PARTY TRANSACTIONS
The
Company has agreements with related parties for consulting services, notes payable and stock options. See Notes to Financial Statements
numbers 6, 7, 8 and 10 for more details.
NOTE
10 – COMMITMENTS AND CONTINGENCIES
Consulting
Agreements
–
On June 9, 2015, the Company entered into a consulting agreement with one individual to provide various
services to the Company. The Company has agreed to pay up to $50,000 in fees to this individual to include all costs associated
with the development and procurement of sales including, but not limited to: his time, all testing by the individual and/or other
labs at his direction, all travel expenses, sales and marketing brochures and any and all other costs associated with the sales
of Anolyte fluids to a specific industry and all related parties. The agreement expired December 31, 2015. On January 1, 2016,
the Company amended the previous agreement and extended it for six months through June 30, 2016. The Company agreed to pay the
individual an additional $16,500 in consulting fees and expenses. On July 1, 2016, the Company extended the previously amended
agreement through December 31, 2016 and agreed to pay an additional $24,000 in consulting fees plus expenses. The Company continued
to use the services of this consultant, on a month-to-month basis for $3,000 per month, terminating the use of those on December
31, 2017.
On
August 10, 2017 the Company entered into a consulting contract to receive assistance in financing. Upon execution of the agreement,
the consultant received $3,000 plus a $1,000 retainer for initial expenses and further received $3,000 per month for six-months
thereafter.
On
September 1, 2017, the Company entered into a five-year employment agreement with Marion E. Paris, Jr. to be the Vice President
for Business Development and Director of Intellectual Properties for Paradigm. Under the terms of the employment agreement, Mr.
Paris is to be paid an annual base salary of $90,000 and other benefits, including four weeks paid vacation. In addition, the
Company agreed to pay Mr. Paris a signing bonus of $40,000.
On
November 21, 2016, the Company signed a lease for approximately 12,000 square feet of office, research & development, warehouse,
and production space in Little River, South Carolina. The lease was effective December 1, 2016 at a rate of $4,800 per month for
a period of three years. The Company has an option to extend the lease for two periods of three years each. The Company’s
future lease commitments by year are as follow:
|
2018
|
|
|
$
|
59,250
|
|
|
2019
|
|
|
|
52,950
|
|
|
2020
|
|
|
|
--
|
|
|
Total
|
|
|
$
|
112,200
|
|
NOTE
11 - SUBSEQUENT EVENTS
On
January 2, 2018, the Company entered into a promissory note with an unrelated party for $150,000. The note is due April 3, 2018,
is unsecured and bears an interest rate of 8.0% per annum.
On
January 2, 2018 the Company issued 110,000 shares of common stock at $0.50 per share to an unrelated party for cash proceeds of
$55,000.
On
February 13, 2018 the Company entered into a promissory note with an unrelated party for $12,500. The note is due April 15, 2018,
is unsecured and bears an interest rate of 8% per annum.
On
February 22, 2018 the Company retired its January 2, 2018 promissory note with an unrelated party of $150,000 and consolidated
this amount into a new promissory note for $250,000 (an additional $100,000 received). The note is due on April 30, 2018, is unsecured
and bears an interest rate of 8.0% per annum.
On
March 1, 2018 the Company entered into a 24-month fluid sales agreement with an entity. The Company leases 150 square feet of
space from this entity and the Company pays a part time technician to manufacture fluid solutions for the entity to sell, utilizing
the Company’s US EPA product registration. The Company receives a monthly fee from the fluid sales entity based upon the
greater amount between a negotiated royalty price per volume of the fluid solutions or a minimum sales number.
On
March 15, 2018 the Company entered into a 12-month service agreement, expiring on March 15, 2019, for strategic planning, financing,
capital formation, up listing and expansion of the Company’s shareholder base. The consulting company received a $5,000
non-refundable initial fee and shall receive $2,500 per month for the remaining months of the contract, and in addition received
2,000,000 shares of the Company’s restricted common stock.
On
March 28, 2018 the Company extinguished its February 22, 2018 promissory note with an unrelated party of $250,000 and consolidated
this amount into a convertible note for $450,000 (an additional $200,000 received). The note is due on March 31, 2021 and is convertible
into common stock at a conversion price of $0.4285 and bears interest of 8.0% per annum. This note also contains an anti-dilution
clause, which becomes effective in the event the Company exceeds 60,000,000 issued shares of its stock.
On
April 10, 2018 the Company entered into a promissory note with a related party for $30,000. The note is due January 15, 2019,
is unsecured and bears an interest rate of 3.0% per annum.
On
April 10, 2018 the Company issued 120,000 shares of common stock at $0.50 per share to a related party for cash proceed of $60,000.
On
April 12, 2018 the Company entered into an agreement to purchase the original US EPA Registration No. 83241-1 for EcaFlo®
Anolyte. The Company has paid a $5,000 deposit with the remaining balance due in increments during the second quarter of 2018
to finalize the agreement.