Executive Overview
On August 31, 2016, PCT LTD entered into a Securities Exchange Agreement (the
"Exchange Agreement") with Paradigm Convergence Technologies Corporation, a
Nevada corporation ("Paradigm"). Pursuant to the terms of the Exchange
Agreement, Paradigm became the wholly-owned subsidiary of PCT LTD after the
exchange transaction. PCT LTD is a holding company, which through Paradigm is
engaged in the business of marketing new products and technologies through
licensing and joint ventures.
PCT LTD had not recorded revenues for the two fiscal years prior to its
acquisition of Paradigm and was dependent upon financing to continue basic
operations. Paradigm has recorded revenue since it initiated operations in 2012;
however, those revenues have not been sufficient to finance operations. The
Company recorded a net income of $988,619 for the year ended December 31, 2021
and accumulated losses of $29,598,993 from inception through December 31, 2021.
PCT LTD remains dependent upon additional financing to continue operations. The
Company intends to raise additional financing through private placements of its
common stock and note payable issuances. We expect that we would issue such
stock pursuant to exemptions to the registration requirements provided by
federal and state securities laws. The purchasers and manner of issuance will be
determined according to our financial needs, as discussed below, and the
available exemptions to the registration requirements of the Securities Act of
1933. We also note that if we issue more shares of our common stock, then our
stockholders may experience dilution in the value per share of their common
stock.
The expected costs for the next twelve months include:
• continuation of commercial launch of non-toxic sanitizing,
disinfecting and sterilizing products and technologies with a strong
emphasis on health care facilities, including hospitals, nursing
homes, assisted living facilities, clinics and medical, dental and
veterinarian offices;
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• continued research and development on product generation units
including those designed for on-site deployment at customers'
facilities;
• accelerated research and development and initial commercialization
on applications of the products in the agricultural sector, most
specifically with respect to abatement of a specific crop disease
crisis caused by a bacterium in the U.S. and elsewhere;
• acquiring available complementary technology rights;
• payment of short-term debt;
• hiring of additional personnel in 2022; and
• general and administrative operating costs.
Management projects these costs to total approximately $2,580,000. To minimize
these costs, the Company intends to maintain its practice of controlling
operating overheads with efficient facilities commitments, generally below
market salaries and consulting fees, and rigorous prioritization of expenditure
requirements. Based on its understanding of the commercial readiness of its
products and technologies, the capabilities of its personnel (current and being
hired), established business relationships and the general market conditions,
management believes that the Company expects to be covering its fixed operating
expenses ("burn rate") by the end of the third quarter of 2022.
Liquidity and Capital Resources
A critical component of our operating plan impacting our continued existence is
the ability to obtain additional capital through additional equity and/or debt
financing. We do not anticipate generating sufficient positive internal
operating cash flow until such time as we can deliver our products to market and
generate substantial revenues, which may take the next full year to fully
realize, if ever. In the event we cannot obtain the necessary capital to pursue
our strategic plan, we may have to significantly curtail our operations. This
would materially impact our ability to continue operations.
December 31, December 31,
SUMMARY OF BALANCE SHEET 2021 2020
Cash and cash equivalents $ 116,497 $ 115,196
Total current assets 310,763 747,756
Total assets 4,254,258 4,634,610
Total liabilities 6,283,637 11,038,156
Accumulated deficit (29,598,993 ) (30,587,612 )
Total stockholders' deficit $ (4,498,024 ) $ (6,662,191 )For the year ended December 31, 2021, the Company recorded net income of
$988,619 and at December 31, 2021 had a working capital deficit of $4,466,106.
Since inception we had not established an ongoing source of revenue sufficient
to cover our operating costs. During the years ended December 31, 2021 and 2020
we primarily relied upon equity issuances and advances and loans from
stockholders and third parties to fund our operations. The Company has relied on
raising debt and equity capital in order to fund its ongoing day-to-day
operations and its corporate overhead. We had $116,497 in cash at December 31,
2021, compared to $115,196 in cash at December 31, 2020. We had total
liabilities of $6,283,637 at December 31, 2021 compared to $11,038,156 at
December 31, 2020.
Total assets decreased by $380,352 to $4,254,258 at December 31, 2021 compared
to $4,634,610 at December 31, 2020. This decrease is primarily from a decrease
in accounts receivable and prepaid expenses and from depreciation and
amortization recorded on intangible assets and right-of-use assets during the
year ended December 31, 2021.
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Total liabilities decreased by $4,754,519 to $6,283,637 at December 31, 2021
compared to $11,038,156 at December 31, 2020. This decrease is primarily from a
decrease in derivative liabilities of $4,058,767 and a decrease in notes
payable, notes payable - related party, and convertible notes payable of
$616,995.
Our current cash flow is not sufficient to meet our monthly expenses of
approximately $215,000 and to fund future research and development adequately.
We intend to rely on additional debt financing, loans from existing stockholders
and private placements of common stock for additional funding in addition to the
increasing our recognized revenue from the leasing and/or sale of products;
however, there is no assurance that additional funding will be available. We do
not have material commitments for future capital expenditures. However, we
cannot assure you that we will be able to obtain short-term financing, or that
sources of such financing, if any, will continue to be available, and if
available, that they will be on favorable terms.
During the next 12 months we anticipate incurring additional costs related to
the filing of Exchange Act reports. We believe we will be able to meet these
costs through funds provided by management, significant stockholders and/or
third parties. We may also rely on the issuance of our common stock in lieu of
cash to convert debt or pay for expenses.
The table below presents information regarding cash flows:
Year ended Year ended
SUMMARY OF CASH FLOWS December 31, 2021 December 31, 2020
Net cash used in operating activities $ (1,508,640 ) $ (830,664 )
Net cash used in investing activities $ (468,866 ) $ (163,133 )
Net cash provided by operating activities $ 1,978,807 $ 1,041,380
Net change in cash
$ 1,301 $ 47,583
Commitments and Obligations
At December 31, 2021 the Company recorded notes payable totaling approximately
$2,165,102 (related, non-related and convertible, net of debt discount) compared
to notes payable totaling $2,781,597 (related, non-related and convertible, net
of debt discount) at December 31, 2020. These notes payable represent cash
advances received and expenses paid from third parties and related parties. At
December 31, 2021, all of the notes payable carry effective interest from 0% to
12% and are due ranging from on demand to November 30, 2023.
The Company headquarters and operations are located in Little River, South
Carolina. The Company re-negotiated an annual lease on the Little River, SC
facility for $7,500 per month, retroactive to July 1, 2020, which is renewable
for an additional four years (with a 2% increase annually). Effective July 1,
2021 through June 30, 2022, the monthly lease payment is $7,650. The Company
added a three-year lease for 9,600 sf. of warehouse space in Fort Wayne,
Indiana, effective November 1, 2020, for $4,500/month. Effective April 1, 2021,
the Company entered into a 2-year lease for additional office space in Little
River, SC, for $2,750 per month, which was terminated effective October 14,
2021.
Results of Operations
SUMMARY OF OPERATIONS Year Ended December 31
2021 2020
Revenues $ 1,281,177 $ 2,519,914
Total operating expenses 3,773,257 3,921,143
Total other income (expense) 3,480,699 (2,410,816 )
Net income (loss) 988,619 (3,812,045 )
Net income (loss) attributable to common stockholders' 988,619 (4,082,045 )
Basic income (loss) per share
0.00 (0.01 )
Diluted income (loss) per share $ (0.00 ) $ (0.01 )
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Revenues decreased to $1,281,177 for the year ended December 31, 2021 compared
to $2,519,914 for the year ended December 31, 2020. The revenue decrease for the
period was primarily due to the decreased volume of fluids sold as a result of
the decreased need for an effective US EPA-registered disinfectant as the
country came out of the COVID-19 pandemic. Accordingly, product sales decreased
to $233,147 during the year ended December 31, 2021 compared to $1,527,465
during the year ended December 31, 2020. However, revenue for equipment leases
increased to $894,786 during the year ended December 31, 2021 compared to
$750,496 during the year ended December 31, 2020.
Total operating expenses decreased to $3,773,257 during the year ended December
31, 2021 compared to $3,921,143 during the year ended December 31, 2020. The
decrease during the period was primarily due to a decrease in cost of product,
licensing, and equipment leases of $884,456 partially offset by an increase in
general and administrative expenses of $719,543.
General and administrative expenses increased to $3,204,922 for the year ended
December 31, 2021 compared to $2,485,379 during the year ended December 31,
2020. General and administrative increased due to stock-based compensation for
consulting services, salaries and wages, and professional and accounting fees.
Depreciation and amortization expenses increased to $367,534 during the year
ended December 31, 2021 compared to $348,708 during the year ended December 31,
2020.
Total other income was $3,480,699 for the year ended December 31, 2021 compared
to other expense of $2,410,816 during the year ended December 31, 2020. The
overall change was a primarily due to a gain on change in fair value of
derivative liability of $22,861 and a gain on settlement of debt of $3,930,402
during the year ended December 31, 2021 versus a loss on change in fair value of
derivative liability of $13,046,832 and a gain settlement of debt of $12,020,966
during the year ended December 31, 2020.
As a result of the changes described above, net income was $988,619 during the
year ended December 31, 2021 compared to a net loss of $3,812,045 during the
year ended December 31, 2020.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources and would be considered
material to investors.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis. The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to
prepare our financial statements. A complete summary of these policies is
included in the notes to our financial statements. In general, management's
estimates are based on historical experience, on information from third party
professionals, and on various other assumptions that are believed to be
reasonable under the facts and circumstances. Actual results could differ from
those estimates made by management.
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