PCT Corp. (Ticker: PCTL)
78. From at least June 5, 2018 through June 15, 2022, Kramer executed SPAs
pursuant to which Power Up and 1800 Diagonal purchased a total of 21 convertible note
obligations of PCT Corp., Inc. (Ticker: PTCL), with a total principal amount of $1,578,250.
Kramer authorized Power Up and 1800 Diagonal to disburse funds from their bank accounts to
fund the PCT notes.
79. PCT, a regular client of the Entity Defendants, is a Nevada corporation that
principally conducts its business from Little River, South Carolina. At all relevant times, PCT’s
stock qualified as a “penny stock” as defined by Exchange Act Rule 3a51-1 and was traded on
the OTC Markets bulletin board (OTC BB) or OTC Markets Pink.
80. The following chart lists the PCT notes and the specific Entity Defendant that
purchased each note during the Relevant Period, along with the conversion discount and other
terms:
Case 1:24-cv-03498 Document 1 Filed 05/07/24 Page 22 of 34
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Date of
Note
Date
Funded
Entity
Defendant Principal Term
Interest
Rate
Conversion
Discount
6/5/2018 6/13/2018 Power Up $68,000 12 months 12% 39%
7/25/2018 7/30/2018 Power Up $38,000 12 months 12% 39%
8/27/2018 8/29/2018 Power Up $53,000 12 months 12% 39%
12/5/2018 12/12/2018 Power Up $60,000 12 months 12% 39%
1/15/2019 1/16/2019 Power Up $30,000 12 months 12% 39%
2/21/2019 2/26/2019 Power Up $50,000 12 months 12% 39%
4/29/2019 5/2/2019 Power Up $35,000 12 months 12% 39%
10/7/2019 10/8/2019 Power Up $53,000 12 months 12% 39%
10/29/2019 10/31/2019 Power Up $50,000 12 months 12% 39%
3/2/2020 3/9/2020 Power Up $45,000 12 months 12% 39%
4/9/2020 4/16/2020 Power Up $128,000 12 months 12% 39%
5/8/2020 5/12/2020 Power Up $83,000 12 months 12% 39%
9/21/2020 9/22/2020 Power Up $53,500 6 months 12% 39%
2/22/2021 2/23/2021 Power Up $128,000 12 months 12% 39%
3/26/2021 3/30/2021 Power Up $83,000 12 months 12% 39%
4/5/2021 4/7/2021 Power Up $43,000 12 months 12% 39%
5/3/2021 5/10/2021 Power Up $128,000 12 months 12% 39%
11/4/2021 11/8/2021 1800
Diagonal
$226,162 12 months 19% 25%
3/29/2022 4/4/2022 1800
Diagonal
$128,000 12 months 12% 39%
6/1/2022 6/2/2022 1800
Diagonal
$53,000 12 months 12% 39%
6/14/2022 6/15/2022 1800
Diagonal
$53,000 12 months 12% 39%
81. Only one of the four notes purchased by 1800 Diagonal from PTC—the
November 4, 2021 note—was structured as a default convertible note. The remaining were in
the standard convertible note format that Kramer had used throughout the Relevant Period.
82. With the exception of the November 4, 2021 note, the PCT notes identified in
Paragraph 80 typically had a 12% interest rate and a 1-year maturity. Each such note granted the
Entity Defendant the unilateral right, beginning 180 days after the date of note, to convert the
unpaid principal and interest, in full or part, into common stock at a discount. The conversion
rates were highly favorable to Power Up and 1800 Diagonal. They were entitled to convert their
PCT notes into common stock at a 39% discount to the “Market Price,” defined as the lowest
closing bid price during the 15-day period prior the date of the conversion notice.
Case 1:24-cv-03498 Document 1 Filed 05/07/24 Page 23 of 34
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83. The November 4, 2021 default convertible note, which 1800 Diagonal purchased
pursuant to a stock purchase agreement that Kramer executed, carried a 10% original issue
discount and required the issuer to pay 1800 Diagonal an additional upfront fee equal to 11% of
the principal on the first day. 1800 Diagonal was entitled to convert the note, in full or part, only
upon the occurrence of an event of default. If PCT opted to repay the note after an event of
default, the payment obligation was increased to 150% of the unpaid principal plus interest and
the amount became immediately due and payable. In the event of a default, 1800 Diagonal was
entitled to convert the note, in full or part, at a highly favorable 25% discount to the “Market
Price,” defined as the lowest closing bid price during the five trading days prior to the date of the
conversion notice.
84. All of the PCT notes, including the November 4, 2021 default convertible, bore a
restrictive legend at the top that was materially similar to the legend for the Bantec notes
reflected in Paragraph 69. This legend identified the note as a security and restricted the sale or
transfer of the note and underlying post-conversion securities.
85. The course of conduct alleged in Paragraph 87, and the terms of the notes
themselves, show that Power Up and 1800 Diagonal, acting through Kramer, purchased PCT’s
notes with an eye toward converting them and distributing newly issued shares of PCT’s
common stock into the public markets.
86. PCT opted to prepay 13 of the notes before the 180-day mark. The notes allowed
prepayments up to 180 days after the note was purchased but imposed a steep pre-payment
penalty equal to 12% to 37% of the outstanding principal and interest depending on how close to
the 180 days mark the payment was made. PCT pre-paid these notes shortly before the 180th
Case 1:24-cv-03498 Document 1 Filed 05/07/24 Page 24 of 34
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day, before the Entity Defendants’ conversion right was triggered. PCT incurred a 37% penalty
on top of the principal and accrued interest.
87. As of March 31, 2023, Power Up and 1800 Diagonal, acting through Kramer, had
converted seven of the remaining PCT notes identified in Paragraph 80, including the November
14, 2021 default convertible note. The notes were converted in increments on at least 34
separate occasions and Kramer signed the conversion notices. The conversions began after the
180th day and were completed before the notes reached maturity. Collectively, Power Up and
1800 Diagonal received more than 250 million newly issued shares of PCT common stock.
88. The course of conduct alleged in Paragraphs 89 to 91 show that Power Up and
1800 Diagonal did not convert the PCT notes in order to hold the shares for appreciation. They
converted the notes instead to promptly sell the shares into the public markets and capture as
much of the spread between the discounted conversion price and the public market price as
possible.
89. Shortly after the shares from each conversion were deposited into the Power Up
and 1800 Diagonal brokerage accounts, their brokerage firms, acting under instructions from
Kramer, began to sell the newly-converted, newly issued shares on the over-the-counter markets.
90. On average it took Power Up and 1800 Diagonal approximately three days from
the date of the conversion notice to receive the PCTL shares into their accounts and complete the
sale of all shares associated with the conversion. On a majority of the trading dates, Power Up’s
and 1800 Diagonal’s sales constituted more than 30% of that day’s total trading volume in PCT
common stock.
91. As of March 31, 2023, Power Up’s and 1800 Diagonal’s sales of PCT shares
generated trading profits of more than $450,000 (more than $290,000 for Power Up and
Case 1:24-cv-03498 Document 1 Filed 05/07/24 Page 25 of 34
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$160,000 for 1800 Diagonal) which were achieved principally because of the spread between the
discounted conversion prices and the prevailing market prices at the time of sales.
92. PCT reported approximately 52 million total outstanding shares of common stock
outstanding as of April 12, 2019, before the Entity Defendants converted any PCT notes.
Between June 2019 and November 2019, Power Up converted the December 12, 2018 note and
the January 16, February 26, and May 2, 2019 notes, into 177 million newly issued shares of
PCT common stock which it then sold into the public markets. PCT reported nearly 525 million
total outstanding shares of common stock as of April 10, 2020, 33% of which Power Up had
distributed into the public market marketplace, despite never having registered as a dealer.
93. PCT reported approximately 790 million total outstanding shares of common
stock outstanding as of May 11, 2022, before the Entity Defendants converted any additional
PCT notes. From late May 2022 through March 2023, 1800 Diagonal converted the November
8, 2021 default convertible note and the April 4 and June 2, 2022 convertible notes, into
approximately 93 million newly issued shares of PCT common stock which it then sold into the
public markets. It was not registered as dealer when it did so. Shortly thereafter, PCT became
delinquent in its filings with the SEC, and it informed investors that it was not in a financial
position to pay the estimated $90,000 it would cost to pay an auditor to audit its financials.
