The accompanying notes are an integral part of these condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
NOTE 1 - Nature of Operations
Bravatek Solutions, Inc., a Colorado corporation (the “Company”), was incorporated on April 19, 2007, as eCrypt Technologies, Inc. Effective October 23, 2015, the Company changed its name to “Bravatek Solutions, Inc.” in order to better reflect the Company’s expanding operations and strategy. The Company’s business operations are oriented around the marketing and distribution of proprietary and allied security, defense and information security software, hardware and services (including telecom services). Products include software, hardware and services, and span a diverse variety of industries including, but not limited to, email security, user authentication, telecommunications and cyber breach protection. Bravatek is a security platform company offering services, software, tools and systems that it provides, develops, acquires or obtains through strategic marketing or other agreements. The Company began taking pre-orders of Tuitio, a consumer software product (protected by two issued patents and licensed by the Company) in the second quarter of 2018.
In December 2017, the Company entered into a Joint Venture Agreement (the “Agreement”) with DarkPulse Technologies, Inc. (“DarkPulse”), pursuant to which the parties formed a joint venture limited liability company in Delaware to develop, market and sell products and services based on DarkPulse’s patented BOTDA DarkPulse technology (the “Technology”) to be owned 40% by the Company and 60% by Dark Pulse (the “JV”). During the year ended December 31, 2018, the Company funded $89,450 to the JV which was written off in in its entirety at September 30, 2018.
In January of 2018, the Company acquired HelpComm, Inc., a Virginia corporation engaged in the provision of telecom services. These telecom services include cellular tower mapping and audits, ground audits, civil equipment installation, cellular site decommissioning, 3G/4G/5G installations, project/construction management, battery installation and maintenance, shelter and compound preventative maintenance, site cleanup, and other related services. On March 12, 2019, the Company and HelpComm entered into a Rescission, Settlement and Confidentiality Agreement with Mutual Releases, whereby the acquisition of HelpComm was fully rescinded as of January 1, 2018, resulting in a loss on rescinded acquisition of $370,917 during the nine months ended September 30, 2018.
NOTE 2 - Significant Accounting Policies
Basis of Presentation
On February 3, 2018, the Board of Directors of the Company changed the Company’s fiscal year end to December 31
st
from March 31
st
. On May 3, 2018, the Company filed a Transition Report on Form 10-KT covering the nine-month period from April 1, 2017, through December 31, 2017 (the “Transition Period”) which reflects the Company’s financial results during that nine-month period.
The accompanying condensed financial statements in this report have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed unaudited financial statements should be read in conjunction with a reading of the Company’s financial statements and notes thereto included in the Transition Report for the nine months ended December 31, 2017, filed with the United States Securities and Exchange Commission (the “SEC”) on May 3, 2018. Interim results of operations for the three and nine months ended September 30, 2018, and 2017, are not necessarily indicative of future results for the full year. Certain amounts from the 2017 period have been reclassified to conform to the presentation used in the current period.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Such estimates and assumptions impact both assets and liabilities, including, but not limited to: net realizable value of accounts receivable, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of the valuation allowances on deferred tax assets and estimates of the probability and potential magnitude of contingent liabilities.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near-term events. Accordingly, actual results could differ significantly from estimates.
Stock Split
On January 16, 2019, the Company affected a 10,000 for 1 reverse stock split. All common stock share and per share information has been retroactively adjusted to reflect this reverse stock split.
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
Other intangible assets
In June 2017, the Company purchased for $200,000 exclusivity rights from Mile High Construction (“MHC”), of which $107,520 was funded in 2017. During the nine months ended September 30, 2018, the Company funded an additional $30,380 to MHC.
|
|
|
|
|
|
(Restated)
|
|
|
|
|
Life in years
|
|
|
2018
|
|
|
2017
|
|
|
Exclusivity rights
|
|
|
1
|
|
|
|
137,900
|
|
|
|
107,520
|
|
|
Software
|
|
|
3
|
|
|
|
60,362
|
|
|
|
60,362
|
|
|
Total intangible assets acquired
|
|
|
|
|
|
|
198,262
|
|
|
|
167,822
|
|
|
Less accumulated amortization
|
|
|
|
|
|
|
(198,262
|
)
|
|
|
(119,980
|
)
|
|
Intangible assets, net
|
|
|
|
|
|
$
|
-
|
|
|
$
|
47,092
|
|
Amortization expense was $78,282 and $14,993, for the nine months ended September 30, 2018, and 2017, respectively and $0 and $5,016, for the three months ended September 30, 2018, and 2017, respectively.
Uncertainty as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has an accumulated deficit of $33,583,572 and has a working capital deficit of $4,956,150 as of September 30, 2018, which raises substantial doubt about its ability to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional capital through a private placement and public offering of its common stock. These plans, if successful, will mitigate the factors which raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable and accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments.
The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of September 30, 2018, and December 31, 2017, for each fair value hierarchy level:
|
September 30, 2018 (Restated)
|
|
Derivative
Liabilities
|
|
|
Total
|
|
|
Level III
|
|
$
|
2,072,214
|
|
|
$
|
2,072,214
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
Level III
|
|
$
|
3,842,211
|
|
|
$
|
3,842,211
|
|
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.
For stock-based simple derivative financial instruments, the Company uses the weighted average Black-Scholes-Merton option pricing model simulations to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Revenue Recognition
Accounting Standards Update (“ASU”) No. 2014-09,
Revenue from Contracts with Customers
("
Topic 606
"), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the "modified retrospective" transition method for open contracts for the implementation of
Topic 606.
The Company had no significant post-delivery obligations; therefore, this new standard did not result in a material recognition of revenue on the Company’s accompanying financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under
Topic 605, Revenue Recognition
.
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
Revenue from licensing software is recognized under
Topic 606
in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and includes the following elements:
|
·
|
executed contracts with the Company’s customers that it believes are legally enforceable;
|
|
·
|
identification of performance obligations in the respective contract;
|
|
·
|
determination of the transaction price for each performance obligation in the respective contract;
|
|
·
|
allocation of the transaction price to each performance obligation; and
|
|
·
|
recognition of revenue only when the Company satisfies each performance obligation.
|
After applying these five elements the Company’s recognizes licensed software revenue at the time the software is delivered or available to the customer, at which time the Company has no further obligations related to the sales contract with its customers.
Net Earnings (Loss) per Share
As of September 30, 2018 and December 31, 2017, there were warrants and options to purchase 3,365 shares of common stock, and the Company’s outstanding convertible debt is convertible into approximately 603,828 shares of common stock. These amounts are not included in the computation of dilutive loss per share because their impact is antidilutive for the nine months ended September 30, 2018 and 2017 and for the three months ended September 30, 2017. The following table illustrates the computation of basic and diluted EPS for the three months ended September 30, 2018:
|
|
|
(Restated)
|
|
|
|
|
For the three months ending
September 30, 2018
|
|
|
|
|
Net Loss
|
|
|
Shares
|
|
|
Per Share
Amount
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
Income available to stockholders
|
|
$
|
141,778
|
|
|
|
938,491
|
|
|
$
|
0.15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
|
-
|
|
|
|
603,828
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilute EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss available to stockholders plus assumed conversions
|
|
$
|
-
|
|
|
|
1,542,319
|
|
|
$
|
0.09
|
|
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)”. Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard will have on our financial statements.
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
In January 2017, the FASB issued ASU 2017-01, “Business
Combinations (Topic 805) Clarifying the Definition of a Business
” (“ASU 2017-01”). The Amendments in this Update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. Early adoption of this standard is permitted. The Company adopted ASU 2017-01 on January 1, 2018, with no significant impact on the condensed financial statements.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606).
ASU 2014-09 is amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20, ASU 2017-10, ASU 2017-13 and ASU 2017-14, which FASB issued in August 2015, March 2016, April 2016, May 2016, May 2016, December 2016, May 2017, September 2017 and November 2017, respectively (collectively, the amended ASU 2014-09). The amended ASU 2014-09 provides a single comprehensive model for the recognition of revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. It requires an entity to recognize revenue when the entity transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amended ASU 2014-09 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s). The amended ASU 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date for the amended ASU 2014-09 is for years beginning after December 15, 2017 with early adoption permitted. The Company adopted the new guidance effective January 1, 2018 under the modified retrospective transition approach and it did not have a material impact on the condensed financial statements of the Company.
NOTE 3 - Related Party Transactions
As of September 30, 2018, and December 31, 2017, included in accounts payable - related party is $337,183 and $318,179, respectively, for amounts owed to the Company’s CEO.
On June 1, 2018, the Company issued 1 share of its Series E Preferred Stock to Dr. Cellucci, in consideration of $25,000 of accrued and unpaid wages, Dr. Cellucci’s stock pledge of Series C Preferred Stock as collateral to a lender, the Company’s failure to timely pay current and past salaries, and Dr. Cellucci’s willingness to accrue unpaid payroll and non-reimbursement of business expenses without penalty or action for all amounts. The Company determined that the issuance of the Series E Preferred Stock resulted in a change of control of the Company. The Company determined that fair value of the Series E Preferred Stock (see Note 7) issued to the Company’s CEO was $2,333,140.
For the three months ended March 31, 2018, the Company recognized revenue from Mile High Construction, a former joint venture partner, $24,837 which is included in Sales, related party on the financial statements.
NOTE 4 - Notes Payable
From May 18, 2010 through June 27, 2013, the Company issued in the aggregate $558,500 of unsecured notes payable to a Nevada corporation, lender and preferred shareholder of the Company (“Global“). The notes bear interest at 10%, compounded annually and $553,000 and $5,500 matured on November 30, 2014, and June 27, 2015, respectively. On February 16, 2015, the Company secured extensions on all of the notes that matured on November 30, 2014 through April 1, 2015, with no change in original terms of the agreement.
On June 15, 2015, Company entered into a
Settlement Agreement and Partial Waiver and Release
(the “Settlement Agreement “) with Global. Global owned 2,377,500 shares of the Company ‘s Series A Convertible Preferred Stock and was the holder of outstanding promissory notes in the original principal amount of $558,500, with accrued interest thereon due to Global of approximately $267,960 (the “Global Notes “) immediately prior to the Settlement Agreement. Pursuant to the Settlement Agreement, Global agreed to (1) waive interest due of $267,960 under the Global Notes and $158,500 of principal, such that only $400,000 of principal and interest would be considered outstanding as of the settlement agreement date, and (2) immediately return all of the Preferred Stock to the Company for cancellation, in consideration for the Company issuing 856 shares of common stock to Global. As of June 15, 2015, the note is payable on demand as part of the Settlement Agreement. As of September 30, 2018, and December 31, 2017, the note balance was $400,000.
The Company issued five notes from December 18, 2012 to May 30, 2013 totaling $199,960 in unsecured notes payable to a third party. The notes bear an interest rate of 10%, compounded annually and matured from December 18, 2014 through May 30, 2015. On February 16, 2015, the Company secured a notes payable extension through April 1, 2015, with no change in original terms of the agreements. The notes payable were again extended on August 6, 2015, through January 1, 2016, with no change in original terms of the agreement. As of September 30, 2018, and December 31, 2017, the note balance was $199,960 and the notes are currently in default. Accrued interest as of September 30, 2018, and December 31, 2017, was $112,778 and $97,781, respectively.
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
The Company issued six notes from July 12, 2013 to June 16, 2014, totaling $230,828 in unsecured notes payable to a third party. The notes bear an interest rate of 10%, compounded annually and matured from July 12, 2014 through June 16, 2015. On February 16, 2015, the Company secured a notes payable extension through April 1, 2015, with no other changes in original terms of the agreements. The notes payable were again extended on August 6, 2015, through January 1, 2016, with no other changes in original terms of the agreements. As of September 30, 2018, and December 31, 2017, the note balance was $230,828 and the notes are currently in default. Accrued interest as of September 30, 2018, and December 31, 2017, was $109,389 and $92,077, respectively.
NOTE 5 - Convertible Notes Payable
Convertible notes payable consisted of the following at September 30, 2018 and December 31, 2017:
|
|
|
(Restated)
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Issued on December 19, 2014 for $156,000; accrues interest at 8% per annum; due December 19, 2015 (in default); convertible at 68% of the lowest closing price 20 days prior to conversion
|
|
$
|
135,371
|
|
|
$
|
135,371
|
|
|
Issued on May 1, 2017 for $50,000; accrues interest at 8% per annum; due May 1, 2018 (in default); convertible at 55% of the lowest closing price 20 days prior to conversion
|
|
|
50,000
|
|
|
|
50,000
|
|
|
Issued on May 1, 2017 for $50,000; accrues interest at 8% per annum; due May 1, 2018 (in default); convertible at 55% of the lowest closing price 20 days prior to conversion
|
|
|
50,000
|
|
|
|
50,000
|
|
|
Issued on May 1, 2017 for $17,500; accrues interest at 8% per annum; due May 1, 2018 (in default); convertible at 55% of the lowest closing price 20 days prior to conversion
|
|
|
17,500
|
|
|
|
17,500
|
|
|
Issued on May 1, 2017 for $25,000; accrues interest at 8% per annum; due May 1, 2018 (in default); convertible at 55% of the lowest closing price 20 days prior to conversion
|
|
|
25,000
|
|
|
|
25,000
|
|
|
Issued on May 3, 2017 for $29,700; accrues interest at 8% per annum; due May 3, 2018 (in default); convertible at 55% of the lowest closing price 20 days prior to conversion
|
|
|
29,700
|
|
|
|
29,700
|
|
|
Issued on May 3, 2017 for $25,300; accrues interest at 8% per annum; due May 3, 2018 (in default); convertible at 55% of the lowest closing price 20 days prior to conversion
|
|
|
25,300
|
|
|
|
25,300
|
|
|
Issued on May 3, 2017 for $22,000; accrues interest at 8% per annum; due May 3, 2018 (in default); convertible at 55% of the lowest closing price 20 days prior to conversion
|
|
|
22,000
|
|
|
|
22,000
|
|
|
Issued on June 8, 2017 for $140,750; accrues interest at 8% per annum; due June 8, 2018 (in default); convertible at 55% of the lowest closing price 20 days prior to conversion
|
|
|
140,750
|
|
|
|
140,750
|
|
|
Issued on June 8, 2017 for $140,750; accrues interest at 8% per annum; due June 8, 2018 (in default); convertible at 55% of the lowest closing price 20 days prior to conversion
|
|
|
140,750
|
|
|
|
140,750
|
|
|
Issued on October 12, 2017 for $40,111; accrues interest at 10% per annum; due October 12, 2018; convertible at 60% of the average of the three lowest closing price 20 days prior to conversion
|
|
|
-
|
|
|
|
40,112
|
|
|
Issued on June 9, 2017 for $165,025; accrues interest at 10% per annum; due June 9, 2018; convertible at 60% of the average of the three lowest closing price 20 days prior to conversion
|
|
|
-
|
|
|
|
52,565
|
|
|
Issued on June 23, 2017 for $262,775; accrues interest at 10% per annum; due June 23, 2018; convertible at 60% of the average of the three lowest closing price 20 days prior to conversion
|
|
|
-
|
|
|
|
227,735
|
|
|
Issued on August 9, 2017 for $223,422; accrues interest at 10% per annum; due August 9, 2018; convertible at 60% of the average of the three lowest closing price 20 days prior to conversion
|
|
|
-
|
|
|
|
223,422
|
|
|
Issued on November 1, 2017 for $239,200; accrues interest at 12% per annum; due November 1, 2018; convertible at 60% of the average of the three lowest closing price 20 days prior to conversion
|
|
|
-
|
|
|
|
239,200
|
|
|
Issued on December 26, 2017 for $120,750; accrues interest at 12% per annum; due June 26, 2018 (in default); convertible at 60% of the average of the three lowest closing price 20 days prior to conversion
|
|
|
98,750
|
|
|
|
120,750
|
|
|
Issued on January 26, 2018 for $184,000; accrues interest at 10% per annum; due January 26, 2019; convertible at 60% of the average of the three lowest closing price 20 days prior to conversion
|
|
|
150,000
|
|
|
|
-
|
|
|
Issued on April 2, 2018 for $45,000; accrues interest at 12% per annum; due October 2, 2018 (in default); convertible at 60% of the average of the three lowest closing price 20 days prior to conversion
|
|
|
45,000
|
|
|
|
-
|
|
|
Issued on May 11, 2018 for $215,000; accrues interest at 12% per annum; due May 11, 2019; convertible at 60% of the average of the three lowest closing price 20 days prior to conversion
|
|
|
215,000
|
|
|
|
-
|
|
|
Issued on June 21, 2018 for $184,000; accrues interest at 12% per annum; due June 21, 2019; convertible at 60% of the average of the three lowest closing price 20 days prior to conversion
|
|
|
163,000
|
|
|
|
-
|
|
|
Issued on August 21, 2018 for $59000; accrues interest at 10% per annum; due August 21, 2019; convertible at 60% of the average of the three lowest closing price 20 days prior to conversion
|
|
|
59,000
|
|
|
|
-
|
|
|
Issued on August 1, 2017 for $181,700; accrues interest at 10% per annum; due February 1, 2018; convertible at 60% of the lowest closing price 20 days prior to conversion
|
|
|
-
|
|
|
|
51,349
|
|
|
Issued on November 7, 2017 for $120,750; accrues interest at 10% per annum; due May 1, 2018 (in default); convertible at 60% of the lowest closing price 20 days prior to conversion
|
|
|
120,750
|
|
|
|
120,750
|
|
|
Issued on January 29, 2018 for $84,525; accrues interest at 10% per annum; due January 29, 2019; convertible at 60% of the lowest closing price 20 days prior to conversion
|
|
|
84,525
|
|
|
|
-
|
|
|
Issued on April 8, 2018 for $34,500; accrues interest at 10% per annum; due April 8, 2019; convertible at 60% of the lowest closing price 20 days prior to conversion
|
|
|
34,500
|
|
|
|
-
|
|
|
Issued on May 22, 2018 for $52,969; accrues interest at 10% per annum; due May 22, 2019; convertible at 60% of the lowest closing price 20 days prior to conversion
|
|
|
52,969
|
|
|
|
-
|
|
|
Issued on June 15, 2018 for $63,000; accrues interest at 10% per annum; due June 15, 2019; convertible at 60% of the lowest closing price 20 days prior to conversion
|
|
|
63,000
|
|
|
|
-
|
|
|
Issued on August 21, 2018 for $59,000; accrues interest at 12% per annum; due August 21, 2019; convertible at 60% of the lowest closing price 25 days prior to conversion
|
|
|
59,000
|
|
|
|
-
|
|
|
Issued on June 8, 2017 for $140,750; accrues interest at 8% per annum; due June 8, 2018; convertible at 55% of the lowest closing price 20 days prior to conversion
|
|
|
-
|
|
|
|
140,750
|
|
|
Issued on June 8, 2017 for $140,750; accrues interest at 8% per annum; due June 8, 2018; convertible at 55% of the lowest closing price 20 days prior to conversion
|
|
|
-
|
|
|
|
140,750
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable
|
|
|
1,781,865
|
|
|
|
1,993,754
|
|
|
Unamortized debt discount
|
|
|
(580,281
|
)
|
|
|
(1,195,957
|
)
|
|
Convertible notes payable, net
|
|
$
|
1,201,584
|
|
|
$
|
797,797
|
|
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
A summary of the convertible notes payable balance as of September 30, 2018, and December 31, 2017, is as follows:
|
|
|
(Restated)
|
|
|
|
|
|
|
|
September 30,
2018
|
|
|
December 31,
2017
|
|
|
Principal balance
|
|
$
|
1,781,865
|
|
|
$
|
1,993,754
|
|
|
Unamortized discounts
|
|
|
(580,281
|
)
|
|
|
(1,195,957
|
)
|
|
Ending balance, net
|
|
$
|
1,201,584
|
|
|
$
|
797,797
|
|
The following is a roll-forward of the Company’s convertible notes and related discounts for the nine months ended September 30, 2018, and the year ended December 31, 2017:
|
|
|
Principal
|
|
|
Debt
|
|
|
|
|
|
|
|
Balance
|
|
|
Discounts
|
|
|
Total
|
|
|
Balances at April 1, 2017
|
|
$
|
1,311,163
|
|
|
$
|
(39,436
|
)
|
|
$
|
1,271,727
|
|
|
New issuances
|
|
|
2,378,873
|
|
|
|
(2,378,873
|
)
|
|
|
-
|
|
|
Liquidated damages added to note
|
|
|
42,505
|
|
|
|
(42,146
|
)
|
|
|
359
|
|
|
Conversions
|
|
|
(1,470,005
|
)
|
|
|
-
|
|
|
|
(1,470,005
|
)
|
|
Cash payments
|
|
|
(268,782
|
)
|
|
|
-
|
|
|
|
(268,782
|
)
|
|
Amortization
|
|
|
-
|
|
|
|
1,264,498
|
|
|
|
1,264,498
|
|
|
Balance at December 31, 2017
|
|
|
1,993,754
|
|
|
|
(1,195,957
|
)
|
|
|
797,797
|
|
|
New issuances
|
|
|
1,000,994
|
|
|
|
(707,000
|
)
|
|
|
293,994
|
|
|
Other
|
|
|
3,919
|
|
|
|
|
|
|
|
3,919
|
|
|
Conversions
|
|
|
(1,121,691
|
)
|
|
|
-
|
|
|
|
(1,121,691
|
)
|
|
Cash payments
|
|
|
(95,111
|
)
|
|
|
-
|
|
|
|
(95,111
|
)
|
|
Amortization
|
|
|
-
|
|
|
|
1,322,676
|
|
|
|
1,322,676
|
|
|
Balances September 30, 2018
|
|
$
|
1,781,865
|
|
|
$
|
(580,281
|
)
|
|
$
|
1,201,584
|
|
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
NOTE 6 - Derivative liabilities
The Company determined that the conversion features of the convertible notes represented embedded derivatives since the convertible notes are convertible into a variable number of shares upon conversion. Accordingly, the notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature is bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments is recorded as liabilities on the balance sheet with the corresponding amount recorded as a discount to each Note, with any excess of the fair value of the derivative component over the face amount of the note recorded as an expense on the issue date. Such discounts are amortized from the date of issuance to the maturity dates of the Notes. The change in the fair value of the derivative liabilities are recorded in other income or expenses in the condensed statements of operations at the end of each period, with the offset to the derivative liabilities on the balance sheet.
The Company valued the derivative liabilities at September 30, 2018, and December 31, 2017, at $2,072,214 and $3,842,211, respectively. The Company used the Black-Scholes pricing valuation model with the following assumptions as of September 30, 2018; risk-free interest rate of 2.36% and volatility of 133%, and the following assumptions at December 31, 2017, risk-free interest rate of 1.53% and volatility of 316%.
A summary of the activity related to derivative liabilities for the nine months ended September 30, 2018, is as follows:
|
|
|
(Restated)
|
|
|
|
|
September 30,
2018
|
|
|
Beginning Balance, December 31, 2017
|
|
$
|
3,842,211
|
|
|
Initial Derivative Liability
|
|
|
1,133,704
|
|
|
Reclassification for note conversions and payments
|
|
|
(1,362,090
|
)
|
|
Fair Value Change
|
|
|
(1,541,611
|
)
|
|
Ending Balance, September 30, 2018
|
|
$
|
2,072,214
|
|
Gain or (loss) on fair value of derivatives for the three and nine months ended September 30, 2018 and 2017 is comprised of:
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
Initial derivative expense
|
|
$
|
20,393
|
|
|
$
|
3,157,811
|
|
|
$
|
518,704
|
|
|
$
|
5,334,582
|
|
|
Fair value change in derivatives
|
|
|
(864,898
|
)
|
|
|
5,296,943
|
|
|
|
(1,541,611
|
)
|
|
|
10,564,084
|
|
|
Loss (gain) on fair value of derivatives
|
|
$
|
(844,505
|
)
|
|
$
|
8,454,754
|
|
|
$
|
(1,022,907
|
)
|
|
$
|
15,898,666
|
|
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
NOTE 7 - Stockholders’ Deficit
Preferred Stock
10,000,000 shares of preferred stock, $0.0001 par value have been authorized.
Series A Convertible Preferred Stock
.
5,000,000 shares of preferred stock are designated as Series A Convertible Preferred Stock (“Series A Preferred Stock”). Each share of Series A Convertible Preferred Stock is convertible at the election of the holder into 0.004 shares of common stock, subject to a 4.9% beneficial ownership limitation, but has no voting rights until converted into common stock. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the outstanding shares of Series A Convertible Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders, whether from capital, surplus funds or earnings, and before any payment is made in respect of the shares of Common Stock, an amount equal to $2.50 per share of Series A Convertible Preferred Stock, subject to adjustment for stock dividends, combinations, splits, recapitalizations and the like with respect to the Series A Convertible Preferred Stock, plus any and all accrued but unpaid dividends. The holders of Series A Convertible Preferred Stock are entitled to dividends when declared by the board of directors. As of September 30, 2018, and December 31, 2017, there are no shares of Series A Preferred Stock outstanding.
Series B Preferred Stock
350,000 shares of preferred stock are designated as Series B Preferred Stock. Each share of Series B Preferred Stock is convertible at the election of the holder into .004 shares of common stock, subject to a 4.9% beneficial ownership limitation. Series B Preferred Stock has no voting rights until converted into common stock. The holders of the Series B Preferred Stock do not have any rights to dividends or any liquidation preferences. As of September 30, 2018, and December 31, 2017, there are 264,503 shares of Series B Preferred Stock outstanding.
Series C Preferred Stock
1,000,000 shares of preferred stock are designated as Series C Preferred Stock. Each share of Series C Preferred stock is convertible at the election of the holder into 100 shares of common stock. On October 23, 2015, (the “Amendment Date”), the Company amended the terms and conditions of the Series C Preferred stock, whereby each share of Series C Preferred stock entitles the holder thereof to 10,000 votes on all matters submitted to a vote of the stockholders of the Company. The Company determined that on the Amendment Date, the amended voting rights of the preferred stock resulted in a change of control of the Company. The holders of the Series C Preferred stock do not have any rights to dividends or any liquidation preferences. During the year ended March 31, 2016, the Company’s CEO and another shareholder returned a total of 12,791 shares of common stock to the Company for cancellation in exchange for the issuance of 319,768 shares of Series C Preferred Stock. As of September 30, 2018, and December 31, 2017, there are 319,768 shares of Series C preferred stock outstanding, of which 223,768 shares are owned by our Chairman and CEO, Dr. Thomas Cellucci. On October 30, 2017, Dr. Cellucci, and Carebourn Capital L.P. executed Amendment No.1 to their Pledge Agreement, whereby, Dr. Cellucci, as collateral security, pledged 223,768 shares of his Series C Preferred Stock to Carebourn.
Series D Convertible Preferred Stock
On January 12, 2018, the Corporation amended its Articles of Incorporation (the “Articles of Amendment”) to designate a series of preferred stock, the “Series D Preferred Stock.” There were 100,000 shares of preferred stock designated as Series D Preferred Stock, $0.0001 par value. Each share of Series D Preferred Stock is convertible at the election of the holder into a number of shares of Corporation common stock equal to $24.00 divided by the volume-weighted average price of the common stock as reported on OTCMarkets.com on the trading day immediately preceding conversion, subject to a 4.99% beneficial ownership limitation. The holders of the Series D Preferred Stock do not have any rights to dividends or any liquidation preferences, and they do not have any voting rights prior to conversion into common stock. As of June 30, 2019, and December 31, 2018, there are no shares of Series D Preferred Stock outstanding.
Series E Preferred Stock
On June 1, 2018, the Company amended its Articles of Incorporation in the State of Colorado to designate a series of preferred stock, the Series E Preferred Stock. One (1) share of preferred stock was designated as Series E Preferred Stock. The Series E Preferred Stock is not convertible into common stock, nor does the Series E Preferred Stock have any right to dividends and any liquidation preference. The Series E Preferred Stock entitles its holder to a number of votes per share equal to twice the number of votes of all outstanding shares of capital stock of the Company. On June 1, 2018, the Company issued 1 share of its Series E Preferred Stock to Dr. Cellucci, in consideration of $25,000 of accrued and unpaid wages, Dr. Cellucci’s stock pledge of Series C Preferred Stock as collateral to a lender, the Company’s failure to timely pay current and past salaries, and Dr. Cellucci’s willingness to accrue unpaid payroll and non-reimbursement of business expenses without penalty or action for all amounts. The issuance to Dr. Cellucci was made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as Dr. Cellucci is an accredited investor, there was no general solicitation, and the transaction did not involve a public offering. The Company determined that the issuance of the Series E Preferred Stock resulted in a change of control of the Company. The Company determined that the fair value of the Series E Preferred Stock issued to the Company’s CEO was $2,333,140. The fair value was determined as set forth in the Statement of Financial Accounting Standard ASC 820-10-35-37, Fair Value in Financial Instruments.
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
Common stock
Stock Split
On January 16, 2019, the Company affected a 10,000 for 1 reverse stock split. All common stock share and per share information has been retroactively adjusted to reflect this reverse stock split.
During the nine months ended September 30, 2018, the Company issued 145,099 shares of common stock for conversion of $1,121,691 of principal and $55,742 of accrued interest, for a total of $1,177,433.
On May 9, 2018, the Company agreed to issue 2,500 shares of the Company’s common stock to Triton Funds, LP’s (“Triton”) affiliate, Triton Funds LLC (See Note 8). The shares were issued on May 18, 2018.
As of September 30, 2018, there were 951,667 shares of common stock issued and outstanding and 1,221 shares of common stock to be issued.
Stock Options
The following table summarizes activities related to stock options of the Company for the nine months ended September 30, 2018:
|
|
|
Number of
Options
|
|
|
Weighted-Average Exercise Price per
Share
|
|
|
Weighted-Average Remaining Life
(Years)
|
|
|
Outstanding and exercisable at December 31, 2017
|
|
|
1
|
|
|
$
|
11,030,000
|
|
|
|
7.19
|
|
|
Outstanding and exercisable at September 30, 2018 (Restated)
|
|
|
1
|
|
|
$
|
11,030,000
|
|
|
|
6.44
|
|
The following table summarizes stock option information as of September 30, 2018:
|
Exercise Prices
|
|
|
Outstanding
|
|
|
Weighted Average
Contractual Life
|
|
Exercisable
|
|
|
$
|
75,0000,000
|
|
|
|
0
|
|
|
3.48 Years
|
|
|
0
|
|
|
$
|
2,500,000
|
|
|
|
1
|
|
|
6.85 Years
|
|
|
1
|
|
|
Total
|
|
|
|
1
|
|
|
6.44 Years
|
|
|
1
|
|
Warrants
For the nine months ended September 30, 2018, the Company did not grant any warrants, and there were no exercises of any existing warrants. The following table summarizes the activity related to warrants of the Company for the nine months ended September 30, 2018:
|
|
|
Number of
Warrants
|
|
|
Weighted-Average Exercise Price per
Share
|
|
|
Weighted-Average Remaining Life
(Years)
|
|
|
Outstanding and exercisable at December 31, 2017
|
|
|
1
|
|
|
$
|
4,470,000
|
|
|
|
2.49
|
|
|
Outstanding and exercisable at September 30, 2018 (Restated)
|
|
|
1
|
|
|
$
|
4,470,000
|
|
|
|
1.74
|
|
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
NOTE 8 - Commitments and Contingencies
Legal Matters
The Company is not a party to any significant pending legal proceedings other than as disclosed below, and no other such proceedings are known to be contemplated. No director, officer or affiliate of the Company, and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.
On or about March 27, 2018, Global Capital Partners, LLC (“Global”) sent a demand for payment of amounts allegedly owed by the Company to Global pursuant to several promissory notes and threatening legal action. The Company retained Texas litigation counsel and responded to the demand letter.
On September 7, 2018, the Company filed a claim against Liberated Solutions, Inc. d/b/a the Go Eco Group and Brian Conway for breach of contract and other causes of action in the County Court No. 2 for Travis County, Texas (case no. C-1-CV-18-008488), seeking approximately $55,000 in damages. On November 2, 2018, the court entered judgment against the defendants in favor of the Company for $55,000 in damages, plus $4,244 in attorney’s fees.
On October 1, 2018, the Company filed a lawsuit against Mile High Construction seeking $134,900 in damages plus interest and attorney’s fees.
Strategic Alliance Agreements
On September 5, 2017, the Company entered into a Strategic Alliance Agreement with DarkPulse Technology Holdings Inc. (“DarkPulse”), a New York corporation engaged in manufacturing hardware and software based on its BOTDA (Brillouin Optical Time Domain Analysis) technology, designating the Company as DarkPulse’s project-based partnership channel for government and non-governmental departments, agencies and units, for the purpose of promoting DarkPulse’s products, and pursuant to which DarkPulse will cross-promote the Company’s products and services, and the Company will be paid sales commissions for clients introduces to DarkPulse by the Company. As of September 30, 2018, the Company has not recognized any revenue or expenses related to this agreement. On October 19, 2017, the Company entered into an Addendum (the “Addendum”) to the Strategic Alliance Agreement with DarkPulse, pursuant to which Addendum the Company shall receive 20% of project revenue for DarkPulse’s “Five Deployments Eurasian Mining Project,” and 10% of project revenue for two additional DarkPulse agency agreements more specifically described in the Addendum. As of September 30, 2018, the Company has not recognized any revenue or expenses related to this agreement.
On January 3, 2018, the Company entered into a Strategic Alliance Agreement with QBRICS, Inc. (“QBRICS”), a corporation organized under the laws of Delaware engaged in providing customized private blockchain platforms and solutions for governmental and non-governmental departments / agencies / units for the purpose of promoting QBRICS’s relevant capabilities, products and/or service solutions, and pursuant to which QBRICS will cross-promote the Company’s products and services, and the Company will be paid sales commissions in the range of 10%-20% of project revenue for clients introduced by the Company, registered with QBRICS, and delivered through the Company or a QBRICS-designated distribution affiliate or sales channel. As of September 30, 2018, the Company has not recognized any revenue or expenses related to this agreement.
On January 4, 2018, the Company entered into a Strategic Alliance Agreement with AppGuard LLC (“AppGuard”), a corporation organized under the laws of Delaware engaged in providing anti-malware software for Windows devices, for the purpose of promoting AppGuard’s relevant capabilities, products and/or service solutions, and pursuant to which AppGuard will cross-promote the Company’s products and services, and the Company will be paid sales commissions in the range of 10%-20% of project revenue for clients introduced by the Company, registered with AppGuard, and delivered through the Company or a AppGuard-designated distribution affiliate or sales channel. As of September 30, 2018, the Company has recognized $1,666 in revenue and $738 in expenses related to the agreement.
On January 10, 2018, the Company entered into a Strategic Alliance Agreement with Fazync LLC (“Fazync”), a Colorado limited liability company engaged in providing energy-saving solutions and capabilities to the Critical Infrastructure/Key Resources arena, for the purpose of promoting Fazync’s relevant capabilities, products and/or service solutions, and pursuant to which Fazync will cross-promote the Company’s products and services, and the Company will be paid sales commissions in the range of 10%-20% of project revenue for clients introduced by the Company, registered with Fazync, and delivered through the Company or a Fazync-designated distribution affiliate or sales channel. As of September 30, 2018, the Company has not recognized any revenue or expenses related to this agreement.
On February 15, 2018, the Company entered into a Strategic Alliance Agreement (the “DP Telecom Strategic Alliance Agreement”) with IEVOLV Ventures, Inc., a California corporation engaged in providing turnkey telecom services (“IEVOLV”), and with DP Telecom Inc., a Wyoming corporation engaged in providing telecommunications implementation support for turn-key vendors with a focus on electrical and ground-based projects while providing logistical management for strategic partners in the northern California market (“DP Telecom” and together with IEVOLV the “MAP Partners”), for the purpose of promoting the MAP Partners’ relevant capabilities, products and/or service solutions, and pursuant to which the MAP Partners will cross-promote the Company’s products and services, and the Company will be paid sales commissions in the range of 15%-20% of project net profit for clients introduced by the Company. As of September 30, 2018, the Company has not recognized any revenue or expenses related to this agreement.
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
Pursuant to the DP Telecom Strategic Alliance Agreement, the parties also agreed that the Company would make every reasonable effort to fund $200,000 to DP Telecom within 60 days pursuant to a Credit Agreement attached to the DP Telecom Strategic Alliance Agreement as Exhibit A (the “Credit Agreement”), which the MAP Partners and the Company would execute at closing of the funding (the “Closing”). At the Closing, (1) Bravatek was to fund DP Telecom $200,000, (2) DP Telecom was to execute a secured promissory note (the “Note”) and security agreement (the “Security Agreement”) in the forms attached as exhibits to the Credit Agreement, (3) IEVOLV was to execute a guaranty (the “Guaranty”) in the form attached as an exhibit to the Credit Agreement, (4) each of DP Telecom and IEVOLV were to pay Bravatek 20% of their net profits for a minimum of 6 months following the Closing, and (5) each of DP Telecom and IEVOLV were to grant the Company a right of first refusal to provide telecom services for all telecom projects that either DP Telecom or IEVOLV receive for a minimum of 6 months following Closing. On March 1, 2018, the Company remitted $25,000 to DP Telecom in exchange for a Promissory Note. Since the entire $200,000 was not funded, other than the issuance of the Promissory Note, the parties have not proceeded to Closing and executed the additional agreements that were to be executed at Closing. The Company and DP Telecom entered into a settlement agreement on October 8, 2018 whereby DP Telcom agreed to repay the $25,000 with weekly payments of $300.
On March 14, 2018, the Company entered into a Strategic Alliance Agreement with OrangeHook, Inc. (“OrangeHook”), a Florida corporation engaged in the business of providing identification authentication and credentialing software, for the purpose of promoting OrangeHook’s relevant capabilities, products and/or service solutions, and pursuant to which OrangeHook will cross-promote the Company’s products and services, and the Company will be paid sales commissions in the range of 10%-20% of project revenue for clients introduced by the Company, registered with OrangeHook, and delivered through the Company or a OrangeHook-designated distribution affiliate or sales channel. As of September 30, 2018, the Company has not recognized any revenue or expenses related to this agreement.
On March 28, 2018, the Company entered into a Strategic Alliance Agreement with Center for Threat Intelligence, LLC (“Center”), a Washington limited liability company engaged in the business of providing critical threat intelligence training, for the purpose of promoting Center’s relevant capabilities, products and/or service solutions, and pursuant to which Center will cross-promote the Company’s products and services, and the Company will be paid sales commissions in the range of 10%-20% of project revenue for clients introduced by the Company, registered with Center, and delivered through the Company or a Center-designated distribution affiliate or sales channel. As of September 30, 2018, the Company has not recognized any revenue or expenses related to this agreement.
On May 11, 2018, the Company entered into a Strategic Alliance Agreement with KP Consulting, a Guam-based systems integration consulting services business. Pursuant to the agreement, the Company will offer a business advisory role to KP Consulting for prospective clients in the private and public sectors. KP Consulting will cross-promote the Company’s products and services, and the Company will be paid sales commissions in the range of 10%-20% of project revenue for clients introduced by the Company, registered with KP Consulting. As of September 30, 2018, the Company has not recognized any revenue or expenses related to this agreement.
On June 26, 2018, the Company entered into a Strategic Alliance Agreement with AG Capital Management, LLP (“AG”), a Kazakhstan-based company engaged in the business of providing scalable integrated secure IT services focused on financial, security, commerce and other markets for the purpose to streamline secure low-cost transactions. Pursuant to the agreement, the Company will offer a business advisory role to KP Consulting for prospective clients in the private and public sectors. AG will cross-promote the Company’s products and services, and the Company will be paid sales commissions in the range of 10%-20% of project revenue for clients introduced by the Company, registered with AG. As of September 30, 2018, the Company has not recognized any revenue or expenses related to this agreement.
Joint Venture Agreements
Effective December 21, 2017, the Company entered into a Joint Venture Agreement (the “Agreement”) with DarkPulse Technologies, Inc. (“DarkPulse”), pursuant to which (1) the parties formed a joint venture limited liability company in Delaware to develop, market and sell products and services based on DarkPulse’s patented BOTDA dark-pulse technology (the “Technology”) to be owned 40% by the Company and 60% by Dark Pulse (the “JV”); (2) the Company would fund $10,000 in initial capital to the JV; and (3) and the JV would have a royalty-free non-exclusive license to use the Technology in the North America, Asia and European government, military and CI/KR (Critical Infrastructure / Key Resources) market segments. While DarkPulse has a controlling financial interest in the JV, the Company and DarkPulse jointly manage the JV, and any significant decisions and/or actions of the JV require the mutual consent of both parties. On January 25, 2018, our CEO was appointed to the Board of Directors of DarkPulse, and on February 5, 2018, he was also named Co-CEO of DarkPulse. Additionally, during the nine months ended September 30, 2018, the Company funded $89,450 to the JV and was the only party with a financial risk in the JV. Due to the termination of the relationship between our CEO and DarkPulse in 2019, the company recorded a loss of these funds in the amount of $89,450. On March 26, 2019, DarkPulse notified the JV that it was terminating the JV’s license to DarkPulse’s technology.
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
Effective December 21, 2017, the Company entered into a Joint Venture Agreement (the “Agreement” or the “JV”) with The Go Eco Group, a corporation organized under the laws of the State of Nevada (“LIBE”), pursuant to which (1) the parties formed a JV limited liability company in Delaware to develop, market and sell products, services and technology based on a web-enabled Light Guard System (the “System”), (2) the JV is owned 35% by the Company and 65% by LIBE; (3) the Company funded $25,000 in initial capital to the JV; and (4) the JV shall have an irrevocable royalty-free non-exclusive license to use all of LIBE’s direct and/or licensed intellectual property necessary for the JV to develop and sell the System. While LIBE has a controlling financial interest in the JV, the Company and LIBE jointly manage the JV and any significant decisions and/or actions of the JV require the mutual consent of both parties. Therefore, the Company is accounting for its 40% ownership interest in the JV using the equity method of accounting. The JV is a related party to the Company. As of September 30, 2018, the JV owes the Company $30,000, and management has recorded an allowance for doubtful accounts of $30,000. The Company engaged a law firm to pursue the collection of the $30,000, and has now received a judgment as described above.
Other
On July 10, 2017, the Company filed an Affidavit of Claim in the amount of $552,444 with The Hanover Insurance Company (“Hanover”) as surety for YKTG, LLC (“YKTG”), related to YKTG’s alleged breaches of contract and failure to cure. Hanover denied the claim on the basis that the Company did not render “labor, materials and equipment” to YKTG relating to the YKTG construction contract for which Hanover was surety, and the Company is evaluating its options for legal recourse.
On October 30, 2017, Dr. Cellucci, and Carebourn Capital L.P. executed Amendment No.1 to their Pledge Agreement (the “Pledge Agreement”), whereby, Dr. Cellucci, as collateral security, pledged 223,768 shares of his Series C Preferred Stock to Carebourn.
On April 19, 2018, the Company entered into a three-year White Label Distribution and Marketing Agreement with a MAP partner, whereas, they developed a security application product that blocks the ability of malware to execute (the “Software”). The Company will market, distribute and sell the Software under the Company’s registered trademark “Tuitio”. The Company will amortize the $40,000 over the three-year term of the agreement beginning on the date that the product is delivered and by the vendor fulfilling all of their product delivery obligations of the agreement. Product delivery commenced in June 2018.
On May 9, 2018, the Company entered into an Equity Purchase Agreement (the “EPA”) with Triton Funds, LP (“Triton”) for $500,000, which EPA was amended effective as of August 30, 2018. Triton, a new fund launched by students at the University of California, San Diego (UCSD), is making the investment to drive the continued expansion of BVTK’s proprietary technology which assists corporate entities, governments, and individuals in protecting their organizations against errors, as well as cyber and physical attacks. Pursuant to the EPA, each closing for Capital Call Shares shall occur on the date that is 5 business days following the date that the Investor receives Capital Call Shares from the Company. The purchase price for the shares to be paid by Triton at each closing shall be 75% of the lowest daily volume-weighted average price of the Company’s common stock during the 5 trading days prior to a closing date. Triton’s obligation to purchase Capital Call Shares is subject to several conditions, including (i) that the Company has filed a registration statement with the SEC registering the Capital Call Shares within 130 days from the date of the amended EPA, and (ii) that the purchase of Capital Call Shares shall not cause Triton to own more than 4.99% of the outstanding shares of the Company’s common stock. On October 26, 2018, the Company filed the registration statement, but it has not been declared effective. In connection with the EPA, the Company issued 2,500 shares common stock to Triton’s affiliate, Triton Funds LLC, on May 18, 2018.
Management and the Board of Directors believes it is owed monies in the following amounts, by the following firms, for breaches of executed agreements of the given party. None of the amounts below are included in the assets of the Company reflected on its balance sheet. In April of 2018, the Company engaged a law firm to pursue collections of the following:
|
DTREDS, LLC
|
|
$
|
1,376,167
|
|
|
YKTG LLC
|
|
|
4,857,441
|
|
|
TOTAL
|
|
$
|
6,233,608
|
|
NOTE 9 - Subsequent Events
The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no other such events that warrant disclosure or recognition in the financial statements, except as stated herein.
Subsequent to September 30, 2018, the holders of the Company’s convertible notes converted $105,000 of the principal and interest balance of the convertible notes into 25,000 shares of common stock.
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
On October 26, 2018, the Company amended its Articles of Incorporation to increase the number of authorized shares of common stock to 11,600,000,000.
During October of 2018, Adar Bays, LLC (“Adar”), one of the Company’s lenders holding approximately $636,371.20 in convertible notes, sent two demand letters to the Company noting the Company in default for the Company’s failure to (i) repay the notes at maturity, (ii) honor a partial conversion of the notes, and (iii) reserve sufficient shares for issuance upon conversion of the notes. The Company retained litigation counsel, which responded to Adar’s counsel, and on or about November 9, 2018, Adar’s manager and the Company’s CEO agreed to headline settlement terms. The parties’ attorneys are in discussions regarding a more formal settlement agreement, the terms of which have not yet been agreed to by the parties.
On November 9, 2018, the Company issued a convertible promissory note, with a face value of $241,500, maturing on November 9, 2019, and stated interest of 10% to a third-party investor. The note is convertible at any time following the funding of the note into a variable number of the Company’s common stock, based on a conversion ratio of 60% of the average of the three lowest trading prices quoted for the 20 days prior to conversion. The note contained an original issue discount of $31,500.
On January 3, 2019, the Company issued 10,000 shares of common stock to Adar Bays in partial satisfaction of its obligations under, and the holder’s election to convert a $5,500 portion of, the Company’s convertible promissory note issued to Adar on December 19, 2014.
On January 7, 2019, the Company entered into a Strategic Alliance Agreement with Optimized Fuel Technologies, a Wyoming corporation engaged in the business of manufacturing and distributing Electric Vehicles, for the purpose of developing a joint Product Solution and Application Strategy whereby targeted markets, potential clients, and types of applications can be developed.
On January 17, 2019, the Company issued 51,811 shares of common stock to Adar Bays in partial satisfaction of its obligations under, and the holder’s election to convert a $7,409 portion of, the Company’s convertible promissory note issued to Adar on May 3, 2017.
On January 22, 2019, the Company issued 45,335 shares of common stock to Carebourn in partial satisfaction of its obligations under, and the holder’s election to convert a $8,750 portion of principal and $11,741.51 of interest, the Company’s convertible promissory note issued to Carebourn on December 26, 2017.
On January 26, 2019, the Company issued 59,671 shares of common stock to Adar Bays in partial satisfaction of its obligations under, and the holder’s election to convert a $8,533 portion of, the Company’s convertible promissory note issued to Adar on May 3, 2017.
On March 25, 2019, the Company entered into a Strategic Alliance Agreement with MC Smart Controls, a Utah corporation engaged in the business of providing engineering, design, manufacturing, sales, marketing, and installation of irrigation controls, water flow sensors and IIOT (Industrial Internet of Things) technology, for the purpose developing and implementing joint Product Solution and Application Strategy for targeted markets, potential clients, and applications.
On March 26, 2019, the Company issued 42,937 shares of common stock to Adar Bays in partial satisfaction of its obligations under, and the holder’s election to convert a $6,058 portion of, the Company’s convertible promissory note issued to Adar on May 3, 2017.
On March 26, 2019, the Company issued 64,971 shares of common stock to Adar Bays in partial satisfaction of its obligations under, and the holder’s election to convert a $13,185 portion of, the Company’s convertible promissory note issued to Adar on May 3, 2017.
On March 26, 2019, the Company entered into a Non-Binding Letter of Intent with Superior Innovation Technology Capital to create a possible Joint Venture or Merger of Superior Innovation Technology and Bravatek.
On April 1, 2019, the Company entered into a Strategic Alliance Agreement with Cellcrypt, Inc, (Cellcrypt), a Delaware corporation engaged in the business of secure mobile communications for smartphones, tables, and desktop PCs and Macs that have and are being certified for US Government use for the purpose of promoting Cellcrypt’s products through Solutions for Enterprise-Wide Procurement (SEWP) Government-Wide Acquisition Contract (GWAC).
On April 8, 2019, the Company issued a convertible promissory note, with a face value of $105,000, maturing on April 8, 2020, and stated interest of 9% to a third-party investor. The note is convertible at any time following the funding of the note into a variable number of the Company’s common stock, based on a conversion ratio of 60% of the average of the three lowed trading prices quoted for the 20 days prior to conversion. The note contained an original issue discount of $5,000.
April 22, 2019, and stated interest of 12% to a third-party investor. The note is convertible at any time following the funding of the note into a variable number of the Company’s common stock, based on a conversion ratio of 60% of the average of the three lowed trading prices quoted for the 20 days prior to conversion. The note contained an original issue discount of $5,325.
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
On April 30, 2019, the Company issued a convertible promissory note, with a face value of $16,100, maturing on April 30, 2020, and stated interest of 10% to a third-party investor. The note is convertible at any time following the funding of the note into a variable number of the Company’s common stock, based on a conversion ratio of 60% of the average of the three lowed trading prices quoted for the 20 days prior to conversion. The note contained an original issue discount of $2,100.
On May 3, 2019, the Company entered into a Strategic Alliance Agreement with Neotericon, LLC, a New Hampshire corporation engaged in the business of providing novel materials for use in energy generation and storage, substance detection and analysis, chemical manufacture, and secure identification of materials, for the purpose of developing a project-based channel for governmental and non-governmental departments, agencies, or units to promote Neotricon’s capabilities, products and/or service solutions.
On May 10, 2019, the Company entered into a Strategic Alliance Agreement with HS Today, a nonprofit, nonpartisan media outlet dedicated to informing and supporting the efforts of public, private, nonprofit, and academic organizations and practitioners engaged in homeland security mission, for the purpose of regularly featuring advertisements from the Company related to its cybersecurity software enterprise and consumer solutions.
On May 15, 2019, the Company issued a convertible promissory note, with a face value of $52,500, maturing on May 15, 2020 and stated interest of 8% to a third-party investor. The note is convertible at any time following the funding of the note into a variable number of the Company’s common stock, based on a conversion ratio of 60% of the average of the three lowed trading prices quotes for 20 days prior to conversion.
On May 21, 2019, the Company entered into a Strategic Alliance Agreement with Attacktica, Inc., a Virginia corporation, engaged in the business of providing top-tier cyber analysis services and cyber-security based products for both the public and private sectors—helping its clients maintain compliancy and improve their security posture in order to protect their valuable assets from unauthorized access and possible theft, modification, or destruction, for the purpose of forming a project-based business partnership channel for governmental and non-governmental departments, agencies, or units to promote Critical Power Group’s relevant products and/or service solutions.
On June 3, 2019, the Company entered into a Strategic Alliance Agreement with Emmet Harvest LLP, a corporation organized under the laws of Kazakhstan, engaged in the business of providing novel, higher yield metal-leaching processes, for the purpose of forming a project-based business partnership channel for governmental and non-governmental departments, agencies, or units to promote Emmet Harvest’s relevant products and/or service solutions.
On June 12, 2019, the Company entered into a Strategic Alliance Agreement with Mani Group a Utah corporation, engaged in the business of providing engineering, design, manufacturing, sales, marketing and installation of irrigation controls and water flow sensor technology, for the purpose of forming a project-based business partnership channel for governmental and non-governmental departments, agencies, or units to promote the Mani Group’s relevant products and/or service solutions.
On June 12, 2019, the Company entered into a Strategic Alliance Agreement with Critical Power Group, a Virginia corporation, engaged in the business of providing sales, marketing, and servicing energy efficient solutions for buildings and off-grid projects to high performance and energy efficient data centers in the public and private sector, for the purpose of forming a project-based business partnership channel for governmental and non-governmental departments, agencies, or units to promote Critical Power Group’s relevant products and/or service solutions.
On June 14, 2019, the Company entered into a Strategic Alliance Agreement with RMA Armament, a Iowa corporation, engaged in the business of providing top-tier, fully-tested body armor and protection for applications in both the public and private sectors for helping its clients maintain the capability to perform their duties in harsh or dangerous environments, for the purpose of forming a project-based business partnership channel for governmental and non-governmental departments, agencies, or units to promote Critical Power Group’s relevant products and/or service solutions.
On July 3, 2019, the Company entered into a settlement agreement with Global in connection with the $400,000 note payable, whereby the Company agreed to pay $385,000 in cash and issue a convertible note payable for $95,000. The cash is to be paid $7,500 at the end of each calendar month with the unpaid balance accruing interest at 10% after one year. The convertible note accrues interest at 10% per annum and is convertible into shares of common stock based on the average of the three lowest closing bid prices 10 days prior to conversion.
On July 8, 2019, the Company issued 68,028 shares of common stock to Adar Bays in partial satisfaction of its obligations under, and the holder’s election to convert a $10,177 portion of the Company’s convertible promissory note issued to Adar on May 3, 2017
On July 25, 2019, the Company issued 71,424 shares of common stock to Adar Bays in partial satisfaction of its obligations under, and the holder’s election to convert a $10,685 portion of the Company’s convertible promissory note issued to Adar on May 3, 2017
BRAVATEK SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
On August 5, 2019, the Company entered into a Strategic Alliance Agreement with Easy Aerial, Inc., a Delaware corporation, a small business which designs, produces, deploys and supports IT network integrated and fully autonomous drone-based solutions for perimeter security, first responders and incident management applications. Easy Aerial products include patented and cutting-edge technologies which are all implemented to create a highly reliable, dependable and effective system to deliver improved security and surveillance communications for the purpose of early detection and identification of security threats, for the purpose of forming a project-based business partnership channel for governmental and non-governmental departments, agencies, or units to promote Easy Aerial’s relevant capabilities, products and/or service solutions.
On August 5, 2019, the Company issued 66,966 shares of common stock to Adar Bays in partial satisfaction of its obligations under, and the holder’s election to convert a $10,681 portion of the Company’s convertible promissory note issued to Adar on May 3, 2017