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14. SUBSEQUENT EVENTS
12 Months Ended
Dec. 31, 2018
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 14 – SUBSEQUENT EVENTS

 

Amendment of the Certificate of Incorporation to Increase of Authorized Shares

 

On February 5, 2019, the majority stockholders holding a majority of the issued and outstanding voting shares of the Company amended the Company’s Certificate of Incorporation to increase the number of authorized shares of Common Stock from 250,000,000 to 3,000,000,000.

 

Entry into Material Agreement

 

Effective January 3, 2019, the Company, through its wholly-owned subsidiary, DarkPulse Technology Holdings, Inc. (“DTHI”), entered into a License Agreement with Battelle Memorial Institute (“Battelle”), which operates the Pacific Northwest National Laboratory (the “Battelle License”), pursuant to which Battelle granted DTHI the right to make, have made, use, import and sell products incorporating certain patents pertaining to (i) explosives detection when combined with a quadrupole or ion trap mass spectrometer, or with an ion mobility spectrometer, (ii) illicit drug detection when combined with a quadrupole or ion trap mass spectrometer, or with an ion mobility spectrometer and (iii) chemical warfare agent detection when combined with a quadrupole or ion trap mass spectrometer, or with an ion mobility spectrometer. The license is non-exclusive with respect to the explosive and illicit drug detection and exclusive with respect to the chemical warfare agent detection. The territory covered by the Battelle License includes any country in which Battelle has pending patent applications or issued patents set forth in the Battelle License and DTHI agreed to reimburse Battelle for agreed upon patenting expenses.

 

In consideration for the license, DTHI agreed to: (i) Pay Battelle $20,000 at the time of signing the Battelle License, of which $15,000 was paid and $5,000 was initially paid by the Company as an option fee, which was applied towards the fee; (ii) pay Battelle $10,000 on or before the 90-day anniversary of signing the Battelle License; (iii) pay to Battelle a royalty equal to 6% of gross sales of products or services incorporating the licensed patents, subject to minimum royalty payments of $10,000 for 2019, $30,000 for 2020, $50,000 for 2021 and $80,000 for 2022 and thereafter; (iv) pay to Battelle, in the event DTHI sublicenses the licensed patents, 25% of the Company's revenues from sublicensing; and (v) reimburse Battelle for certain costs and expenses of securing patent protection for the licensed patented technology.

  

The term of the Battelle License continues until the last of the licensed patents rights has expired, or the earlier adjudication that all of such proprietary rights are unenforceable. DTHI may terminate at anytime upon providing 60 days notice to Battelle. Either party may terminate the Battelle License Agreement prior to expiration of the term in the event that the other party breaches the Battelle License and fails to cure such breach within 60 days from receipt of notice of breach. However, in the event DTHI fails to provide Battelle a required report or a payment, then Battelle may terminate at anytime without notice.

 

Financings

 

GS Capital Partners, LLC

 

On January 10, 2019, the Company entered into a Securities Purchase Agreement with GS Capital Partners, LLC (“GS Capital”) for the sale of an 8% convertible redeemable note in the principal amount of $65,000 (the “GS Note") with an original issue discount of $4,000.  The financing closed on January 15, 2019.

 

The GS Note bears interest at the rate of 8% per annum.  All interest and principal must be repaid on January 10, 2020.  Subject to the Company increasing its authorized shares of common stock, the GS Note is convertible into common stock, at GS Capital’s option, at a 30% discount to the lowest trading prices of the common stock during the 20-trading day period prior to conversion.  In the event the Company prepays the GS Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by a premium ranging from 15% to 30%.

 

GS Capital has agreed to restrict its ability to convert the GS Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. As of the date hereof, the Company is obligated on $65,000 in face amount of GS Note issued to GS Capital. The GS Note is a debt obligation arising other than in the ordinary course of business which constitute a direct financial obligation of the Company.

 

The GS Note was offered and sold to GS Capital in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(a)(2) under the Securities Act of 1933 (the “Securities Act”) and/or Rule 506 promulgated under the Securities Act. GS Capital is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act.

 

Crown Bridge Partners, LLC

 

Effective February 12, 2019, the Company entered into a Securities Purchase Agreement with Crown Bridge Partners, LLC (“Crown Bridge”) for the sale of a convertible promissory note in the aggregate principal amount of up to $105,000 (the “February 2019 Crown Bridge Note”), which was dated February 5, 2019. Crown Bridge purchased the February 2019 Crown Bridge Note and agreed to pay aggregate consideration of up to $105,000 with an original issue discount of $10,500 in tranches as follows: $35,000 of principal amount was funded by payment of $31,500 on the effective date and the balance may be funded in Crown Bridge’s sole discretion at any time. The first tranche of funding under the February 2019 Crown Bridge Note carries a prorated original issue discount of $3,500.00 and bears interest at the rate of 8% per year. Interest accrues daily on the outstanding principal amount of the note at a rate per annum equal to 8% on the basis of a 365-day year.

 

Crown Bridge is entitled to, at any time or from time to time, convert the February 2019 Crown Bridge Note into shares of our common stock, at a conversion price per share equal to seventy percent (70%) of the lowest traded price of the common stock during the twenty (20) trading days immediately preceding the date of the date of conversion, upon the terms and subject to the conditions of the February 2019 Crown Bridge Note. The conversion price of the February 2019 Crown Bridge Note is subject to adjustment in the event of stock splits, stock dividends and similar corporate events.

 

Crown Bridge has agreed to restrict its ability to convert the February 2019 Crown Bridge Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.   

 

As of the date hereof, the Company is obligated on $35,000 in face amount of February 2019 Crown Bridge Note issued to Crown Bridge. The February 2019 Crown Bridge Note is a debt obligation arising other than in the ordinary course of business which constitute a direct financial obligation of the Company.

 

The February 2019 Crown Bridge Note was offered and sold to Crown Bridge in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(a)(2) under the Securities Act of 1933 (the “Securities Act”) and/or Rule 506 promulgated under the Securities Act. February 2019 Crown Bridge Note is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act.

 

The foregoing information is a summary of each of the agreements involved in the transactions described above, is not complete, and is qualified in its entirety by reference to the full text of those agreements, each of which is attached an exhibit to this Current Report on Form 8-K. Readers should review those agreements for a complete understanding of the terms and conditions associated with this transaction.

 

Removal of Directors and Certain Officers; Appointment of Certain Officers

 

On February 7, 2019, the stockholder holding a majority of the voting rights (the “Majority Stockholder”) of the Company executed a stockholder consent in accordance with Delaware General Corporation Law and the Company’s Bylaws to remove Thomas A. Cellucci as a director of the Company. As a result of the foregoing action by the Majority Stockholder, Thomas A. Cellucci was removed as a director of the Company on February 7, 2019.

 

On February 7, 2019, the Company, in its capacity as the stockholder holding 100% of the voting rights of its wholly-owned subsidiary, DarkPulse Technologies, Inc. (“DPT”), removed Thomas A. Cellucci as a director of DPT in accordance with the relevant provisions of the New Brunswick Business Corporations Act and DPT’s Articles of Incorporation and Bylaws.

 

On March 1, 2019, the Board of Directors of the Company terminated Thomas A. Cellucci as an Executive Officer of the Company, and appointed Dennis M. O’Leary as Chief Executive Officer and Secretary of the Company.

 

On March 1, 2019, the Board of Directors of DPT terminated Thomas A. Cellucci as an Executive Officer of DPT, and appointed Dennis M. O’Leary as Chief Executive Officer of DPT.

 

On March 8, 2019, DarkPulse, Inc. terminated Stephen Goodman as Chief Financial Officer of the Company, and appointed Dennis M. O’Leary as Chief Financial Officer of the Company. The decisions to dismiss Stephen Goodman as Chief Financial Officer of the Company and appoint Dennis O’Leary as Chief Financial Officer of the Company were approved and ratified by the Company’s Board of Directors.

 

On March 18, 2019, the Company terminated Mark A. Banash as Chief Technology Officer of the Company. The decision to dismiss Mark Banash as Chief Technology Officer of the Company was approved and ratified by the Company’s Board of Directors.

 

On March 18, 2019, DPT terminated Mark A. Banash as Chief Technology Officer of DPT. The decision to dismiss Mark A. Banash as Chief Technology Officer of DPT was approved and ratified by DPT’s Board of Directors.

 

On March 19, 2019, the Company terminated David Singer as Chief Marketing Officer of the Company. The decision to dismiss David Singer as Chief Marketing Officer of the Company was approved and ratified by the Company’s Board of Directors.

 

Change in Certifying Accountant

 

On March 11, 2019, the Company advised Haynie & Company (the “Former Auditor”) that it was dismissed as the Company’s independent registered public accounting firm. The decision to dismiss the Former Auditor as the Company’s independent registered public accounting firm was approved by the Company’s Board of Directors. On March 11, 2019, the Company engaged Boyle CPA, LLC (the “New Auditor”) as its independent registered public accounting firm for the Company’s fiscal year ended December 31, 2018. The decision to engage the New Auditor as the Company’s independent registered public accounting firm was approved and ratified by the Company’s Board of Directors.

 

Technology License Revocation

 

On March 26, 2019 (the “Technology License Revocation Date”), DarkPulse Technologies, Inc. (“DPT”), a wholly-owned subsidiary of the Company, informed DarkPulse BVTK, LLC (the “JV Entity”) and Bravatek Solutions, Inc. ("Bravatek") that, effective immediately, DPT was revoking from the JV Entity that certain exclusive, but revocable, right and license to promote, market and sell products and services based on the patented BOTDA dark-pulse technology (the “Technology”) exclusively owned by DPT and the Company, and that, as of the Technology License Revocation Date, neither the JV Entity, nor Bravatek or any of its respective shareholders, officers, directors, affiliates, agents, consultants, counsel, employees, vendors, investors, subsidiaries, executors, administrators, successors or assigns (collectively, the “BVTK Parties”) will possess or maintain any rights, powers, licenses or privileges to promote, market, sell or develop products and services anywhere in the world based on the Technology or any derivative thereof (collectively, the “DarkPulse Technology”), and that, accordingly, as of the Technology License Revocation Date, any and all ownership rights, powers, licenses and privileges to the DarkPulse Technology exclusively and solely remain with and belong to DPT and the Company. In addition, DPT directed the JV Entity and the BVTK Parties to return all confidential and proprietary information, documents and materials pertaining to DPT and its DarkPulse Technology that are in their possession, and DPT informed the JV Entity and the BVTK Parties that they are strictly prohibited from sharing with third parties any confidential and proprietary information, documents or materials pertaining to or in connection with DPT or its DarkPulse Technology.