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Table of Contents
As filed with the Securities and Exchange
Commission on April 20, 2022
Registration No. 333-261453
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
DARKPULSE,
INC.
(Exact name of registrant as specified in its
charter)
Delaware |
|
7372 |
|
87-0472109 |
(State or Other Jurisdiction
of Incorporation) |
|
(Primary Standard
Classification Code) |
|
(IRS Employer
Identification No.) |
1345 Ave of the Americas, 2nd Floor
New York, NY 10105
(800) 436-1436
(Address, including zip code, and telephone number,
including area code of registrant’s principal executive offices)
The Corporation Trust Company
Corporation Trust Center
1209 Orange St.
Wilmington, DE 19801
(302) 658-7581
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Brian Higley, Esq.
Business Legal Advisors, LLC
14888 Auburn Sky Drive
Draper, UT 84020
(801) 634-1984
Approximate date of
commencement of proposed sale to the public:
As soon as practicable
after the effective date of this Registration Statement.
Approximate date of commencement of proposed sale
to the public: As soon as practicable and from time to time after this Registration Statement is declared effective.
If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.
☒
If this Form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
Non-accelerated filer |
☒ |
Smaller reporting company |
☒ |
|
|
Emerging growth company |
☐ |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
The registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(A) of the Securities
Act or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(A), may
determine.
EXPLANATORY NOTE
On December 1, 2021, DarkPulse, Inc., a Delaware
corporation (the “Company”), filed a registration statement with the Securities and Exchange Commission (the “SEC”)
on Form S-1 (File No. 333-261453), as amended (the “Registration Statement”), covering the sales of up to 300,000,000
shares of the Company’s common stock, par value $0.001 (the “Common Stock”). The Registration Statement was originally
declared effective by the SEC on December 10, 2021.
This Post-Effective Amendment No. 1 is being
filed in order to include information from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021
that was filed with the SEC on April 15, 2022 and to make certain corresponding changes in the Registration Statement.
No additional securities are being registered
under this Post-Effective Amendment. All applicable registration and filing fees were paid at the time of the original filing of the Registration
Statement.
The information in this prospectus
is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities
in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS |
SUBJECT TO COMPLETION |
DATED APRIL 20, 2022 |
300,000,000 Shares of Common Stock
This prospectus relates to the offer and resale
of up to: 300,000,000 shares of our common stock, par value $0.0001 per share (the “Shares”), that may be purchased
by GHS Investments LLC, a Nevada limited liability company (“GHS”), pursuant to the Equity Financing Agreement dated
November 9, 2021 between the Company and GHS (the “EFA”). GHS is also referred to herein as the “Selling Security
Holder.”
We will not receive any of the proceeds from the
sales of the Shares by the Selling Security Holder.
The Selling Security Holder identified in this
prospectus may offer the shares of Common Stock from time to time through public or private transactions at prevailing market prices or
at privately negotiated prices. The Selling Security Holder can offer all, some or none of its shares of Common Stock, thus we have no
way of determining the number of shares of Common Stock it will hold after this offering. See “Plan of Distribution.”
The Selling Security Holder is an “underwriter”
within the meaning of Section 2(a)(11) of the Securities Act.
Our Common Stock is currently quoted on the OTC
Markets under the symbol “DPLS.” On April 14, 2022, the last reported sale price of our Common Stock on the OTC Markets
was $0.048.
Investing in our Common Stock involves a high
degree of risk. You should review carefully the risks and uncertainties described under the heading “Risk Factors”
beginning on page 5 of this prospectus, and under similar headings in any amendments or supplements to this prospectus.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus.
Any representation to the contrary is a criminal offense.
The date of this prospectus is April 20, 2022
TABLE OF CONTENTS
You should rely only on the information contained
in this prospectus. We have not authorized anyone to provide you with information different from that which is contained in this prospectus.
This prospectus may be used only where it is legal to sell these securities. The information in this prospectus may only be accurate on
the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of securities.
ABOUT THIS PROSPECTUS
The registration statement of which this prospectus
forms a part that we have filed with the U.S. Securities and Exchange Commission (the “SEC”) and includes exhibits
that provide more detail of the matters discussed in this prospectus. You should read this prospectus and the related exhibits filed with
the SEC, together with the additional information described under the heading “Where You Can Find More Information” before
making your investment decision.
You should rely only on the information provided
in this prospectus or in any prospectus supplement or any free writing prospectuses or amendments thereto. Neither we, nor the Selling
Security Holder, have authorized anyone else to provide you with different information. If anyone provides you with different or inconsistent
information, you should not rely on it. You should assume that the information in this prospectus is accurate only as of the date hereof.
Our business, financial condition, results of operations and prospects may have changed since that date.
Neither we, nor the Selling Security Holder, are
offering to sell or seeking offers to purchase these securities in any jurisdiction where the offer or sale is not permitted. Neither
we, nor the Selling Security Holder, have done anything that would permit this offering or possession or distribution of this prospectus
in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who
come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities
as to distribution of the prospectus outside of the United States.
Information contained in, and that can be accessed
through, our web site, www.darkpulse.com, does not constitute part of this prospectus.
This prospectus includes market and industry data
that has been obtained from third party sources, including industry publications, as well as industry data prepared by our management
on the basis of its knowledge of and experience in the industries in which we operate (including our management’s estimates and
assumptions relating to such industries based on that knowledge). Management’s knowledge of such industries has been developed through
its experience and participation in these industries. While our management believes the third-party sources referred to in this prospectus
are reliable, neither we nor our management have independently verified any of the data from such sources referred to in this prospectus
or ascertained the underlying economic assumptions relied upon by such sources. Internally prepared and third-party market forecasts in
particular are estimates only and may be inaccurate, especially over long periods of time. In addition, the underwriters have not independently
verified any of the industry data prepared by management or ascertained the underlying estimates and assumptions relied upon by management.
Furthermore, references in this prospectus to any publications, reports, surveys or articles prepared by third parties should not be construed
as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report,
survey or article is not incorporated by reference in this prospectus.
PROSPECTUS SUMMARY
This summary highlights information contained
elsewhere in this prospectus; it does not contain all the information you should consider before investing in our Common Stock. You should
read the entire prospectus before making an investment decision. Throughout this prospectus, the terms the “Company”, “DarkPulse”,
“we,” “us,” “our,” and “our company” refer to DarkPulse, Inc., a Delaware corporation.
Company Overview
DarkPulse, Inc. (“DarkPulse”
or the "Company") is a technology-security company incorporated in 1989 as Klever Marketing, Inc ("Klever").
One of our principal wholly-owned subsidiaries, DarkPulse Technologies Inc. ("DPTI"), originally started as a technology
spinout from the University of New Brunswick, Fredericton, Canada. DPI is comprised of multiple security platforms: Patented BOTDA Fiber
Optic sensor systems and Satellite Communications services.
In December 2010, DPTI entered into an Assignment
Agreement with the University of New Brunswick, Canada (the “University”), pursuant to which the University sold,
transferred, and assigned to us certain patents related to the University’s BOTDA dark-pulse technology (the "Patents")
in exchange for the issuance of a debenture to the University in the amount of C$1,500,000 (Canadian dollars). In April 2017, DPTI
issued a replacement debenture to the University in the amount of US$1,491,923 (the “Debenture”). The Patents
and the Debenture were initially recorded in our accounts at $1,491,923, based upon the exchange rate between the U.S. dollar and the
Canadian dollar on December 16, 2010, the date of the original debenture. In addition to the repayment of principal and interest, the
Debenture requires DPTI to pay the University a 2% royalty on sales of any and all products or services which incorporate the Patents
for a period of five years commencing on April 24, 2018, as well as to reimburse the University for its patent-related costs.
On April 27, 2018, Klever entered into an Agreement
and Plan of Merger (the “Merger Agreement” or the “Merger”) involving Klever as the surviving parent
corporation and acquiring DPTI as its wholly-owned subsidiary. On July 18, 2018, the parties closed the Merger Agreement, as amended on
July 7, 2018, and the name of the Company was subsequently changed to “DarkPulse, Inc.” With the change of control of the
Company, the Merger was accounted for as a recapitalization in a manner similar to a reverse acquisition.
On July 20, 2018, we filed a Certificate of
Amendment to our Certificate of Incorporation with the State of Delaware, changing the name of the Company to “DarkPulse, Inc.”
We filed a corporate action notification with the Financial Industry Regulatory Authority (“FINRA”), and our ticker
symbol was changed to “DPLS.”
Our security and monitoring systems will be
delivered in applications for critical infrastructure/ key resources such as but not limited to border security, pipelines, the oil and
gas industry and mine safety. Current uses of fiber optic distributed sensor technology have been limited to quasi-static, long-term structural
health monitoring due to the time required to obtain the data and its poor precision. Our patented BOTDA dark-pulse sensor technology
allows for the monitoring of highly dynamic environments due to its greater resolution and accuracy.
The Company has recently completed several acquisitions.
Our Business
We offer a full suite of engineering, installation
and security management solutions to industries and governments. Coupled with our patented Brillouin
optical time domain analyzer (“BOTDA”) dark-pulse technology (the “DarkPulse Technology”),
we provide our customers a comprehensive data stream of critical metrics for assessing the health and security of their infrastructure.
Our comprehensive system provides for rapid, precise analysis and responsive activities predetermined by the end-user customer. These
responses include the use of “smart” AI platformed cameras, facial recognition technologies and multiple drone platforms.
Our User Interface (UI) is cloud based which offers end-users access to their systems on any device located anywhere in the world. Additional
programming of the UI is being completed within a game engine that will also offer access via Virtual Reality headsets, allowing end-users
to virtually inspection their assets.
Historically, distributed sensor systems have
been too costly, slow and limited in their capabilities to attain widespread use. In addition, Brillouin-based sensors have been plagued
with temperature and strain cross-sensitivity, i.e. the inability to distinguish between temperature and strain change along the same
fiber. The loss of spatial resolution with an increase in fiber length has also limited the use of distributed sensor systems. Due to
these shortcomings, existing technologies are unable to succeed within today’s dynamic environments, and needs for more advanced
sensor technologies have remained unsatisfied.
By contrast to existing technologies, the DarkPulse
Technology is a distributed-fiber sensing system, based on dark-pulse Brillouin scattering, which reports in real-time
on conditions such as temperature, stress, strain corrosion and structural health monitoring of Critical Infrastructure/Key Resources
including Bridges, Buildings, Roadways pipelines and mining installations.
DarkPulse Technology’s differentiators from
and advantages over existing technologies:
|
· |
Real-time Reporting: Higher data acquisition speeds allowing for structural monitoring of dynamic systems |
|
|
|
|
· |
Cost to Customer: Significantly lower acquisition and operating costs |
|
|
|
|
· |
Precision: A greater magnitude of precision and spatial resolution than other systems currently available |
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Applications: Wider range of capabilities than other systems currently available |
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Power consumption: Lower power consumption than existing systems allowing for off-grid installations |
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Integration: Capable of integrating with existing systems |
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Central station monitoring/cloud-based GUI |
We believe that these key advantages should
allow us not only to enter existing markets, but more importantly, to open new market opportunities with new applications. We intend
to leverage new applications to target clients that have been unable to make use of distributed fiber optic technology to date.
Available Information
All reports of the Company filed with the SEC
are available free of charge through the SEC’s website at www.sec.gov. In addition, the public may read and copy materials
filed by the Company at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. The public may also
obtain additional information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.
Where You Can Find Us
The Company’s executive offices are located
at 1345 Ave of the Americas, 2nd Floor, New York, NY 10105, and our telephone number is (800) 436-1436. Our website address
is www.darkpulse.com. Information contained on our website does not form part of this prospectus and is intended for informational
purposes only.
THE OFFERING
Common Stock outstanding before the offering |
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5,379,471,416 shares of Common Stock. |
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Common Stock to be outstanding after giving effect to the issuance of 300,000,000 shares
of Common Stock, 169,649,518 of which have been sold with 130,350,482 remaining to be issued |
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5,584,394,889 shares of Common Stock. |
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Use of Proceeds |
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We will not receive any of the proceeds from any sale of the shares of Common Stock by the Selling Security Holder. We will receive proceeds from the purchase of the Common Stock under the EFA from the Selling Security Holder. See “Use of Proceeds.” |
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Risk Factors |
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The Common Stock offered hereby involves a high degree of risk and
should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors”
beginning on page 5. |
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Trading Symbol |
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The Company’s Common Stock is quoted on the OTC Markets under the symbol “DPLS.” |
The number of shares of Common Stock outstanding
is based on an aggregate of 5,379,471,416 shares outstanding as of April 11, 2022 and excludes the shares of Common Stock issuable upon
purchase of the Shares under the EFA.
For a more detailed description of the Shares
and the EFA, see “Private Placement”.
RISK FACTORS
Readers of this Prospectus should carefully consider
the risks and uncertainties described below.
Our failure to successfully address the risks
and uncertainties described below would have a material adverse effect on our business, financial condition and/or results of operations,
and the trading price of our common stock may decline and investors may lose all or part of their investment. We cannot assure you that
we will successfully address these risks or other unknown risks that may affect our business.
As an enterprise engaged in the commercialization
of new technology, our business is inherently risky. Our common shares are considered speculative during the development of our business
operations. Prospective investors should consider carefully the risk factors set out below.
Risks Related to Our Business
Business interruptions, including any interruptions
resulting from COVID-19, could significantly disrupt our operations and could have a material adverse impact on us if the situation continues.
The ongoing coronavirus outbreak which began in
China at the beginning of 2020 has impacted various businesses throughout the world, including travel restrictions and the extended shutdown
of certain businesses in impacted geographic regions. If the coronavirus outbreak situation should worsen, we may experience disruptions
to our business including, but not limited to equipment, to our workforce, or to our business relationships with other third parties.
The extent to which the coronavirus impacts our
operations or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted
with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus and
the actions to contain the coronavirus or treat its impact, among others. Any such disruptions or losses we incur could have a material
adverse effect on our financial results and our ability to conduct business as expected.
Escalating global tensions, including
the conflict between Russia and Ukraine, could negatively impact us.
The ongoing conflict between Russia and Ukraine
could lead to disruption, instability and volatility in global markets and industries that could negatively impact our operations. The
U.S. government and other governments in jurisdictions in which we operate have imposed severe sanctions and export controls against Russia
and Russian interests and threatened additional sanctions and controls. The impact of these measures, as well as potential responses to
them by Russia, is currently unknown and they could adversely affect our business, partners or customers.
If we default on the Convertible Debenture, the secured holder
could take possession of our assets, including our patents and other intellectual property.
The Convertible Debenture (Secured) issued April
24, 2017, is secured by our assets, which includes our patents and other intellectual property. In the event that we default on the obligations
in the Debenture, the secured holder could take possession of our assets, including our patents and other intellectual property. If this
were to occur, investors would likely lose all of their investment.
We need to continue as a going concern if our business is to
succeed.
Our independent registered public accounting
firm reports on our audited financial statements for the years ended December 31, 2021 and 2020, indicate that there are a number
of factors that raise substantial risks about our ability to continue as a going concern. Such factors identified in the report are our
accumulated deficit since inception, our failure to attain profitable operations, the excess of liabilities over assets, and our dependence
upon obtaining adequate additional financing to pay our liabilities. If we are not able to continue as a going concern, investors could
lose their investments.
We have made and
expect to continue to make acquisitions that could disrupt our operations and harm our operating results.
Our growth depends upon
market growth, our ability to enhance our existing products, and our ability to introduce new products on a timely basis. We intend to
continue to address the need to develop new products and enhance existing products through acquisitions of other companies, product lines,
technologies, and personnel. Acquisitions involve numerous risks, including the following:
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Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired companies, particularly companies with large and widespread operations and/or complex products; |
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Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions; |
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Potential difficulties in completing projects associated with in-process research and development intangibles; |
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Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions; |
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Initial dependence on unfamiliar supply chains |
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Insufficient revenue to offset increased expenses associated with acquisitions; and |
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The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans. |
Acquisitions may also
cause us to:
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Issue common stock that would dilute our current shareholders’ percentage ownership; |
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Use a substantial portion of our cash resources or incur debt; |
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Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition; |
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Record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges; |
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Incur amortization expenses related to certain intangible assets; |
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Incur tax expenses related to the effect of acquisitions on our intercompany research and development cost sharing arrangement and legal structure; |
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Incur large and immediate write-offs and restructuring and other related expenses; and |
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Become subject to intellectual property or other litigation. |
Mergers and acquisitions
are inherently risky and subject to many factors outside of our control, and no assurance can be given that our previous or future acquisitions
will be successful and will not materially adversely affect our business, operating results, or financial condition. Failure to manage
and successfully integrate acquisitions could materially harm our business and operating results. Prior acquisitions could result in a
wide range of outcomes, from successful introduction of new products and technologies to a failure to do so. Even when an acquired company
has already developed and marketed products, there can be no assurance that product enhancements will be made in a timely fashion or that
pre-acquisition due diligence will have identified all possible issues that might arise with respect to such products.
From time to time, we
have made acquisitions that resulted in charges in an individual quarter. These charges may occur in any particular quarter, resulting
in variability in our quarterly earnings. In addition, our effective tax rate for future periods is uncertain and could be impacted by
mergers and acquisitions. Risks related to new product development also apply to acquisitions.
Because of the unique difficulties and uncertainties
inherent in technology development, we face a risk of business failure.
Potential investors should be aware of the difficulties
normally encountered by companies developing new technology and the high rate of failure of such enterprises. The likelihood of success
must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the development
of new technology with limited personnel and financial means. These potential problems include, but are not limited to, unanticipated
technical problems that extend the time and cost of product development, or unanticipated problems with the operation of our technology
or that with which we are licensing that also extend the time and cost of product development.
If we do not obtain additional financing
or sufficient revenues, our business will fail.
Our current operating funds are less than
necessary to fulfill our operating costs and we will need to obtain additional financing in order to continue our business operations.
Although we are generating revenues, we are not generating net income.
We will require additional financing to execute
our business plan through raising additional capital and/or generating greater revenues.
Obtaining additional financing is subject to a
number of factors, including acceptance of our DarkPulse Technology and current financial condition as well as general market conditions.
These factors affect the timing, amount, terms
or conditions of additional financing unavailable to us. If additional financing is not arranged, we will face the risk of going out of
business. Our management is currently engaged in actively pursuing multiple financing options in order to obtain the capital necessary
to execute our business plan.
The most likely source of future funds presently
available to us is through the additional sales of equity or through convertible debt instruments. Any sales of share capital or conversion
of convertible debt will most likely result in dilution to existing shareholders.
There is no history upon which to base any assumption
as to the likelihood we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues
or achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.
Successful technical development of our
products does not guarantee successful commercialization.
We may successfully complete the technical development
for one or all of our product development programs, but still fail to develop a commercially successful product for a number of reasons,
including among others the following:
| · | Ineffective distribution and marketing; |
| · | Lack of sufficient cooperation from our partners;
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| · | Demonstrations of the products not aligning with
or meeting customer needs. |
Our success in the market for the products we
develop will depend largely on our ability to prove our products’ capabilities. Upon demonstration, our products and/or technology
may not have the capabilities they were designed to have or that we believed they would have. Furthermore, even if we do successfully
demonstrate our products’ capabilities, potential customers may be more comfortable doing business with a larger, more established,
more proven company than us. Moreover, competing products may prevent us from gaining wide market acceptance of our products. Significant
revenue from new product investments may not be achieved for a number of years, if at all.
If we fail to protect our intellectual property rights, we could
lose our ability to compete in the marketplace.
Our intellectual property and proprietary rights
are important to our ability to remain competitive and for the success of our products and our business. We rely on a combination of patent,
trademark and trade secret laws as well as confidentiality agreements and procedures, non-compete agreements and other contractual provisions
to protect our intellectual property, other proprietary rights and our brand. We have confidentiality agreements in place with our consultants,
customers and certain business suppliers and plan to require future employees to enter into confidentiality and non-compete agreements.
We have little protection when we must rely on trade secrets and nondisclosure agreements. Our intellectual property rights may be challenged,
invalidated or circumvented by third parties. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge
or other trade secrets by employees or competitors. Furthermore, our competitors may independently develop technologies and products that
are substantially equivalent or superior to our technologies and/or products, which could result in decreased revenues. Moreover, the
laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S. Litigation may be
necessary to enforce our intellectual property rights which could result in substantial costs to us and substantial diversion of management
attention. If we do not adequately protect our intellectual property, our competitors could use it to enhance their products. Our inability
to adequately protect our intellectual property rights could adversely affect our business and financial condition, and the value of our
brand and other intangible assets.
Other companies may claim that we infringe
their intellectual property, which could materially increase our costs and harm our ability to generate future revenue and profit.
We do not believe that we infringe the proprietary
rights of any third party, but claims of infringement are becoming increasingly common and third parties may assert infringement claims
against us. It may be difficult or impossible to identify, prior to receipt of notice from a third party, the trade secrets, patent position
or other intellectual property rights of a third party, either in the United States or in foreign jurisdictions. Any such assertion may
result in litigation or may require us to obtain a license for the intellectual property rights of third parties. If we are required to
obtain licenses to use any third-party technology, we would have to pay royalties, which may significantly reduce any profit on our products.
In addition, any such litigation could be expensive and disruptive to our ability to generate revenue or enter into new market opportunities.
If any of our products were found to infringe other parties’ proprietary rights and we are unable to come to terms regarding a license
with such parties, we may be forced to modify our products to make them non-infringing or to cease production of such products altogether.
The nature of our business involves significant
risks and uncertainties that may not be covered by insurance or indemnity.
We develop and sell products where insurance or
indemnification may not be available, including:
| · | Designing and developing products using advanced technologies in intelligence and homeland security applications that are intended to operate in high demand, high risk situations;
and |
| · | Designing and developing products to collect,
distribute and analyze various types of information. |
Certain products may raise questions with respect to issues of privacy rights, civil liberties, intellectual
property, trespass, conversion and similar concepts, which may raise new legal issues. Indemnification to cover potential claims or liabilities
resulting from a failure of technologies developed or deployed may be available in certain circumstances but not in others. We are not
able to maintain insurance to protect against all operational risks and uncertainties. Substantial claims resulting from an accident,
failure of our product, or liability arising from our products in excess of any indemnity or insurance coverage (or for which indemnity
or insurance is not available or was not obtained) could harm our financial condition, cash flows, and operating results. Any accident,
even if fully covered or insured, could negatively affect our reputation among our customers and the public, and make it more difficult
for us to compete effectively.
We are heavily reliant on Dennis O’Leary,
our Chairman and Chief Executive Officer, and the departure or loss of Dennis O’Leary could disrupt our business.
We depend heavily on the continued efforts of
Dennis O’Leary, Chairman, Chief Executive Officer and director. Mr. O’Leary is essential to our strategic vision and day-to-day
operations and would be difficult to replace. We currently do not have an employment agreement with Mr. O’Leary, thus we cannot
be certain that he will desire to continue with us for the necessary time it will to complete the product development and initial sales
channel development. The departure or loss of Mr. O’Leary, or the inability to hire and retain a qualified replacement, could negatively
impact our ability to manage our business.
If we are unable to recruit and retain key
management, technical and sales personnel, our business would be negatively affected.
For our business to be successful, we need to
attract and retain highly qualified technical, management and sales personnel. The failure to recruit additional key personnel when needed
with specific qualifications and on acceptable terms or to retain good relationships with our partners might impede our ability to continue
to develop, commercialize and sell our products. To the extent the demand for skilled personnel exceeds supply, we could experience higher
labor, recruiting and training costs in order to attract and retain such employees. We face competition for qualified personnel from other
companies with significantly more resources available to them and thus may not be able to attract the level of personnel needed for our
business to succeed.
Material weaknesses in our internal control
over financial reporting may, until remedied, cause errors in our financial statements or cause our filings with the SEC to not be timely.
We believe that material weaknesses exist
in our internal control over financial reporting as of December 31, 2021, including those related to (i) our internal audit
functions and (ii) a lack of segregation of duties within accounting functions. If our internal control over financial reporting or
disclosure controls and procedures are not effective, there may be errors in our financial statements that could require a
restatement or our filings may not be timely made with the Securities and Exchange Commission (the “SEC”). We
intend to implement additional corporate governance and control measures to strengthen our control environment as we are able, but
we may not achieve our desired objectives. Moreover, no control environment, no matter how well designed and operated, can prevent
or detect all errors or fraud. We may identify material weaknesses and control deficiencies in our internal control over financial
reporting in the future that may require remediation and could lead investors losing confidence in our reported financial
information, which could lead to a decline in our stock price.
Risks Related to Our Organization and Our Common
Stock
You may experience dilution of your ownership
interests because of the future issuance of additional shares of our common or preferred stock or other securities that are convertible
into or exercisable for our common or preferred stock.
We are authorized to issue an aggregate of 20,000,000,000
shares of common stock and 2,000,000 shares of “blank check” preferred stock. In the future, we may issue our authorized but
previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We may issue
additional shares of our common stock or other securities that are convertible into or exercisable for our common stock in connection
with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business
purposes. The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of the
common stock. We will need to raise additional capital in the near future to meet our working capital needs, and there can be no assurance
that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with these
capital raising efforts, including at a price (or exercise or conversion prices) below the price an investor paid for stock.
Because the SEC imposes additional sales
practice requirements on brokers who deal in our shares that are penny stocks, some brokers may be unwilling to trade them. This means
that investors may have difficulty reselling their shares and may cause the price of the shares to decline.
Our shares qualify as penny stocks and are covered
by Section 15(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which imposes additional
sales practice requirements on broker/dealers who sell our securities in this offering or in the aftermarket. In particular, prior to
selling a penny stock, broker/dealers must give the prospective customer a risk disclosure document that: contains a description of the
nature and level of risk in the market for penny stocks in both public offerings and secondary trading; contains a description of the
broker/dealers’ duties to the customer and of the rights and remedies available to the customer with respect to violations of such
duties or other requirements of Federal securities laws; contains a brief, clear, narrative description of a dealer market, including
“bid” and “ask” prices for penny stocks and the significance of the spread between the bid and ask prices; contains
the toll free telephone number for inquiries on disciplinary actions established pursuant to section 15(A)(i); defines significant terms
used in the disclosure document or in the conduct of trading in penny stocks; and contains such other information, and is in such form
(including language, type size, and format), as the SEC requires by rule or regulation. Further, for sales of our securities, the broker/dealer
must make a special suitability determination and receive from you a written agreement before making a sale to you. Because of the imposition
of the foregoing additional sales practices, it is possible that brokers will not want to make a market in our shares. This could prevent
reselling of shares and may cause the price of the shares to decline.
We do not expect to declare or pay any dividends.
We have not declared or paid any dividends on
our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future.
Volatility of Stock Price.
Our common shares are currently publicly traded
on the OTC Markets under the symbol “DPLS.” In the future, the trading price of our common shares may be subject to wide fluctuations.
Trading prices of the common shares may fluctuate in response to a number of factors, many of which will be beyond our control. In addition,
the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to the operating performance of such companies. Market and industry factors may adversely
affect the market price of the common shares, regardless of our operating performance. Readers should carefully consider the risks and
uncertainties described below before deciding whether to invest in shares of our common stock.
Our failure to successfully address the risks
and uncertainties described below would have a material adverse effect on our business, financial condition and/or results of operations,
and the trading price of our common stock may decline and investors may lose all or part of their investment. We cannot assure you that
we will successfully address these risks or other unknown risks that may affect our business.
As an enterprise engaged in the development of
new technology, our business is inherently risky. Our common shares are considered speculative during the development of our new business
operations. Prospective investors should consider carefully the risk factors set out herein. The market price of our common stock
has fluctuated significantly.
Being a public company is expensive and administratively burdensome.
As a public reporting company, we are subject
to the information and reporting requirements of the Securities Act, the Exchange Act and other federal securities laws, rules and regulations
related thereto, including compliance with the Sarbanes-Oxley Act. Complying with these laws and regulations requires the time and attention
of our Board of Directors and management team, and increases our expenses. We estimate we will incur approximately $200,000 to $300,000
annually in connection with being a public company.
Among other things, we are required to:
| · | Maintain and evaluate a system of internal controls
over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations
of the SEC and the Public Company Accounting Oversight Board; |
| · | Prepare and distribute periodic reports in compliance
with our obligations under federal securities laws; |
| · | Institute a more comprehensive compliance function,
including with respect to corporate governance; and |
| · | Involve, to a greater degree, our outside legal
counsel and accountants in the above activities. |
The costs of preparing and filing annual and quarterly
reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders are expensive and much greater
than that of a privately-held company, and compliance with these rules and regulations may require us to hire additional financial reporting,
internal controls and other finance personnel, and will involve a material increase in regulatory, legal and accounting expenses and the
attention of management. There can be no assurance that we will be able to comply with the applicable regulations in a timely manner,
if at all. In addition, being a public company makes it more expensive for us to obtain director and officer liability insurance. In the
future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage.
If we fail to establish and maintain an
effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any inability
to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our
common stock.
Effective internal control is necessary for us
to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not
be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation
with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial
condition, results of operation and access to capital. We have not performed an in-depth analysis to determine if historical un-discovered
failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.
Public company compliance may make it more
difficult to attract and retain officers and directors.
The Sarbanes-Oxley Act and new rules subsequently
implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, we expect these
new rules and regulations to increase our compliance costs in 2022 and beyond and to make certain activities more time consuming and costly.
As a public company, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director
and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons
to serve on our Board of Directors or as executive officers.
You could lose all of your investment.
An investment in our securities is speculative
and involves a high degree of risk. Potential investors should be aware that the value of an investment in the Company may go down as
well as up. In addition, there can be no certainty that the market value of an investment in the Company will fully reflect its underlying
value. You could lose your entire investment.
The ability of our Board of Directors to
issue additional stock may prevent or make more difficult certain transactions, including a sale or merger of the Company.
Our Board of Directors is authorized to issue
up to 2,000,000 shares of preferred stock with powers, rights and preferences designated by it. Shares of voting or convertible preferred
stock could be issued, or rights to purchase such shares could be issued, to create voting impediments or to frustrate persons seeking
to effect a takeover or otherwise gain control of the Company. The ability of the Board of Directors to issue such additional shares
of preferred stock, with rights and preferences it deems advisable, could discourage an attempt by a party to acquire control of the Company
by tender offer or other means. Such issuances could therefore deprive stockholders of benefits that could result from such an attempt,
such as the realization of a premium over the market price for their shares in a tender offer or the temporary increase in market price
that such an attempt could cause. Moreover, the issuance of such additional shares of preferred stock to persons friendly to the
Board of Directors could make it more difficult to remove incumbent officers and directors from office even if such change were to be
favorable to stockholders generally.
Our stock may be traded infrequently and
in low volumes, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell your shares.
Until our common stock is listed on a national
securities exchange such as the New York Stock Exchange or the Nasdaq, we expect our common stock to remain eligible for quotation on
the OTC Markets, or on another over-the-counter quotation system. In those venues, however, the shares of our common stock may trade infrequently
and in low volumes, meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time
may be relatively small or non-existent. An investor may find it difficult to obtain accurate quotations as to the market value of our
common stock or to sell his or her shares at or near bid prices or at all. In addition, if we fail to meet the criteria set forth in SEC
regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established
customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock,
which may further affect the liquidity of our common stock. This would also make it more difficult for us to raise capital.
There currently is no active public market
for our common stock and there can be no assurance that an active public market will ever develop. Failure to develop or maintain a trading
market could negatively affect the value of our common stock and make it difficult or impossible for you to sell your shares.
There is currently no active public market for
shares of our common stock and one may never develop. Our common stock is quoted on the OTC Markets. The OTC Markets is a thinly traded
market and lacks the liquidity of certain other public markets with which some investors may have more experience. We may not ever be
able to satisfy the listing requirements for our common stock to be listed on a national securities exchange, which is often a more widely-traded
and liquid market. Some, but not all, of the factors which may delay or prevent the listing of our common stock on a more widely-traded
and liquid market include the following: our stockholders’ equity may be insufficient; the market value of our outstanding securities
may be too low; our net income from operations may be too low; our common stock may not be sufficiently widely held; we may not be able
to secure market makers for our common stock; and we may fail to meet the rules and requirements mandated by the several exchanges and
markets to have our common stock listed. Should we fail to satisfy the initial listing standards of the national exchanges, or our common
stock is otherwise rejected for listing, and remains listed on the OTC Markets or is suspended from the OTC Markets, the trading price
of our common stock could suffer and the trading market for our common stock may be less liquid and our common stock price may be subject
to increased volatility, making it difficult or impossible to sell shares of our common stock.
Our common stock is subject to the “penny
stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and
may reduce the value of an investment in the stock.
Rule 15g-9 under the Exchange Act establishes
the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less
than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction
involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s account for transactions
in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity
and quantity of the penny stock to be purchased.
In order to approve a person’s account for
transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the
person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior
to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight
form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer
received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute
transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of
our common stock and cause a decline in the market value of our common stock.
Disclosure also has to be made about the risks
of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or
dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in
cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for
the penny stock held in the account and information on the limited market in penny stocks.
Our stock price may be volatile.
The market price of our common stock is likely
to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including
the following:
| · | The continued effects of the COVID-19 pandemic and its variants; |
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| · | The impact of conflict between the Russian Federation and Ukraine on our operations; |
| | |
| · | Geo-political events, such as the crisis in Ukraine, government responses to such events and the related impact
on the economy both nationally and internationally; |
| | |
| · | Changes in our industry; |
| · | Competitive pricing pressures; |
| · | Our ability to obtain working capital financing; |
| · | Additions or departures of key personnel; |
| · | Sales of our common stock; |
| · | Our ability to execute our business plan; |
| · | Operating results that fall below expectations; |
| · | Loss of any strategic relationship; |
| · | Regulatory developments; and |
| · | Economic and other external factors. |
In addition, the securities markets have from
time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies.
These market fluctuations may also materially and adversely affect the market price of our common stock.
Offers or availability for sale of a substantial
number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell substantial amounts of
our common stock in the public market, including upon the expiration of any statutory holding period under Rule 144, or issued upon the
conversion of preferred stock or exercise of warrants, it could create a circumstance commonly referred to as an "overhang"
and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have
occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related
securities in the future at a time and price that we deem reasonable or appropriate.
Risks Related to the Offering
Our existing stockholders may experience
significant dilution from the sale of our common stock pursuant to the GHS Equity Financing Agreement.
The sale of our common stock to GHS in accordance
with the EFA may have a dilutive impact on our shareholders. As a result, the market price of our common stock could decline. In addition,
the lower our stock price is at the time we exercise Puts, the more shares of our common stock we will have to issue to GHS in order to
exercise a Put under the EFA. If our stock price decreases, then our existing shareholders would experience greater dilution for any given
dollar amount raised through the offering.
The perceived risk of dilution may cause our stockholders
to sell their shares, which may cause a decline in the price of our common stock. Moreover, the perceived risk of dilution and the resulting
downward pressure on our stock price could encourage investors to engage in short sales of our common stock. By increasing the number
of shares offered for sale, material amounts of short selling could further contribute to progressive price declines in our common stock.
The issuance of shares pursuant to the EFA
may have a significant dilutive effect.
Depending on the number of shares we issue pursuant
to the EFA, it could have a significant dilutive effect upon our existing shareholders. Although the number of shares that we may issue
pursuant to the EFA will vary based on our stock price (the higher our stock price, the less shares we have to issue), there may be a
potential dilutive effect to our shareholders, based on different potential future stock prices, if the full amount of the EFA is realized.
Dilution is based upon common stock put to GHS and the stock price discounted to GHS’s purchase price.
GHS will pay less than the then-prevailing
market price of our common stock which could cause the price of our common stock to decline.
Our common stock to be issued under the EFA will
be purchased at an 8% discount, or 92% of the volume-weighted average price for the Company’s common stock during the ten consecutive
trading days immediately preceding each Put.
GHS has a financial incentive to sell our shares
immediately upon receiving them to realize the profit between the discounted price and the market price. If GHS sells our shares, the
price of our common stock may decrease. If our stock price decreases, GHS may have further incentive to sell such shares. Accordingly,
the discounted sales price in the EFA may cause the price of our common stock to decline.
We may not have access to the full amount
under the financing agreement.
The lowest volume-weighted average price for
the ten days ended April 11, 2022 was $0.0479. At that price we would be
able to sell shares to GHS under the EFA at the discounted price of $0.044068. At that discounted price, the remaining 130,350,482 shares
would only represent $5,744,285, which is below the full amount of the EFA. In addition, any single drawdown must be at least $10,000
and cannot exceed $3,000,000 and any single drawdown may not exceed 200% of the average daily trading dollar volume of our Common Stock
during the ten trading days preceding the put.
There could be unidentified risks involved
with an investment in our securities.
The foregoing risk factors are not a complete
list or explanation of the risks involved with an investment in the securities. Additional risks will likely be experienced that are not
presently foreseen by us. Prospective investors must not construe this the information provided herein as constituting investment, legal,
tax or other professional advice. Before making any decision to invest in our securities, you should read this entire Prospectus and consult
with your own investment, legal, tax and other professional advisors. An investment in our securities is suitable only for investors who
can assume the financial risks of an investment in us for an indefinite period of time and who can afford to lose their entire investment.
We make no representations or warranties of any kind with respect to the likelihood of the success or the business of our Company, the
value of our securities, any financial returns that may be generated or any tax benefits or consequences that may result from an investment
in us.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains various “forward-looking
statements.” You can identify forward-looking statements by the use of forward-looking terminology such as “believes,”
“expects,” “may,” “would,” “could,” “should,” “seeks,” “approximately,”
“intends,” “plans,” “projects,” “estimates” or “anticipates” or the negative
of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans
or intentions. These statements may be impacted by a number of risks and uncertainties.
The forward-looking
statements are based on our beliefs, assumptions and expectations of our future performance taking into account all information currently
available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many
possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results
of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks before
you make an investment decision with respect to our securities. For a further discussion of these and other factors that could impact
our future results, performance or transactions, see the section entitled “Risk Factors.”
PRIVATE PLACEMENT
Equity Financing Agreement
On November 9, 2021,
we entered an EFA and Registration Rights Agreement (the “Registration Rights Agreement”) with GHS, pursuant to which
GHS agreed to purchase up to $30,000,000 in shares of our Common Stock, from time to time over the course of 24 months (the “Contract
Period”) after effectiveness of a registration statement on Form S-1 (the “Registration Statement”) of the
underlying shares of Common Stock.
The EFA grants us the
right, from time to time at our sole discretion (subject to certain conditions) during the Contract Period, to direct GHS to purchase
shares of Common Stock on any business day (a “Put”), provided that at least ten Trading Days (as defined in the EFA)
have passed since the most recent Put. The purchase price of the shares of Common Stock contained in a Put shall be 92% of the Market
Price with “Market Price” defined as the lowest volume weighted average price (VWAP) price of the Common Stock during the
Pricing Period (as defined in the EFA). No Put will be made in an amount less than $10,000 or greater than $3,000,000. In no event are
we entitled to make a Put or is GHS entitled to purchase that number of shares of Common Stock of the Company, which when added to the
sum of the number of shares of Common Stock beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3 of the Exchange
Act), by GHS, would exceed 4.99% of the number of shares of Common Stock outstanding on such date, as determined in accordance with Rule
13d-1(j) of the Exchange Act.
The EFA will terminate
upon any of the following events: when GHS has purchased an aggregate of $30,000,000 in the Common Stock of the Company pursuant to the
EFA; on the date that is 24 months from the date of the EFA; or by mutual written consent of the parties. Actual sales of shares of Common
Stock to GHS under the EFA will depend on a variety of factors to be determined by us from time to time, including, among others, market
conditions, the trading price of the Common Stock and determinations by us as to the appropriate sources of funding for the Company and
its operations. The net proceeds under the EFA to us will depend on the frequency and prices at which we sell shares of our stock to GHS.
The Registration Rights
Agreement provides that we shall (i) use our best efforts to file with the SEC the Registration Statement within 45 days of the date of
the Registration Rights Agreement; and (ii) have the Registration Statement declared effective by the SEC within 30 days after the date
the Registration Statement is filed with the SSEC, but in no event more than 90 days after the Registration Statement is filed.
We to use the proceeds
from the Puts for operational expenses and also potential acquisitions deemed beneficial
to the operational capabilities of the Company.
See “Plan of Distribution” elsewhere
in this prospectus for more information.
USE OF PROCEEDS
The Selling Security Holder will receive all the
proceeds from the sales of the Shares under this prospectus. We will not receive any proceeds from these sales. To the extent we receive
proceeds from the Puts to the Selling Security Holder, we will use those proceeds for operations and acquisitions. We have agreed
to bear the certain expenses relating to the registration of the shares of Common Stock being registered herein for Selling Security Holder.
See “Plan of Distribution” elsewhere
in this prospectus for more information.
SELLING SECURITY HOLDER
This prospectus covers the offering of up to 300,000,000
shares of Common Stock (of which 169,649,518 have been sold) being offered by the Selling Security Holder, which includes shares
of Common Stock acquirable upon the issuance of a Put to the Selling Security Holder, as described herein. We are registering the Shares
in order to permit the Selling Security Holder to offer their shares of Common Stock for resale from time to time.
The table below lists the Selling Security Holder
and other information regarding the “beneficial ownership” of the shares of Common Stock by the Selling Security Holder. In
accordance with Rule 13d-3 of the Exchange Act, “beneficial ownership” includes any shares of Common Stock as to which the
Selling Security Holder has sole or shared voting power or investment power and any shares of Common Stock the Selling Security Holder
has the right to acquire within 60 days.
The Selling Security Holder is an “underwriter”
within the meaning of Section 2(a)(11) of the Securities Act.
The second column indicates the number of
shares of Common Stock beneficially owned by the Selling Security Holder, based on its ownership as of April 11, 2022. The second
column also assumes purchase of all shares of stock to be acquired under the maximum amount of securities to be sold by the Company to
the Selling Security Holder, without regard to any limitations on purchase described in this prospectus or in the EFA.
The third column lists the shares of Common Stock
being offered by this prospectus by the Selling Security Holder. Such aggregate amount of Common Stock does not take into account any
applicable limitations on purchase of the securities under the EFA.
This prospectus covers the resale of (i) all of
the shares of Common Stock issued and issuable upon the Company issuing a Put, and (ii) any securities issued or then issuable upon any
full anti-dilution protection, stock split, dividend or other distribution, recapitalization or similar event with respect to the common
shares.
Because the issuance price of the common shares
may be adjusted, the number of shares of Common Stock that will actually be issued upon issuance of the common shares may be more or less
than the number of shares of Common Stock being offered by this prospectus. The Selling Security Holder can offer all, some or none of
its shares of Common Stock, thus we have no way of determining the number of shares of Common Stock it will hold after this offering.
Therefore, the fourth and fifth columns assume that the Selling Security Holder will sell all shares of Common Stock covered by this prospectus.
See “Plan of Distribution.”
The Selling Security Holder identified below has
confirmed to us that it is not a broker-dealer or an affiliate of a broker-dealer within the meaning of United States federal securities
laws.
| |
Number of Shares of Common Stock Owned Prior to Offering(1) | | |
Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus | | |
Number of Shares of Common Stock Owned After Offering | | |
Percentage Beneficially Owned After Offering | |
GHS Investments, LLC (1) | |
| 0 | | |
| 300,000,000 | (2) | |
| – | | |
| – | |
TOTAL | |
| 0 | | |
| 300,000,000 | | |
| – | | |
| – | |
__________
(1) |
GHS Investments, LLC is a limited liability company organized under the laws of Nevada. Mark Grober has dispositive power over the shares owned by GHS. |
(2) |
300,000,000 shares to be issued pursuant to the EFA (of which 169,649,518
have been sold). |
Material Relationships with Selling Security
Holder
The Selling Security Holder has not at any time
during the past three years acted as one of our employees, officers or directors or had a material relationship with us except (i) with
respect to transactions described above in “Private Placement,” and (ii) the Purchase Agreement dated August 19, 2021 with
GHS.
MARKET PRICE OF COMMON STOCK AND OTHER STOCKHOLDER
MATTERS
Our Common Stock is currently quoted on the OTC
Markets, which is sponsored by OTC Markets Group, Inc. The OTC Markets is a network of security dealers who buy and sell stock. The dealers
are connected by a computer network that provides information on current “bids” and “asks,” as well as volume
information. Our shares are quoted on the OTC Markets under the symbol “DPLS.”
The table below sets forth for the periods indicated
the quarterly high and low bid prices as reported by OTC Markets. Limited trading volume has occurred during these periods. These quotations
reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.
2022: | |
High | | |
Low | |
First Quarter | |
$ | 0.089 | | |
$ | 0.0252 | |
2021: | |
High | | |
Low | |
First Quarter | |
$ | 0.0510 | | |
$ | 0.0007 | |
Second Quarter | |
$ | 0.0969 | | |
$ | 0.0106 | |
Third Quarter | |
$ | 0.2020 | | |
$ | 0.0653 | |
Fourth Quarter | |
$ | 0.1400 | | |
$ | 0.0511 | |
2020: | |
High | | |
Low | |
First Quarter | |
$ | 0.0002 | | |
$ | 0.0001 | |
Second Quarter | |
$ | 0.0002 | | |
$ | 0.0001 | |
Third Quarter | |
$ | 0.0006 | | |
$ | 0.0001 | |
Fourth Quarter | |
$ | 0.0011 | | |
$ | 0.0001 | |
The Company’s common stock is considered
to be penny stock under rules promulgated by the SEC. Under these rules, broker-dealers participating in transactions in these securities
must first deliver a risk disclosure document which describes risks associated with these stocks, broker-dealers’ duties, customers’
rights and remedies, market and other information, and make suitability determinations approving the customers for these stock transactions
based on financial situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing, provide
monthly account statements to customers, and obtain specific written consent of each customer. With these restrictions, the likely effect
of designation as a penny stock is to decrease the willingness of broker-dealers to make a market for the stock, to decrease the liquidity
of the stock and increase the transaction cost of sales and purchases of these stocks compared to other securities.
The high and low bid price for shares of our
Common Stock on April 11, 2022, was $0.0515 and $0.0451, respectively, based upon bids that represent prices quoted by broker-dealers
on the OTC Markets.
Approximate Number of Equity Security Holders
As of April 11, 2022, there were approximately
920 stockholders of record. Because shares of our Common Stock are held by depositaries, brokers and other nominees, the number of
beneficial holders of our shares is substantially larger than the number of stockholders of record.
Dividends
We have not declared or paid a cash dividend to
our stockholders since we were organized and does not intend to pay dividends in the foreseeable future. Our board of directors presently
intends to retain any earnings to finance our operations and does not expect to authorize cash dividends in the foreseeable future. Any
payment of cash dividends in the future will depend upon our earnings, capital requirements and other factors.
Section 15(g) of the Securities Exchange Act of 1934
Our shares are covered by section 15(g) of the
Exchange Act that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess
of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer
must make a special suitability determination for the purchase and have received the purchaser's written agreement to the transaction
prior to the sale. Consequently, the Rule may affect the ability of broker/dealers to sell our securities and also may affect your ability
to sell your shares in the secondary market.
Section 15(g) also imposes additional sales practice
requirements on broker/dealers who sell penny securities. These rules require a one-page summary of certain essential items. The items
include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of
the function of the penny stock market, such as bid and offer quotes, a dealers spread and broker/dealer compensation; the broker/dealer
compensation, the broker/dealers’ duties to its customers, including the disclosures required by any other penny stock disclosure
rules; the customers’ rights and remedies in cases of fraud in penny stock transactions; and, the FINRA’s toll free telephone
number and the central number of the North American Securities Administrators Association, for information on the disciplinary history
of broker/dealers and their associated persons.
Penny Stock
Our stock is considered a penny stock. The SEC
has adopted rules that regulate broker-dealer practices in transactions in penny stocks. Penny stocks are generally equity securities
with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange
or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure
document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both
public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and
of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities
laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance
of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines
significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and
is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to
effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation
of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the
market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock
is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure
statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect
of reducing the trading activity for our Common Stock. Therefore, stockholders may have difficulty selling our securities.
Rule 10B-18 Transactions
During the year ended December 31, 2021, there
were no repurchases of our common stock by the Company.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
This Management’s Discussion and Analysis
of Financial Condition and Results of Operations contain certain forward-looking statements. Historical results may not indicate future
performance. Our forward-looking statements reflect our current views about future events; are based on assumptions and are subject to
known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements.
Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited
to, those discussed in the “Risk Factors” section. We undertake no obligation to publicly update or revise any forward-looking
statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon
forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements
Critical Accounting Policies
The following discussions are based upon our financial
statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the United
States.
The preparation of these financial statements
requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosures of contingencies. We continually evaluate the accounting policies and estimates used to prepare the
financial statements. We base our estimates on historical experiences and assumptions believed to be reasonable under current facts and
circumstances. Actual amounts and results could differ from these estimates made by management.
Business Overview
DarkPulse is a technology company focused on the
manufacture, sale, installation, and monitoring of laser sensing systems based on its patented BOTDA dark-pulse sensor technology. The
Company develops, markets, and distributes a full suite of engineering, monitoring, installation and security management solutions for
critical infrastructure/key resources to both industries and governments. Coupled with our patented DarkPulse Technology, DarkPulse
provides its customers a comprehensive data stream of critical metrics for assessing the health and security of their infrastructure.
Our systems provide rapid, precise analysis and responsive activities predetermined by the end-user customer. The Company’s activities
since inception have consisted of developing various solutions, obtaining patents and trademarks related to its technology, raising capital,
acquisition of companies deemed to expand global operations and/or capabilities, creating key partnerships to expand our suite of products
and services. Our activities have evolved to a sales-focused mission since the successful completion of our BOTDA system in December 2020.
Headquartered in New York, DarkPulse is a
globally based technology company with presence in United Kingdom, India, Dubai, Russian Federation, Turkey, Azerbaijan, Iraq, Libya,
Egypt, United States and Canada. In addition to the Company’s BOTDA systems, through a series of strategic acquisitions the Company
offers the manufacture, sale, installation, and monitoring of laser sensing systems, O & G pipeline leak detection, physical security
services, telecommunications and satellite communications services, drone and rover systems, and BDaaS. The Company is focused on
expanding services through acquisitions and partnerships to address global infrastructure and critical environmental resource challenges.
DarkPulse offers a full suite of engineering and environmental solutions that provide safety and security infrastructure projects. The
sensing and monitoring capabilities offered by DarkPulse and our subsidiary companies operate in the Air, Land, Sea. Our patented technology
provides rapid, precise analysis to protect and safeguard oil and gas pipelines above or below ground, physical security countermeasures,
mining operations, and other critical infrastructure / key resources subject to vulnerability or risk. Our patented Brillouin scattering
distributed fiber sensing system is best in class. The Company is able to monitor areas in around critical infrastructure buried or above
ground including pipelines 100km or more in length and/ or localized pipes as small as 8 CM DIA, detecting internal anomalies before
catastrophic failure. We are developing an Intelligent Rock Bolt, to prevent causalities and fatalities in mining operations and include
a real time sensor system that can detect the location & movement of personnel & equipment throughout a mining operation. We
monitor airflow, air quality, temperature, seismic events, etc. Our sensors cover extended areas, protecting an area from intrusion by
detecting events at any location along the sensing cable. Working safely every day is our first core value and employees at DarkPulse
and our subsidiary companies are recognized experts in their fields, providing comprehensive services for all our clients' needs.
Our Operating Units
Our operating units consist of, Optilan, a
company headquartered in Coventry, United Kingdom whose focus is in telecommunications, energy, rail, critical network infrastructure,
pipeline integrity systems, renewables and security; Remote Intelligence, a company headquartered in Pennsylvania who provides unmanned
aerial drone and UGC (unmanned ground crawler) services to a variety of clients from industrial mapping and ecosystem services, to search
and rescue, to pipeline security; Wildlife Specialists, a company headquartered in Pennsylvania who provides clients with comprehensive
wildlife and environmental assessment, planning, and monitoring services; TerraData Unmanned, a company headquartered in Florida who
custom manufactures NDAA compliant drones and unmanned ground crawlers to meet the needs of its customers; and TJM West Electronics,
a company headquartered in Arizona who is a U.S. manufacturer and test of advanced electronics, cables and sub-assemblies specializing
in advanced package and complex CCA and hardware.
Recent Events
Acquisitions
On August 9, 2021, we entered into a Share Purchase
Agreement with Optilan Guernsey Limited and Optilan Holdco 2 Limited (the “Sellers”), pursuant to which we purchased
from the Sellers all of the issued and outstanding equity interests of Optilan HoldCo 3 Limited, a private company incorporated in England
and Wales (“Optilan”) for £1.00 and also a commitment to enter into the Subscription (as defined below). Optilan
is now a wholly-owned subsidiary of the Company.
On August 9, 2021, we entered into a Subscription
Agreement with Optilan (the “Subscription”), pursuant to which we agreed to purchase an aggregate of 4,000,000 Ordinary
Shares of Optilan for an aggregate purchase price of £4,000,000.
On August 30, 2021, we closed two separate Membership
Interest Purchase Agreements (the “MPAs”) with Remote Intelligence, Limited Liability Company, a Pennsylvania limited
liability company (“RI”) and Wildlife Specialists, LLC, a Pennsylvania limited liability company (“WS”)
pursuant to which we agreed to pay to the majority shareholder of each of RI and WS an aggregate of 15,000,000 shares of our Common Stock,
$500,000 to be paid on the closing date, and an additional $500,000 to be paid 12 weeks from closing date in exchange for 60% ownership
of each of RI and WS. RI and WS are now subsidiaries of the Company.
On September 8, 2021,
we entered into and closed the Stock Purchase Agreement (the “TJM SPA”) with TJM Electronics West, Inc., an Arizona
corporation (“TJM”), and TJM’s shareholders, pursuant to which we agreed to purchase all of the equity interests
in TJM in exchange for $450,000, subject to adjustments as defined in the TJM SPA. TJM is now a wholly-owned subsidiary of the Company.
Effective October 1,
2021, we entered into and closed the Membership Purchase Agreement (the “TerraData MPA”) with TerraData Unmanned, PLLC,
a Florida limited liability company (“TerraData”), and Justin Dee, the sole shareholder of TerraData, pursuant to which
we agreed to purchase 60% of the equity interests in TerraData in exchange for 3,725,386 shares of our Common Stock and $400,000, subject
to adjustments as defined in the TerraData MPA, to be paid within 12 weeks of closing. TerraData is now a subsidiary of the Company.
Financings
On January 4, 2021, we entered into a securities
purchase agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) issuing to Geneva a convertible promissory note
in the aggregate principal amount of $42,350 with a $3,850 original issue discount and $3,500 in transactional expenses due to Geneva
and its counsel. The note bears interest at 8% per annum and may be converted into common shares of our Common Stock at a conversion
price equal to 70% of the lowest trading price of our common stock during the 20 prior trading days. We received $35,000 net cash. On
July 12, 2021, Geneva converted $42,350 of principal and $1,540 into 1,784,146 shares of common stock.
On February 3, 2021, we entered into a securities
purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of $94,200 with a $15,700
original issue discount and $3,500 in transactional expenses due to Geneva and its counsel. The note bears interest at 4.5% per annum
and may be converted into common shares of our Common Stock at a conversion price equal to 81% of the lowest two trading prices of our
Common Stock during the 10 prior trading days. We received $75,000 net cash.
On July 14, 2021, the note was paid in full,
including all accrued and unpaid interest.
On February 18, 2021, we entered into a securities
purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of $76,200 with a $12,700
original issue discount and $3,500 in transactional expenses due to Geneva and its counsel. The note bears interest at 4.5% per annum
and may be converted into common shares of our Common Stock at a conversion price equal to 81% of the lowest two trading prices of our
Common Stock during the 10 prior trading days. We received $60,000 net cash.
On July 14, 2021, the note was paid in full,
including all accrued and unpaid interest.
On April 5, 2021, we entered into a securities
purchase agreement with Geneva Roth issuing to Geneva a convertible promissory note in the aggregate principal amount of $64,200 with
a $10,700 original issue discount and $3,500 in transactional expenses due to Geneva and its counsel. The note bears interest at 4.5%
per annum and may be converted into common shares of our Common Stock at a conversion price equal to 81% of the lowest two trading prices
of our Common Stock during the 10 prior trading days. We received $50,000 net cash. On July 14, 2021, the note was paid in full, including
all accrued and unpaid interest.
On April 26, 2021, we entered a Securities
Purchase Agreement and Registration Rights Agreement with FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC, a Delaware limited liability company
(the “FirstFire”), pursuant to which we issued to FirstFire a Convertible Promissory Note in the principal amount
of $825,000 (the “FirstFire Note”). The purchase price of the FirstFire Note is $750,000. The FirstFire Note matures
on January 26, 2022 upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the FirstFire Note at
10% per annum guaranteed until the FirstFire Note becomes due and payable, whether at maturity or upon acceleration or by prepayment
or otherwise. The FirstFire Note is convertible at any time after 180 days from issuance, upon the election of the FirstFire, into shares
of our Common Stock at $0.015 per share. The FirstFire Note is subject to various “Events of Default,” which are disclosed
in the FirstFire Note. Upon the occurrence of an “Event of Default,” the conversion price would become $0.005. On November
17, 2021, FirstFire converted $825,000 of principal and $61,875 of interest into 177,375,000 shares of common stock.
See “Legal Proceedings” for additional
information regarding the FirstFire Note.
On July 14, 2021, we entered a Securities Purchase
Agreement with GS Capital Partners, LLC (the “GS”), pursuant to which we issued to GS a 6% Redeemable Note in the principal
amount of $2,000,000 (the “GS Note”). The purchase price of the GS Note is $1,980,000. The GS Note matures on July
14, 2022 upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the GS Note at 6% per annum until
the GS Note becomes due and payable. The GS Note is subject to various “Events of Default,” which are disclosed in the GS
Note. Upon the occurrence of an “Event of Default,” the interest rate on the GS Note will be 18%. The GS Note is not convertible
into shares of our Common Stock and is not dilutive to existing or future shareholders and we plan on using a portion of the proceeds
of the GS Note to retire existing convertible debt.
On August 19, 2021, we entered into the Purchase
Agreement with GHS, for the offering of up to $45,000,000 worth of Common Stock. Pursuant to the Purchase Agreement, on August 19, 2021,
we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from the Company, 31,799,260 shares of Common Stock for
total proceeds to the Company, net of discounts, of $3,300,000, at an effective price of $0.1038 per share (the “First Closing”).
We received approximately $2,790,000 in net proceeds from the First Closing after deducting the fees and other estimated offering expenses
payable by us. We used the net proceeds from the First Closing for working capital and for general corporate purposes. The shares were
issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration statement on
Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, 2021, and was declared effective on August 18, 2021.
Pursuant to the Purchase Agreement, on August
31, 2021, we and GHS agreed that the Company would issue and sell to GHS, and GHS would purchase from us, 27,297,995
shares of Common Stock for total proceeds to us, net of discounts, of $3,300,000, at an effective price of $0.120888 per
share (the “Second Closing”). We received approximately $2,885,000 in net proceeds from the Second Closing after deducting
the fees and other estimated offering expenses payable by us. We used the net proceeds from the Second Closing for working capital and
for general corporate purposes. The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to
our currently effective registration statement on Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, 2021,
and was declared effective on August 18, 2021.
Pursuant to the Purchase Agreement, on September
22, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us, 25,630,272 shares of Common Stock for
total proceeds to us, net of discounts, of $2,000,000, at an effective price of $0.085836 per share (the “Third Closing”).
We received approximately $1,915,000 in net proceeds from the Third Closing after deducting the fees and other estimated offering expenses
payable by us. We used the net proceeds from the Third Closing for working capital and for general corporate purposes. The shares were
issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration statement on
Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, 2021, and was declared effective on August 18, 2021.
Pursuant to the Purchase Agreement, on October
1, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us, 37,187,289
shares of Common Stock for total proceeds to us, net of discounts, of $3,000,000, at an effective price of $0.08874 per share (the “Fourth
Closing”). We received approximately $2,850,000 in net proceeds from the Fourth Closing after deducting the fees and other estimated
offering expenses payable by us. We used the net proceeds from the Fourth Closing for working capital and for general corporate purposes.
The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration
statement on Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, 2021, and was declared effective on August
18, 2021.
Pursuant to the Purchase Agreement, on October
14, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us, 14,282,304
shares of Common Stock for total proceeds to us, net of discounts, of $1,055,000, at an effective price of $0.08125 per share (the “Fifth
Closing”). We received approximately $1,002,250 in net proceeds from the Fifth Closing after deducting the fees and other estimated
offering expenses payable by us. We used the net proceeds from the Fifth Closing for working capital and for general corporate purposes.
The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration
statement on Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, 2021, and was declared effective on August
18, 2021.
On November 9, 2021,
we entered an Equity Financing Agreement (the “Equity Financing Agreement”) and Registration Rights Agreement (the
“GHS Registration Rights Agreement”) with GHS, pursuant to which GHS agreed to purchase up to $30,000,000 in shares
of our Common Stock, from time to time over the course of 24 months (the “Contract Period”) after effectiveness of
a registration statement on Form S-1 (the “Registration Statement”) of the underlying shares of Common Stock.
The GHS Registration
Rights Agreement provides that we shall (i) use our best efforts to file with the SEC a Registration Statement within 45 days of the
date of the GHS Registration Rights Agreement; and (ii) have the Registration Statement declared effective by the SEC within 30 days
after the date the GHS Registration Statement is filed with the SEC, but in no event more than 90 days after the GHS Registration Statement
is filed.
Pursuant to the Equity Financing Agreement,
on December 21, 2021, we and GHS agreed that the Company would issue and sell to GHS, and GHS would purchase from us, 43,777,478 shares
of Common Stock for total proceeds to us, net of discounts, of $2,548,326, at an effective price of $0.0696 per share (the “First
EFA Closing”). We received approximately $2,296,469 in net proceeds from the First EFA Closing after deducting the fees and
other estimated offering expenses payable by us. We used the net proceeds from the First EFA Closing for working capital and for general
corporate purposes.
Pursuant to the Equity Financing Agreement,
on January 12, 2022, we and GHS agreed that the Company would issue and sell to GHS, and GHS would purchase from us, 23,372,430 shares
of Common Stock for total proceeds to us, net of discounts, of $1,150,000, at an effective price of $0.054124 per share (the “Second
EFA Closing”). We received approximately $1,033,975 in net proceeds from the Second EFA Closing after deducting the fees and
other estimated offering expenses payable by us. We used the net proceeds from the Second EFA Closing for working capital and for general
corporate purposes.
Pursuant to the Equity Financing Agreement,
on January 21, 2022, we and GHS agreed that the Company would issue and sell to GHS, and GHS would purchase from us, 33,454,988 shares
of Common Stock for total proceeds to us, net of discounts, of $1,150,000, at an effective price of $0.037812 per share (the “Third
EFA Closing”). We received approximately $1,033,975 in net proceeds from the Third EFA Closing after deducting the fees and
other estimated offering expenses payable by us. We used the net proceeds from the Third EFA Closing for working capital and for general
corporate purposes.
Pursuant to the Equity Financing Agreement,
on February 7, 2022, we and GHS agreed that the Company would issue and sell to GHS, and GHS would purchase from us, 16,040,411 shares
of Common Stock for total proceeds to us, net of discounts, of $500,000, at an effective price of $0.0342884 per share (the “Fourth
EFA Closing”). We received approximately $448,975 in net proceeds from the Fourth EFA Closing after deducting the fees and
other estimated offering expenses payable by us. We used the net proceeds from the Fourth EFA Closing for working capital and for general
corporate purposes.
On February 21, 2022, we sold 75,798,921 shares
of our Common Stock at $0.032982 per share for total consideration of $2,500,000.
On March 3, 2022, we sold 16,579,569 shares
of our Common Stock at $0.0301576 per share for total consideration of $500,000.
On March 14, 2022, we sold 5,617,347 shares
of our Common Stock at $0.071208 per share for total consideration of $400,000.
Pursuant to the Equity Financing Agreement,
on March 23, 2022, we and GHS agreed that the Company would issue and sell to GHS, and GHS would purchase from us, 29,257,395 shares
of Common Stock for total proceeds to us, net of discounts, of $1,500,000, at an effective price of $0.056396 per share (the “Fifth
EFA Closing”). We received approximately $1,348,975 in net proceeds from the Fifth EFA Closing after deducting the fees and
other estimated offering expenses payable by us. We used the net proceeds from the Fifth EFA Closing for working capital and for general
corporate purposes.
Pursuant to the Equity Financing Agreement,
on April 11, 2022, we and GHS agreed that the Company would issue and sell to GHS, and GHS would purchase from us, 23,746,816 shares
of Common Stock for total proceeds to us, net of discounts, of $1,000,000, at an effective price of $0.04211091 per share (the “Sixth
EFA Closing”). We received approximately $898,975 in net proceeds from the Sixth EFA Closing after deducting the fees and other
estimated offering expenses payable by us. We used the net proceeds from the Sixth EFA Closing for working capital and for general corporate
purposes.
Partnerships
We have entered into a consulting agreement with
the Bachner Group to assist in the successful transformation from an R&D focused company to a sales-focused company, and assist us
with federal contract opportunities.
Other Events
On August 3, 2021, we entered into an Engagement
Agreement and Terms and Conditions (the “EIAP Agreement”) with Energy & Industrial Advisory Partners, LLC (“EIAP”).
Pursuant to the EIAP Agreement, we have engaged EIAP to serve as an advisor to us in the proposed transaction for agreed target company
or any of its subsidiaries and/or the whole or any part of its or their business or assets (the “Transaction”). EIAP
will receive a monthly retainer of $10,000 per month payable upon receipt of an invoice. EIAP will also receive a consulting bonus fee
of $350,000 payable upon completion of the Transaction. In the event of successful completion of the Transaction as a result of EIAP’s
involvement, EIAP agrees to deduct the total retainer fee from the consulting bonus fee. The EIAP Agreement may be terminated, with or
without cause, by either party upon ten days’ written prior notice thereof to the other party. If (a) during the term of the EIAP
Agreement, or (b) within two years following the date of the EIAP Agreement’s termination by us (provided that such two-year period
shall be extended by the same period of time that we take to settle in full all fees, expenses and/or outlays due or to become due to
EIAP as at the date of the EIAP Agreement’s termination), we complete a transaction with the target company or a similar transaction
to the Transaction, then we will pay the consulting bonus fee at the completion of the transaction.
Going Concern Uncertainty
As shown in the accompanying financial statements,
the Company generated net losses of $4,826,320 and $275,842 during the years ended December 31, 2021 and 2020, respectively. As of December
31, 2021, the Company’s current liabilities exceeded its current assets by $10,120,885. As of December 31, 2021, the Company had
$3,658,846 of cash.
We will require additional funding to finance
the growth of our operations and achieve our strategic objectives. These factors, as relative to capital raising activities, create doubt
as to our ability to continue as a going concern. We are seeking to raise additional capital and are targeting strategic partners in an
effort to accelerate the sales and marketing of our products and begin generating revenues. Our ability to continue as a going concern
is dependent upon the success of future capital offerings or alternative financing arrangements, expansion of our operations and generating
sales. The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as
a going concern. Management is actively pursuing additional sources of financing sufficient to generate enough cash flow to fund its operations;
however, management cannot make any assurances that such financing will be secured.
Results of Operations
For the Years Ended December 31, 2021 and
2020
Revenues
For the year ended December 31, 2021, total
revenues were $7,783,340 compared to $0 for the same period in 2020, an increase of $7,783,340. This increase primarily consisted of
revenues of $7,247,932 from the acquisition of Optilan in August 2021, $277,747 from the acquisition of Wildlife Specialists in August
2021
and $174,266 from the acquisition of TJM Electronics
in September 2021 as well as $13,078 from DarkPulse.
Cost of Goods Sold and Gross Profit
For the year ended December 31, 2021, cost
of goods sold were $6,685,210 compared to $0 for the same period in 2020, an increase of $6,685,210.
Gross profit for the year ended December 31,
2021 was $1,098,130 with a gross profit margin of 14.11% compared to $0 for the same period in 2020 with no gross profit margin.
Operating Expenses
Selling, general and administrative expenses
for year ended December 31, 2021 increased by $3,769,708, or 2,526%, to $3,918,967 from $149,259 for the year ended December 31, 2020.
The increase primarily consisted of an increase
to the operations from our various acquisitions.
Payroll related expenses for year ended December
31, 2021, increased by $2,653,496 to $2,653,683 from $187 for the year ended December 31, 2020. The increase primarily consisted of an
increase to the numbers of employees inherited from our various acquisitions.
Professional fees for the year ended December
31, 2021, increased by $2,879,830 to $2,930,245 from $50,415 for the year ended
December 31, 2020. This increase primarily
consisted of increased legal expenditures associated with the increase in litigation as well as fees associated with the various capital
raises in 2021.
Depreciation and amortization for year ended
December 31, 2021, increased by $207,278 to $258,306 from $51,028 for the year ended
December 31, 2020. This increase is primarily
due to the increase in depreciable assets we acquired from new acquisitions.
Other Income (Expense)
For the year ended December 31, 2021, we had
other income $4,021,700 compared to other expense of $17,103 for the same period in 2020, an increase in income of $4,038,803. This increase
in other income increase primarily consisted of changes of $3,421,633 of gain related to the extinguishment of debt, $653,501 increase
in the fair value of the Company’s derivative instruments, $11,600 of gain on foreign currency exchange rate variance, a decrease
in interest expense of $4,706 due to increased borrowings offset by $31,636 loss on convertible notes.
Net Income (Loss)
As a result of the above, we reported a net
loss of $4,826,320 for the year ended December 31, 2021 compared to a net loss of $275,842 for the year ended December 31, 2020.
Liquidity and Capital Resources
December 31, 2021 Compared to December
31, 2020
We require working capital to fund the continued
development and commercialization of our proprietary fiber optic sensing devices, and for operating expenses. During the year ended
December 31, 2021, we had $17,696,027 in new cash proceeds compared to year ended December 31, 2020, when we had $0 in new cash proceeds.
As of December 31, 2021, we had cash of $3,658,846,
compared to $337 as of December 31, 2020.
We currently do not have sufficient cash to
fund our operations for the next 12 months and we will require working capital to complete development, testing and marketing of our
products and to pay for ongoing operating expenses. We anticipate adding consultants for technology development and the corresponding
operations of the Company, but this will not occur prior to obtaining additional capital. Management is currently in the process of looking
for additional investors. Currently, loans from banks or other lending sources for lines of credit or similar short-term borrowings are
not available to us. We have been able to raise working capital to fund operations through the issuances of convertible notes or obtained
through the issuance of the Company’s restricted common stock. As of December 31, 2021, our current liabilities exceeded our current
assets by $10,120,885.
Cash Flows from Operating Activities
During the year ended December 31, 2021, net
cash used by operating activities was $11,715,101, resulting from our net loss of $4,826,320 and an increase in expenses related to our
convertible notes payables, including amortization of debt discount of $515,975 and loan acquisition costs of $480,450, increase in stock-based
compensation of $1,346,808, increase in inventory of $1,175,869 and operating lease liabilities of $2,451,692. These increases were offset
by a decrease in derivative liability of $687,124, increase in accounts payable and accrued expenses of $2,041,588 and an increase from
the gain on the extinguishment of debt of $3,488,860, increase in accounts receivable of $771,432, unbilled revenue of $822,031 and increase
in contract liability of $922,631.
By comparison, during the year ended December
31, 2020, net cash used by operating activities was $8,192, resulting from our net loss of $275,842 partially offset by non-cash expenses
totaling $14,445 and increases in accounts payable and accrued liabilities of $269,589.
Cash Flows from Investing Activities
During the year ended December 31, 2021, we
had net cash used in investing activities of $1,689,153. During the year ended December 31, 2020, net cash used by investing activities
was $4,969, of capitalized patents costs of $4,969.
Cash Flows from Financing Activities
During the year ended December 31, 2021, net
cash provided by financing activities was $17,311,427, comprised of proceeds from the sale of common stock from offering of $14,593,327,
the issuance of convertible debt in the amount of $1,102,700, the issuance of notes payable of $2,000,000 offset by payments on convertible
debt of $384,600.
During the year ended December 31, 2020, net cash
used by financing activities was $4,096, comprised of proceeds from issuance of convertible notes payable of $40,000, offset by repayments
of related party notes payable of $44,096.
Factors That May Affect Future Results
Management’s Discussion and Analysis contains
information based on management’s beliefs and forward-looking statements that involve a number of risks, uncertainties, and assumptions.
There can be no assurance that actual results will not differ materially from the forward-looking statements as a result of various factors,
including but not limited to, our ability to obtain the equity funding or borrowings necessary to market and launch our products, our
ability to successfully serially produce and market our products; our success establishing and maintaining collaborative licensing and
supplier arrangements; the acceptance of our products by customers; our continued ability to pay operating costs; our ability to meet
demand for our products; the amount and nature of competition from our competitors; the effects of technological changes on products and
product demand; and our ability to successfully adapt to market forces and technological demands of our customers.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future material effect on our consolidated financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity capital expenditures or capital resources.
Recent Accounting Pronouncements
We have provided a discussion of recent accounting
pronouncements in Note 1 to the Condensed Financial Statements.
BUSINESS
Organization
DarkPulse is a technology-security company
incorporated in 1989 as Klever. One of our principal wholly-owned subsidiaries, DPTI, originally started as a technology spinout from
the University of New Brunswick, Fredericton, Canada. DPI is comprised of multiple security platforms: Patented BOTDA Fiber Optic sensor
systems and Satellite Communications services.
In December 2010, DPTI entered into an Assignment
Agreement with the University, pursuant to which the University sold, transferred, and assigned to us Patents in exchange for the issuance
of a debenture to the University in the amount of C$1,500,000 (Canadian dollars). In April 2017, DPTI issued the Debenture. The Patents
and the Debenture were initially recorded in our accounts at $1,491,923, based upon the exchange rate between the U.S. dollar and the
Canadian dollar on December 16, 2010, the date of the original debenture. In addition to the repayment of principal and interest, the
Debenture requires DPTI to pay the University a 2% royalty on sales of any and all products or services which incorporate the Patents
for a period of five years commencing on April 24, 2018, as well as to reimburse the University for its patent-related costs.
On April 27, 2018, Klever entered into an Merger
involving Klever as the surviving parent corporation and acquiring DPTI as its wholly-owned subsidiary. On July 18, 2018, the parties
closed the Merger Agreement, as amended on July 7, 2018, and the name of the Company was subsequently changed to “DarkPulse, Inc.”
With the change of control of the Company, the Merger was accounted for as a recapitalization in a manner similar to a reverse acquisition.
On July 20, 2018, we filed a Certificate of
Amendment to our Certificate of Incorporation with the State of Delaware, changing the name of the Company to “DarkPulse, Inc.”
We filed a corporate action notification with FINRA, and our ticker symbol was changed to “DPLS.”
Our security and monitoring systems will be
delivered in applications for critical infrastructure/ key resources such as but not limited to border security, pipelines, the oil and
gas industry and mine safety. Current uses of fiber optic distributed sensor technology have been limited to quasi-static, long-term structural
health monitoring due to the time required to obtain the data and its poor precision. Our patented BOTDA dark-pulse sensor technology
allows for the monitoring of highly dynamic environments due to its greater resolution and accuracy.
Our Operating Units
Optilan
Founded in 1990, Optilan is a leading independent
security and communications systems integrator worldwide. Providing specialist technologies and techniques Optilan helps to protect businesses
and organizations from external threats. Telecommunications, Energy, Rail, Critical Network Infrastructure, Pipeline Integrity Systems,
Renewables and Security. Headquartered in Warwick, United Kingdom with a 30-year pedigree, at Optilan our customers trust us to keep the
integrity of their assets safe and secure, by managing the life cycle delivery risk of our solutions. By fostering a collaborative design
approach to complex problems, we provide innovative solutions, custom fit to even the most demanding of sites and scale of projects. Importantly,
our commitment to our safety culture remains unaverred, to ensure that everyone goes home safely every day. We orchestrate business resilience
with a suite of end-to-end solutions, combined with connectivity and professional service at a global level. Today's business environment
is more dynamic than ever, with continuous change and disruption accepted as the new normal. We complement our tailored, integrated expertise
with a curated ecosystem of leading manufacturers, to achieve both high quality and enduring results. We are proud to foster a unique
culture full of talented individuals. Our sector focus ensures that our account teams are fully accredited in their operational areas.
We are committed to creating individually tailored solutions, using collaborative techniques and programming tools to deliver the networks
of the future. Optilan has provided integrated solutions for leading Oil and Gas, Industrial and Energy companies around the world. As
an industry leader in deploying communication networks with exceptional reliability, our reputation for delivering the highest quality
products remains unsurpassed. This spans mobile, broadband, security systems and customer premise works. Our professionals have the skill
to adopt and embed our expertise into existing platforms, processes, and cultures, delivering exceptional value for our clients. Beyond
our operational scope, we strive to consider the impact of our global footprint and mitigate associated environmental and sustainability
risks. These factors combined set Optilan apart and establish why customers continue to trust and invest in our services.
Remote Intelligence
Remote Intelligence provides Unmanned Aerial
Drone and UGC (unmanned ground crawler) Services to a variety of clients; from Industrial Mapping and Ecosystem Services, to Search and
Rescue, to Pipeline Security, we provide sales and consulting services for all markets. Remote Intelligence started in 2013 with a simple
vision; to use the new and developing field of unmanned aerial vehicles to produce higher quality, safer and more effective products for
a variety of markets. We strive to Equip, Educate and Advance the use of the most advanced Unmanned Aerial Systems and Unmanned Ground
Crawlers in the United States and around the world for commercial, government and domestic use. Our top priorities as we do that are to
find safe and ethical ways to use this new and exciting field of technology to make life better. Providing holistic intelligence consultation
and solutions including full-service Methane Detection and Monitoring. Quick, comprehensive site mapping and aerial inspection services.
We specialize in fully integrated, geo-rectified, 3D modeled mapping and AI for industrial applications, specializing in the energy and
environmental industries, with AI and live streaming capabilities anywhere in the world. Also providing aerial survey, video inspection
services, emergency support services, wildlife and habitat surveys, and comprehensive system design, training, and sales for both the
commercial and private sectors. Integrating the latest tech solutions like artificial intelligence. Globally connected with a base of
operation in Wellsboro Pennsylvania.
TerraData Unmanned
Comprised of a team with more than 30 years
cumulative experience in the unmanned industry, TerraData custom manufactures NDAA compliant drones and unmanned ground crawlers to meet
the needs of its customers. TerraData has successfully delivered a custom drone platform per a customer’s specifications which exceeds
current industry offering by more than 30 minutes. The team has manufactured, and successfully flight tested a Quad Copter drone with
1.5KG payload capabilities that delivers more than 60 minutes of continuous flight. This cutting-edge design is a combination of proprietary
software and hardware. The custom platform offers NDAA compliant autopilot, communications links, TSO Certified GPS unit and ground control
station. Future designs include integrating RTK for mapping, methane detectors, and true terrain following capabilities. There are also
improvements scheduled that are intended to further extend the endurance and provide over 4KG of payload capacity, not including batteries.
TerraData has also announced the research, development and successful testing of an autonomous crawler soon to be released to the market
with Methane and Multi Gas Detection capabilities. Working seamlessly with its partners at DarkPulse and its subsidiary companies, TerraData
can custom design, build and operate a system to meet our customers' needs 24 hours a day 365 days a year around the block or around the
globe.
Wildlife Specialists
Wildlife Specialists, LLC was founded in 2007
to provide clients with comprehensive wildlife and environmental assessment, planning, and monitoring services. We currently maintain
two regional offices located in north central and southeastern Pennsylvania and are available to provide services to clients nationwide
and around the globe. Our staff are well-established professionals who have a wide range of experience in wildlife management, research,
and monitoring at the local and statewide levels throughout the United States. In addition, we have specific expertise in providing the
full range of sensitive species and habitat assessments necessary for your development projects. Wildlife Specialists’ mission is
to provide consulting services that use the latest technology to produce the highest quality results compatible with our clients’
management goals and the appropriate protocols developed by state and federal wildlife management agencies. Wildlife Specialists is fully
insured to industry standards and committed to the safety of our staff, our clients, and the public. We have maintained safety certification
through ISNetWorld and other 3rd party certifiers. We are also officially PennDOT, GSA, Small Business and HUBZone Certified.
TJM West Electronics
TJM West Electronics is an ISO9001 and AS9100
certified electronics and electro-mechanical assembly operation. We operate out of a high tech, 20,000 Sq ft facility in Tempe, Arizona.
Our assembly team is trained to IPC 610 and J-STD-001 standards, Class 2 and 3. We have been in business since 1999. Our latest website
was developed to be a customer interface for rapid costing, build scheduling, open order status, and complete manufacturing history data
records. Registered users can enter build and fabrication parameters for quantities of 2-20 units. Our calculator provides itemized labor,
PCB fabrication cost and delivery. Registered users can also access factory floor for the updated status and delivery date of open orders,
a review of configuration, quotes and full quality history database.
As a U.S. manufacturer and test of advanced
electronics, cables and sub-assemblies. we specialize in advanced package and complex CCA and hardware. Certified to space and flight
AS9100D, TJM has over 20 years supplying ultra-high reliability, and fully documented electronic Hardware. Per AS9100D, TJM maintains
all material certifications, process and measurement reports electronically as part of a complete quality history record. Manufacturing
PCB Design services on the most popular platforms including Cadence, Altium, and Mentor. Design output data integrates seamlessly to our
automated manufacturing line. Test Development ICT to functional and burn-in. We develop a test plan and hardware system to deliver your
100% verified product. Low Cost, High Reliability Manufacturing is the net result of quality planning, optimizing automation technology,
operational efficiency, and communication. High value, low-cost domestic solution to replace offshore manufacturing. Protect your IP and
keep direct line-of sight of manufacturing with products made in the USA. TJM West Is your one stop shop.
Acquisitions
On August 9, 2021, we entered into a Share
Purchase Agreement with Optilan Guernsey Limited and Optilan Holdco 2 Limited, pursuant to which we purchased from the sellers all of
the issued and outstanding equity interests of Optilan for £1.00 and also a commitment to enter into a subscription agreement. Optilan
is now a wholly-owned subsidiary of the Company.
On August 9, 2021, we entered into a Subscription
Agreement with Optilan, pursuant to which we agreed to purchase an aggregate of 4,000,000 Ordinary Shares of Optilan for an aggregate
purchase price of £4,000,000.
On August 30, 2021, we closed two separate
Membership Interest Purchase Agreements with RI and WS pursuant to which we agreed to pay to the majority shareholder of each of RI and
WS an aggregate of 15,000,000 shares of our Common Stock, $500,000 to be paid on the closing date, and an additional $500,000 to be paid
12 weeks from closing date in exchange for 60% ownership of each of RI and WS. RI and WS are now subsidiaries of the Company.
On September 8, 2021,
we entered into and closed the Stock Purchase Agreement with TJM and TJM’s shareholders, pursuant to which we agreed to purchase
all of the equity interests in TJM in exchange for $450,000, subject to adjustments as defined in the Stock Purchase Agreement. TJM is
now a wholly-owned subsidiary of the Company.
Effective October
1, 2021, we entered into and closed the Membership Purchase Agreement with TerraData and Justin Dee, the sole shareholder of TerraData,
pursuant to which we agreed to purchase 60% of the equity interests in TerraData in exchange for 3,725,386 shares of our Common Stock
and $400,000, subject to adjustments as defined in the Membership Purchase Agreement, to be paid within 12 weeks of closing. TerraData
is now a subsidiary of the Company.
Our Business
We offer a full suite of engineering, installation
and security management solutions to industries and governments. Coupled with our patented DarkPulse
Technology, we provide our customers a comprehensive data stream of critical metrics for assessing the health and security of
their infrastructure. Our comprehensive system provides for rapid, precise analysis and responsive activities predetermined by the end-user
customer. These responses include the use of “smart” AI platformed cameras, facial recognition technologies and multiple
drone platforms. Our User Interface (UI) is cloud based which offers end-users access to their systems on any device located anywhere
in the world. Additional programming of the UI is being completed within a game engine that will also offer access via Virtual Reality
headsets, allowing end-users to virtually inspection their assets.
Historically, distributed sensor systems have
been too costly, slow and limited in their capabilities to attain widespread use. In addition, Brillouin-based sensors have been plagued
with temperature and strain cross-sensitivity, i.e. the inability to distinguish between temperature and strain change along the same
fiber. The loss of spatial resolution with an increase in fiber length has also limited the use of distributed sensor systems. Due to
these shortcomings, existing technologies are unable to succeed within today’s dynamic environments, and needs for more advanced
sensor technologies have remained unsatisfied.
By contrast to existing technologies, the DarkPulse
Technology is a distributed-fiber sensing system, based on dark-pulse Brillouin scattering, which reports in real-time
on conditions such as temperature, stress, strain corrosion and structural health monitoring of Critical Infrastructure/Key Resources
including Bridges, Buildings, Roadways pipelines and mining installations.
DarkPulse Technology’s differentiators from
and advantages over existing technologies:
|
· |
Real-time Reporting: Higher data acquisition speeds allowing for structural monitoring of dynamic systems |
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· |
Cost to Customer: Significantly lower acquisition and operating costs |
|
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· |
Precision: A greater magnitude of precision and spatial resolution than other systems currently available |
|
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· |
Applications: Wider range of capabilities than other systems currently available |
|
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· |
Power consumption: Lower power consumption than existing systems allowing for off-grid installations |
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· |
Integration: Capable of integrating with existing systems |
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· |
Central station monitoring/cloud based GUI |
We believe that these key advantages should
allow us not only to enter existing markets, but more importantly, to open new market opportunities with new applications. We intend
to leverage new applications to target clients that have been unable to make use of distributed fiber optic technology to date.
Revenue Generation
We intend to generate revenue from the following
sources:
| · | Hardware equipment sales, warranties, service
contracts and licensing to large enterprises and governments; |
| · | Recurring subscription fees paid by enterprise/government
users for access to our 24/7 monitoring services of their critical infrastructure; |
| · | Recurring subscription fees paid by enterprise/government
users for access to our applications by enterprises/governments; |
| · | Recurring
subscription fees paid by enterprise users for access to data stored in the cloud that may
be integrated into large, third-party providers such as Oracle, Google Cloud; and Microsoft;
among others; and |
| · | Recurring subscription fees paid by enterprise/government
users who subscribe to bundled service offerings. |
Our Market
Current uses of fiber optic distributed sensor
technology have been limited to quasi-static, long-term structural health monitoring due to the time required to obtain the data and its
poor precision. Our DarkPulse Technology allows for the monitoring of highly dynamic environments due to its magnitude of increased resolution
and greater accuracy. The resulting high speed, real-time monitoring capabilities of our DarkPulse Technology should satisfy a broad range
of existing and emerging requirements. Use of the DarkPulse Technology by our customers should result in lower production costs with increased
sensing capabilities that can integrate with existing technology and be upgraded cost effectively.
Due to the characteristics of the fiber used in
fiber optic sensing, the uses of our DarkPulse Technology are wide ranging. Optical fiber is hard-wearing, which allows it to be used
in environments where other technologies fail (for example, at temperatures ranging from -40°C to 300°C and 1000psi). Additionally,
DarkPulse Technology’s sensors allow for live sensing due to the speed at which the analysis takes place.
Our management team is continually identifying
markets in which our DarkPulse Technology may be readily applied. Once these markets (as described below) have been addressed, our DarkPulse
Technology may be adapted and applied to new markets.
Structural Monitoring
| · | Buildings and Skyscrapers |
| · | Bridges, Tunnels and Dams |
| · | Roads and Railway tracks |
Temperature Sensing
| · | Fire Alarm and Environment control |
| · | Low cost and maintenance |
| · | Ability to withstand harsh working environment |
Security & Defense
| · | National Border Protection |
| · | Protection of Military and other sensitive installations |
Consulting Services:
| · | Consulting (as stand-alone or presales) |
| · | Post sales deployment and Support |
| · | Managed services (monitoring, etc.) |
Additional Potential Markets:
| · | Monitoring of composite structures in aircraft |
| · | Dynamic stress monitoring of runways |
| · | Dynamic ship hull stress monitoring, especially
with a view to double-hull oil tankers |
| · | Smart grid and power conservation applications
based on cooling and/or heat proximity – for instance, computer rooms, cell towers for heat soak |
| · | Monitor low temperatures as part of control systems |
| · | Monitoring of temperatures in extreme refrigeration
environments |
| · | Avalanche early warning systems |
Marketing
We utilize our DarkPulse Technology as the foundation
of our ongoing marketing initiatives. Most notably, the greater magnitude of increased capabilities DarkPulse Technology versus existing
bright-pulsing technologies. Existing bright-pulse Brillouin-based sensors have historically been plagued with temperature and strain
cross-sensitivity, i.e. the inability to distinguish between temperature and strain change along the same fiber. The loss of spatial
resolution with an increase in fiber length is also a limiting factor for the use of distributed sensor systems. Because of these shortcomings,
existing bright-pulse Brillouin-based technologies are unable to succeed within today’s dynamic environments, which coincides with
our DarkPulse Technology’s increased capabilities over bright-pulse systems. Our marketing initiatives include daily, broad-based
social media engagement, management of our website, email campaigns, national television commercials, magazine ads, and other ongoing
initiatives designed to increase awareness of our products and services and drive conversion and adoption rates.
Competition
The overall optical sensing market is projected
to reach USD $3.47 billion by 2023 from USD $1.13 billion in 2016, at a CAGR of 15.47% between 2017 and 2023. We are active in the optical
sensing market, including Oil & Gas pipeline health monitoring, National Border Security applications, and the mining industry. We
believe that fiber sensing applications which incorporate our DarkPulse Technology may provide significant competitive advantages over
structural health monitoring applications offered by the long-term leaders in the field, such as Schlumberger, Hewlett-Packard, and Yokogawa,
which collectively account for a significant portion of industry sales. These companies, as well as others, have numerous differences
in feature sets and functionality, but all share certain basic attributes: a bright-pulse technology as the core of their systems architecture.
An architecture designed using bright-pulsing technology has limited sensing capabilities and resolutions of one meter allowing for mostly
long-term quasi-static deployments.
However, we utilize our DarkPulse Technology
allowing for multiple applications into those markets unavailable to companies using bright-pulse technology. While many of the companies
using bright-pulse technology have attempted to incorporate various sensing techniques into a legacy technology, none have been able
to offer the order of magnitude resolutions offered by our DarkPulse Technology. This magnitude in resolution coupled with the DarkPulse
Technology’s increased data collection speeds allows our DarkPulse Technology to be installed into areas of the market that our
competitors cannot. Our future financial condition and operating results depend on our ability to provide a high-quality solution
as well as increased distribution of the solutions in each of the markets in which we compete or intend to compete within.
The markets for our products and services
are highly competitive and we are confronted by aggressive competition. These markets are characterized by frequent product introductions
and rapid technological advances. Our financial condition and operating results can be adversely affected by these and other industry-wide
downward pressures on gross margins. Principal competitive factors important to us include price, product features, relative price and
performance, product quality and reliability, marketing and distribution capability, service and support and corporate reputation.
Intellectual Property
Our policy is to protect our technology by, among
other things, patents, trade secret protection and copyrights. We have taken security measures to protect our trade secrets and proprietary
know-how, to the greatest extent possible. Our means of protecting our proprietary rights may not prove to be adequate and our competitors
may independently develop technology or products that are similar to ours or that compete with ours. Trade secret, patent and copyright
laws afford only certain protections for our technology and products. The laws of many countries do not protect our proprietary rights
to as great an extent as do the laws of the United States. Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to obtain and use information that we regard as proprietary. Third parties may also design around our proprietary rights,
which may render our protected technology and products less valuable, if the design around is favorably received in the marketplace.
In addition, any of our products or technology
covered by patents or other intellectual property rights, could cause us to be subject to various legal actions. Litigation may be necessary
to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights
of others, or to defend against claims of infringement, invalidity, misappropriation, or other claims.
Through DPTI’s April 2017 Intellectual Property
agreement with the University, DPTI was sold, transferred, and assigned U.S. Patent Nos. 7,245,790, 8,643,829, and 9,534,965, each of
which are related to our BOTDA dark-pulse technology. In addition, Canadian Patent No. 2,502,275 was also assigned.
Suppliers
We currently rely on a full-time, dedicated, external
team of experienced professionals for the coding and maintenance of our products. We believe we have mitigated the associated risks
of managing an external team of software and engineering development professionals by incorporating internal management and oversight,
as well as appropriate systems, protocols, controls, and procedures and ensuring that we have access to additional qualified professionals
to provide like or complementary services.
Government Regulation
Government regulation is not
of significant concern for our business nor is government regulation expected to become an impediment to the business in the near- or
mid-term as management is currently unaware of any planned or anticipated government regulation that would have a material impact on
our business. Our management believes it currently possesses all requisite authority to conduct our business as described in this
Prospectus.
Employees
As of April 11, 2022, we had 167 full-time employee and
no part-time employees.
Legal Proceedings
DarkPulse, Inc. v. Twitter, Inc.
On January 24, 2022, the Company filed a petition
in the Supreme Court of the State of New York County of New York to compel a disclosure from Twitter, Inc. The petition sought to compel
Twitter, Inc. to disclose the owner and operator of the “Investor News” Twitter account (@newsfilterio) so the Company could
commence an action for damages arising from false, misleading, and untrue statements made by the Investor News.
On February 23, 2022, the Court ordered Twitter
to release information concerning the owner and operator of the Investor News account to the Company. The
Company will continue to pursue and expose the identities of those individuals or groups and shall take any and all legal action to pursue
the violators.
Carebourn Capital, L.P. v. DarkPulse, Inc.
As disclosed in greater detail in the Company’s
Form 10-Q, filed November 15, 2021, the Company remains in active litigation with Carebourn Capital, L.P. (“Carebourn”).
The remainder of this disclosure will address all material updates since the aforementioned Form 10-Q.
On November 1, 2021, the Company filed a motion
to compel Carebourn to produce certain documents and supplement its responses to certain interrogatories.
On September 27, 2021, Carebourn filed a declaratory
judgment and a motion for declaratory judgment, dismissal of the Company’s claims, and summary judgment (the “Dispositive
Motion”).
On February 15, 2022, the Court rendered its
decision on the aforesaid motions, denying the Dispositive Motion in its entirety and granting in part, and denying in part, the Company’s
motion to compel. Pursuant to the Court’s ruling in the Company’s favor on its motion to compel, the Court has awarded the
Company attorneys’ costs and fees in connection with the successful portions of its motion to compel.
On January 19, 2022, the Company filed a motion
for enforcement of a protective order. It is the Company’s position that Carebourn has violated a protective order that was entered
into by the parties and seeks to protect confidential information exchanged during the litigation. The Court has not yet rendered a decision
on this motion.
On March 24, 2022, Carebourn filed a Motion
to Compel against DarkPulse, alleging that DarkPulse failed to fulfill its discovery obligations by not producing a privilege log. DarkPulse
contends that Carebourn’s motion is meritless and premature.
The Company remains committed to actively litigating
its claims for relief under the Exchange Act.
More Capital, LLC v. DarkPulse, Inc. et
al
As disclosed in greater detail in the Company’s
Form 10-Q, filed November 15, 2021, the Company remains in active litigation with More Capital, LLC (“More”). The remainder
of this disclosure will address all material updates since the aforementioned Form 10-Q.
On October 27, 2021, the Company served its
initial discovery requests, consisting of interrogatories, requests for admission, and requests for production, on More.
On November 24, 2021, More served its responses
to the Company’s initial discovery requests. After reviewing More’s responses, it is the Company’s position that More’s
responses are false, misleading, untrue, and/or evasive.
On February 28, 2022, the Company filed its
motion to compel More to produce certain documents and supplement or otherwise modify its responses to certain interrogatories and requests
for admission. DarkPulse’s motion will be heard on April 14, 2022.
On March 9, 2022, More filed a motion for summary
judgment against the Company. The Company’s opposition was filed on or before March 23, 2022, and More’s motion will be heard
on April 6, 2022.
The Company remains committed to actively litigating
its claims for relief under the Exchange Act.
Goodman et al. v. DarkPulse, Inc.
As disclosed in greater detail in the Company’s
Form 10-Q, filed November 15, 2021, the Company remains in active litigation with Stephen Goodman (“Goodman”), Mark
Banash (“Banash”), and David Singer (“Singer”) (Goodman, Banash, and Singer together, the “Series
D Plaintiffs”). The remainder of this disclosure will address all material updates since the aforementioned Form 10-Q.
On August 20, 2021, the Company and the Series
D Plaintiffs entered into a stipulation, pursuant to which the Company withdrew its motion to dismiss and the Company was provided with
an extended period of time to respond to the complaint.
On September 8, 2021, the Company filed its
Answer and Counterclaims, wherein the Company alleges counterclaims arising from various breaches of fiduciary duties by the Series D
Plaintiffs while they were employed as officers of the Company.
On December 9, 2021, the parties participated
in private mediation. No understanding of settlement was reached at the conclusion thereof.
The Company remains committed to actively litigating
its claims and defenses against the Series D Plaintiffs.
DarkPulse, Inc. v. FirstFire Global Opportunities
Fund, LLC, and Eli Fireman (SDNY)
On December 31, 2021, the Company commenced
an action against FirstFire Global Opportunities Fund, LLC (“FirstFire”), and Eli Fireman (“Fireman”)
(FirstFire and Fireman together, the “FirstFire Parties”) in the United States District Court for the Southern District
of New York. The complaint alleges that FirstFire is an unregistered dealer acting in violation of Section 15(a) of the Exchange Act of
1934 and that the Company is entitled to rescissionary relief from certain convertible promissory notes and securities purchase agreements
entered into by the Company and FirstFire pursuant to Section 29(b) of the Exchange Act. The complaint also asserts claims against Fireman
for control person liability under Section 20(a) of the Exchange Act, unjust enrichment of FirstFire, and constructive trust against FirstFire.
On January 14, 2022, the Company moved for
entry of a temporary restraining order and award of a preliminary injunction against FirstFire to enjoin them from selling or attempting
to sell, transfer, or otherwise dispose of the 177,275,000 common shares the Company believed were in FirstFire’s possession pursuant
to the conversion of a certain note.
On January 14, 2022, the Court denied the Company’s
order to show cause seeking a temporary restraining order.
Following expedited briefing by the parties,
on January 21, 2022, the Court denied the Company’s motion for preliminary injunction.
On March 14, 2022, the FirstFire Parties filed
their letter request for a motion to dismiss the Company’s complaint. The Company responded to the FirstFire Parties’ letter
on March 17, 2022. As of the filing date, the Court has not yet issued a decision on the FirstFire Parties letter request to file its
motion to dismiss.
FirstFire Global Opportunities Fund, LLC
v. DarkPulse, Inc. (Del. Chancery Court)
On December 13, 2021, FirstFire commenced an
action against the Company in the Court of Chancery of the State of Delaware. The complaint seeks declaratory judgment of the issuance
of 177,375,000 shares of Company common stock pursuant to a certain convertible promissory note.
On January 4, 2022, the Company filed a motion
to dismiss FirstFire’s complaint.
On February 11, 2022, the Company filed its
opening memorandum of law in support of its motion to dismiss. The Company’s memorandum argues that the issuance of the certain
convertible promissory note to FirstFire was made under is void ab initio as it violates New York’s criminal usury laws,
and that FirstFire improperly amended the governing law provision of the void convertible note to evade being declared void ab initio
and, instead, continue to enforce the unlawful transaction.
On March 14, 2022, FirstFire filed a notice
of voluntary dismissal of its complaint.
As of December 31, 2021, DarkPulse views the
aforesaid FirstFire Delaware Chancery matter as fully disclosed.
DarkPulse, Inc. v. EMA Financial, LLC et
al
On January 4, 2022, the Company commenced an
action against EMA Financial, LLC (“EMA”), EMA Group, Inc. (“EMA Group”), and Felicia Preston (“Preston”)
(EMA, EMA Group, and Preston together, the “EMA Parties”) in the United States District Court for the Southern District
of New York. The complaint alleges that EMA is an unregistered dealer acting in violation of Section 15(a) of the Exchange Act and that
the Company is entitled to rescissionary relief from certain convertible promissory notes and securities purchase agreements entered into
by the Company and EMA pursuant to Section 29(b) of the Exchange Act. The complaint also asserts claims against Preston for control person
liability under Section 20(a) of the Exchange Act, unjust enrichment of EMA, EMA Group, and Preston, and constructive trust against the
EMA Parties.
On March 28, 2022, the Company filed its first
amended complaint against the EMA Parties. The amended complaint alleges the same causes of action asserted in the initial complaint—(1)
that EMA is an unregistered dealer acting in violation of Section 15(a) of the Exchange Act and, pursuant to Section 29(b) of the Exchange
Act, the Company is entitled to rescissionary relief from certain convertible promissory notes and securities purchase agreements entered
into by the Company and EMA, (2) that Preston is liable pursuant to Section 20(a) of the Exchange Act, and (3) unjust enrichment—along
with two claims: that the EMA Parties, first, violated and, second conspired to violate the Racketeer Influenced and Corrupt Organizations
(RICO) Act for engaging in the collection of an unlawful debt.
The Company remains committed to actively litigating
its claims for relief under the Exchange Act.
In addition to the foregoing Legal Proceedings,
the Company is also actively investigating potential legal claims, including but not limited to stock fraud, market manipulation, and/or
defamation, against certain Twitter accounts, websites, and social media channels. The investigation is ongoing and should potential claims
be identified, the Company will evaluate commencing formal litigation proceedings.
From time to time, the Company may become involved
in litigation relating to claims arising out of its operations in the normal course of business. To the best of the Company’s knowledge,
no governmental authority is contemplating any proceeding to which the Company is a party or to which any of the Company’s properties
are subject, which would reasonably be likely to have a material adverse effect on the Company’s business, financial condition and
operating results.
From time to time, we may become involved
in litigation relating to claims arising out of our operations in the normal course of business. We are not currently involved in any
pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to
which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect
on our business, financial condition and operating results.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
Executive Officers and Directors
The following table sets forth the name, age, and position of each
executive officer and director of the Company:
Director's Name |
Age |
Position |
Dennis O’Leary |
58 |
Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, Secretary & Treasurer |
|
|
|
Dr. Anthony Brown |
48 |
Director |
|
|
|
Carl Eckel |
63 |
Director |
|
|
|
Bill Bayliss |
59 |
Chief Executive Officer of Optilan |
Dennis M. O’Leary, Chairman, CEO, President,
CFO. Mr. O’Leary was appointed as the Company’s Chief Executive Officer, President, Chief Financial Officer and Chairman
of the Board in April 2018. Mr. O’Leary is a serial entrepreneur with significant international experience having founded Sulu
Electric Power and Light Corp (Philippines), a firm with expertise in utility scale power generation and solar energy. In 2010, Mr. O’Leary
co-founded DarkPulse Technologies Inc., a wholly-owned subsidiary of the Company, which is developing specialized devices that monitor
activities along national borders and provide structural health and safety monitoring of oil and gas pipelines. He holds extensive
start-up experience including multiple exit strategies. Mr. O’Leary is an Ambassador for the Province of New Brunswick, Canada,
and a Research Member of the NATO Science and Technology Organization. He served as a member of the Board at Arizona State University’s
School of Engineering, Global Resolve as Chair of the Impact Committee. His previous employment includes the NYPD where he worked as
a member of the Manhattan North Tactical Narcotics Team, which prosecuted establishments involved in the illegal distribution of narcotics.
He was a member of a joint taskforce working with the DEA and USINS in the execution of warrants related to narcotics trafficking. While
at the NYPD, he was assigned to the Department of Justice as a member of the FBI’s investigative team with internal designation
C14. He is a licensed private pilot with turbine experience. Mr. O’Leary was appointed as a Director due to his extensive experience
in the industries in which we operate. Mr. O’Leary is not, and has not been during the past five years, the director of any
other public companies.
Dr. Anthony Brown, Director. Dr. Brown
has served as a Director of the Company since April 2019. He is a physicist and scientist with extensive experience in the development
of Brillouin scattering-based distributed fiber optic sensing. In 2010, Dr. Brown co-founded DarkPulse Technologies, Inc., a wholly-owned
subsidiary of the Company. Dr. Brown has more than 25 years of research and lecturing experience gained at the University of New Brunswick
(“UNB”), focusing primarily on the development of Brillouin scattering-based distributed fiber optic sensor technology.
From 2001 to 2012, Dr. Brown served as an assistant professor and research associate at UNB. During Dr. Brown’s tenure at UNB,
he was instrumental in developing numerous patents in the field of fiber optic sensing. From 2012 to 2015, Dr. Brown served as an Adjunct
Professor at UNB. From 2013 through the present, Dr. Brown has served as a data scientist for Xplornet Communications, Inc. From 2018
through the present, Dr. Brown has served as a consultant for the Company. Dr. Brown received a Bachelor of Science degree in Physics
from UNB in 1995, and a PhD in Physics from UNB in 2001. Dr. Brown was appointed as a Director due to his extensive experience in
the development of Brillouin scattering-based distributed fiber optic sensing. Dr. Brown is not, and has not been during the past five
years, the director of any other public companies.
Carl Eckel, Director. Mr. Eckel has
served as a Director of the Company since April 2019. He is a U.S. military veteran with over 35 years of defense communications system
development and support experience. Mr. Eckel’s career began in the field of telecommunications operations and continued to
evolve with the rapid advancements in telecommunications technologies. While serving in the United States Air Force from 1977 to 1985,
Mr. Eckel was responsible for managing leased communications accounting, planning, user requirement changes, and system upgrades and
replacements for critical Air Force Satellite Control Network (“AFSCN”) Programs at Onizuka AFS, until his honorable
discharge in 1985. As a private civilian, from 1985 to 1992, Mr. Eckel served as a Database Systems Administrator and Site Integrator
for Ford Aerospace / Loral where he was responsible for into customer communications requirements analysis and development of training
for operations and maintenance of the classified and unclassified systems supporting all Space Shuttle and satellite activities. In 1993
recognizing the government’s need for quality affordable training for operations and maintenance of complex software and hardware
communications systems, Mr. Eckel started a successful training development and delivery business that provided training to Washington
D.C. area clients such as the Pentagon 7th CG, the White House Communications Agency. and PACAF based in Hawaii. Mr. Eckel worked for
Allied Signal/Honeywell in 1995-96 as a Group Field Engineer maintaining critical Control Center and Remote Tracking Communications Equipment
around the world, and then rejoining communications systems support with Lockheed from 1997 to 1998. From 1999 to 2000, Mr. Eckel resumed
support on the government side of the AFSCN serving initially in Network Security and Systems Integration. From 2000 to 2001, Mr. Eckel
served as a Deputy Maintenance Manager for ITT where he was responsible for maintenance of AFSCN mission control communications systems.
From 2001 to 2013, Mr. Eckel served as a Site Manager, Program Manager, and Program Director for IITC / Nortel / PEC / Avaya Government
Solutions where he held a team leadership role transitioning back into program management. With this transition Mr. Eckel was a part
of establishing and delivering contract performance that netted 99-100% contract satisfaction award fees. Mr. Eckel advanced to program
director level managing contract team activities, including subcontractors, at multiple locations supporting programs for the Air Force,
Army, and NOAA/NWS. In early 2014, Mr. Eckel transitioned into the Oil and Gas Industry as a safety professional in support of pipeline
integrity work, station work, and mainline projects for clients including Enbridge, Hess, Tesoro, MarkWest, TransCanada, Kinder Morgan,
and Shell. From 2014 through the present, Mr. Eckel has served as a Safety Manager for Minnesota Limited, LLC where he is responsible
for safety compliance, including field safety inspections, incident and accident investigation, and reporting. Mr. Eckel received a diploma
in Communications Systems from the USAF Technical School in Shepherd AFB, TX. Mr. Eckel holds numerous certifications, including OSHA
500 – Authorized OSHA 10 and 30 hour trainer, OSHA 510 HAZWOPER, CPR/AED/First aid, DOT – CSA & HAZMAT Driver Training.
Mr. Eckel was appointed as a Director due to his extensive management experience within the government and the private sectors in
such areas and industries where our technology systems may be advantageously utilized. Mr. Eckel is not, and has not been during the
past five years, the director of any other public companies.
Bill Bayliss, CEO, Optilan. Mr. Bayliss
has served as the CEO of Optilan since February 2020. Mr. Bayliss has been actively involved in leadership positions in both the public
and private industrial/energy sector; including living and working in North America, Middle East and Norway. Mr. Bayliss started his career
in support to the power generation and petrochemical businesses in a wide range of roles including project management, sales and commercial.
He entered the oil and gas business with Brown and Root (B&R) in both London and Aberdeen. He subsequently moved to Norway with Kvaerner
Engineering and returned back to UK with Kellogg B&R (KBR) fulfilling various roles including Senior Manager for the Hibernia Development
in Canada, Business Manager for the Conoco Southern North Sea operations, maintenance and major project work before being promoted to
KBR Global Operations and Maintenance Director. In 2004, Mr. Bayliss moved to Petrofac to set up an engineering, procurement, construction
and commissioning support business that grew significantly from an initial seed corn start up investment, and within his role as Vice
President, developed the business into five divisional areas with an annual turnover of circa $300 million and a support staff of 1,800.
In 2009, he moved to Dubai as Chief Operating Officer of Topaz Engineering and was accountable for four business units with a circa $300
million turnover and over 4000 personnel. Mr. Bayliss joined Viking Seatech in September 2011 as Group CEO to take the business through
financial and organizational restructuring and professionalization. Mr. Bayliss led the sale of this HSBC private equity backed debt leveraged
business which was sold in August 2013 for £150million to USA trade buyer Actuant. At the end of 2014 Mr. Bayliss moved to work
as an independent consultant helping a number of Private Equity houses including Bluewater Energy and Energy Ventures in their due diligence
activities for the acquisition of various targets covering are Operational, Commercial (including financial elements), HSEQ, the supply
chain, organizational structures and general management support. In mid-2016 Bill joined ICR. As Group CEO, he developed and executed
a comprehensive strategy with the “end in mind” that delivered valuable change not only in terms of EBITDA but attractiveness
in terms of exit multiples with the addition of new organic product lines and geographies. At its peak under Bills guidance the business
nearly doubled in size. During late 2019, Mr. Bayliss decided to pursue other activities and was appointed as the CEO of Optilan. Mr.
Bayliss has a Master of Science Degree in Engineering and Risk Management.
Legal Proceedings
During the past ten years there have been no events
under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability
and integrity of any of our directors or executive officers, and none of these persons has been involved in any judicial or administrative
proceedings resulting from involvement in mail or wire fraud or fraud in connection with any business entity, any judicial or administrative
proceedings based on violations of federal or state securities, commodities, banking or insurance laws or regulations, or any disciplinary
sanctions or orders imposed by a stock, commodities or derivatives exchange or other self-regulatory organization.
Family Relationships
There are no family relationships between any
of our directors and executive officers.
Audit Committee
As of December 31, 2021, we did not have a
functioning Audit Committee. Our management is currently reviewing our SEC filings and relying on outside experts to assist with this
process.
EXECUTIVE COMPENSATION
Summary Compensation for Named Executive Officers
The following table shows the executive compensation
paid to our named executive officers for the years ended December 31, 2021 and 2020.
Name and Principal Position | |
Year Ended
Dec 31, | | |
Salary | | |
All Other Compensation | | |
Total | |
Dennis O’Leary | |
| 2021 | | |
$ | 60,000 | | |
$ | – | | |
$ | 60,000 | |
Chairman/CEO and Director | |
| 2020 | | |
$ | – | | |
$ | – | | |
$ | – | |
Bill Bayliss | |
| 2021 | | |
$ | 343,918 | | |
$ | 68,782 | | |
$ | 412,700 | |
CEO, Optilan | |
| 2020 | | |
$ | 321,655 | | |
$ | 12,866 | | |
$ | 334,521 | |
Summary Compensation for Directors
The following table shows the executive compensation
paid to our directors (excluding named executive officers) for the year ended December 31, 2021.
Name and Principal Position | |
Year Ended Dec 31, | | |
Salary | | |
Total | |
Dr. Anthony Brown, Director | |
| 2021 | | |
$ | – | | |
$ | – | |
Carl Eckel, Director | |
| 2021 | | |
$ | 60,000 | | |
$ | 60,000 | |
Equity Awards
As of December 31, 2021, there were no outstanding
equity awards.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Principal Shareholders
The table below sets forth information as
to our directors, named executive officers, and executive officers and each person owning of record or was known by the Company to own
beneficially shares of stock greater than 5% of the 5,379,559,651 (5,379,471,416 common plus 88,235 preferred) shares as of April
11, 2022. The table includes preferred stock that is convertible into common stock and information as to the ownership of the Company's
Stock by each of its directors, named executive officers, and executive officers and by the directors and executive officers as a group.
There were no stock options outstanding as of April 11, 2022. Except as otherwise indicated, all shares are owned directly, and the
persons named in the table have sole voting and investment power with respect to shares shown as beneficially owned by them. The address
for each of our directors, named executive officers, and executive officers is 1345 Avenue of the Americas, 2nd Floor, New
York, NY 10105.
Name
and Position |
Shares of
Common
Stock
Owned |
Shares of
Series D
Preferred
Stock Owned(1) |
Amount and
Nature of
Beneficial
Ownership(2) |
Percentage
of Beneficial Ownership Before Offering(3) |
Percentage
of Beneficial Assuming Remaining 130,250,482 Shares are Sold |
Dennis
O’Leary, CEO and Director |
– |
67,647 |
135,294 |
* |
* |
Dr.
Anthony Brown, Director |
– |
5,882 |
11,764 |
* |
* |
Carl
Eckel, Director |
– |
– |
– |
– |
– |
Bill
Bayliss, CEO, Optilan |
– |
– |
– |
– |
– |
Total
named executive officers, executive officers, and directors (four persons) |
– |
73,529 |
147,058 |
* |
* |
*Less than 1%
| (1) | Each share of Series D Preferred Stock is convertible, at the
option of the holder, into two shares of our Common Stock. |
| | |
| (2) | Under Rule 13d-3 of the Exchange Act, a beneficial owner of a security includes any person who, directly
or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes
the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition
of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to
vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the
right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided.
In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the number of shares beneficially
owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of
any person as shown in the above table does not necessarily reflect the person’s actual ownership or voting power with respect to
the number of shares of common stock actually outstanding on the date of this prospectus. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
Except as disclosed below, for transactions with
our executive officers and directors, please see the disclosure under “EXECUTIVE COMPENSATION” above.
Director Independence
We are not currently subject to listing requirements
of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors
be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority
of “independent directors.”
We currently have not established any committees
of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees
in the future. We do not have a nominating committee or a nominating committee charter. Further, we do not have a policy with regard to
the consideration of any director candidates recommended by security holders. To date, other than as described above, no security holders
have made any such recommendations. The entire Board of Directors performs all functions that would otherwise be performed by committees.
Given the present size of our board it is not practical for us to have committees. If we are able to grow our business and increase our
operations, we intend to expand the size of our board and allocate responsibilities accordingly.
DESCRIPTION OF SECURITIES
We have authorized capital stock consisting of
the following. The total number of shares of capital stock which the Company has the authority to issue is: 20,002,000,000. These shares
shall be divided into two classes with 20,000,000,000 shares designated as common stock at $0.0001 par value (the “Common Stock”)
and 2,000,000 shares designated as preferred stock at $0.01 par value (the “Preferred Stock”).The Preferred Stock
of the Company is issuable by authority of the Board of Director(s) of the Company in one or more classes or one or more series within
any class and such classes or series shall have such voting powers, full or limited, or no voting powers, and such designations, preferences,
limitations or restrictions as our Board of Directors may determine, from time to time. We have 5,379,471,416 common shares and 88,235
preferred shares outstanding as of the date of this prospectus.
Common Stock
Our Certificate of Incorporation authorize us
to issue 20,000,000,000 shares of common stock, par value $0.0001 per share. The holders of outstanding common shares are entitled to
receive dividends out of assets or funds legally available for the payment of dividends of such times and in such amounts as the board
from time to time may determine. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote
of stockholders. There is no cumulative voting of the election of directors then standing for election. The common shares are not entitled
to pre-emptive rights and are not subject to conversion or redemption. Upon liquidation, dissolution or winding up of the Company, the
assets legally available for distribution to stockholders are distributable ratably among the holders of the common shares after payment
of liquidation preferences, if any, on any outstanding payment of other claims of creditors. Each outstanding common share is duly and
validly issued, fully paid and non-assessable.
Preferred Stock
Our Certificate of Incorporation authorize us
to issue 2,000,000 shares of preferred stock, par value $0.01 per share. Our Board of Directors has the authority to issue additional
shares of preferred stock in one or more series, and fix for each series, the designation of and number of shares to be included in each
such series. Our Board of Directors is also authorized to set the powers, privileges, preferences, and relative participating, optional
or other rights, if any, of the shares of each such series and the qualifications, limitations or restrictions of the shares of each such
series.
Unless our Board of Directors provides otherwise,
the shares of all series of preferred stock will rank on parity with respect to the payment of dividends and to the distribution of assets
upon liquidation. Any issuance by us of shares of our preferred stock may have the effect of delaying, deferring or preventing a change
of our control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings and
assets available for distribution to the holders of common stock or could adversely affect the rights and powers, including voting rights,
of the holders of common stock.
On July 12, 2018, we
filed a Certificate of Designation with the State of Delaware amending the designation of its previously designated “Class D Voting
Preferred Stock,” designating 100,000 shares of the Company’s preferred stock as “Series D Preferred Stock.” As
of July 18, 2018, all shares of the Company’s Class A Voting Preferred Stock, Class B Voting Preferred Stock, and Class C Voting
Preferred Stock had been returned to the Company and cancelled. There are presently 88,235 shares of Series D Preferred Stock outstanding.
On December 23, 2021,
we amended the Certificate of Designation for the Series D Preferred Stock. Pursuant to the amendment, Section 4 was changed to the following:
4. Conversion.
Each share of Series D Stock shall be convertible, at the sole and exclusive election of the holder of such share of Series D Preferred
Stock, into two (2) shares of Common Stock of the Corporation.
Each share of Series
D Preferred Stock entitles the holder to 6,000 votes on all matters submitted to a vote of our stockholders and is convertible at the
election of the holder into two shares of Common Stock.
Stock Options
We currently have no outstanding stock options.
Dividend Policy
We have never declared a cash dividend on our
common stock and our Board of Directors does not anticipate that we will pay cash dividends in the foreseeable future. Any future determination
to pay cash dividends will be at the discretion of our board of directors and will depend upon our financial condition, operating results,
capital requirements, restrictions contained in our agreements and other factors which our Board of Directors deems relevant.
Transfer Agent
We have appointed Standard
Registrar and Transfer Company, 440 East 400 South, Suite 200, Salt
Lake City, UT 84111, to act as transfer agent for the common stock.
Anti-Takeover Effects of Delaware Law, Our
Certificate of Incorporation and Bylaws
Certain provisions of our charter documents and
Delaware law could have an anti-takeover effect and could delay, discourage or prevent a tender offer or takeover attempt that a stockholder
might consider to be in its best interests, including attempts that might otherwise result in a premium being paid over the market price
of our common stock.
Charter and Bylaws
Our Certificate of Incorporation and Bylaws contain
provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of
our board of directors, including, among other things:
| · | no cumulative voting in the election of directors,
which limits the ability of minority stockholders to elect director candidates; |
| · | the ability of our board of directors to issue
shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without
stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; |
| · | the exclusive right of our board of directors
to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director,
which prevents stockholders from being able to fill vacancies on our board of directors; |
| · | the requirement that a special meeting of stockholders
may be called only by a majority vote of our board of directors or by stockholders holding shares of our common stock representing in
the aggregate a majority of votes then outstanding, which could delay the ability of our stockholders to force consideration of a proposal
or to take action, including the removal of directors; and |
| · | the ability of our board of directors, by majority
vote, to amend our bylaws, which may allow our board of directors to take additional actions to prevent a hostile acquisition and inhibit
the ability of an acquirer to amend our by-laws to facilitate a hostile acquisition. |
Delaware Anti-Takeover Statute
Under Section 203 of the General Corporation Law
of the State of Delaware (the “DGCL”), a corporation may not, in general, engage in a business combination with any
holder of 15% or more of its capital stock unless the holder has held the stock for three years or (i) our board of directors approves
the transaction prior to the stockholder acquiring the 15% ownership position, (ii) upon consummation of the transaction that resulted
in the stockholder acquiring the 15% ownership position, the stockholder owns at least 85% of the outstanding voting stock (excluding
shares owned by directors or officers and shares owned by certain employee stock plans) or (iii) the transaction is approved by the board
of directors and by the stockholders at an annual or special meeting by a vote of 66 2/3% of the outstanding voting stock (excluding shares
held or controlled by the interested stockholder). In general, Section 203 defines an interested stockholder as any entity or person beneficially
owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled
by any such entity or person.
A Delaware corporation may opt out of this provision
by express provision in its original certificate of incorporation or by amendment to its certificate of incorporation or by-laws approved
by its stockholders. We have opted out of Section 203.
Authorized but Unissued Shares
Our authorized but unissued shares of Common Stock
and Preferred Stock will be available for future issuance without stockholder approval, except as may be required under the listing rules
of any stock exchange on which our Common Stock is then listed. We may use additional shares for a variety of corporate purposes, including
future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but
unissued shares of Common Stock and Preferred Stock could render more difficult or discourage an attempt to obtain control of us by means
of a proxy contest, tender offer, merger or otherwise.
Limitations on Liability and Indemnification
of Officers and Directors
Under our Certificate of Incorporation, our directors
have no personal liability to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except (i) for any
breach of the duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL as it may from time to time be amended or any successor
provision thereto, or (iv) for any transaction from which a director derives an improper personal benefit.
PLAN OF DISTRIBUTION
The common stock offered by this prospectus is
being offering by the Selling Security Holder. The common stock may be sold or distributed from time to time by the Selling Share Holder
directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely as agents at market price prevailing
at the time of sale, at prices related to the prevailing market prices, at negotiated prices , or at fixed prices, which may be changed
. The Selling Security Holder may use any one or more of the following methods when selling securities:
|
· |
ordinary brokers’ transactions; |
|
· |
transactions involving cross or block trades; |
|
· |
through brokers, dealers, or underwriters may act solely as agents; |
|
· |
“at the market” into an existing market for the common stock; |
|
· |
in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents; |
|
· |
in privately negotiated transactions; or |
|
· |
any combination of the foregoing. |
In order to comply with the securities laws of
certain states, if applicable, the shares may be sold only through registered or licensed brokers or dealers. In addition, in certain
states, the shares may not be sold unless they have been registered or qualified for sale in the state or an exemption from the state’s
registration or qualification requirement is available and complied with.
The Selling Security Holder is an “underwriter”
within the meaning of Section 2(a)(11) of the Securities Act.
GHS has informed us that it intends to use an
unaffiliated broker-dealer to effectuate all sales, if any, of the common stock that it may purchase from us pursuant to the EFA. Such
sales will be made at prices and at terms then prevailing or at prices related to the then current market price. Each such unaffiliated
broker-dealer will be an underwriter within the meaning of Section 2(a)(11) of the Securities Act. GHS has informed us that each such
broker-dealer will receive commissions from GHS that will not exceed customary brokerage commissions.
Brokers, dealers, underwriters or agents participating
in the distribution of the shares as agents may receive compensation in the form of commissions, discounts, or concessions from the Selling
Security Holder and/or purchasers of the common stock for whom the broker-dealers may act as agent. The compensation paid to a particular
broker-dealer may be less than or in excess of customary commissions. Neither we nor GHS can presently estimate the amount of compensation
that any agent will receive.
We know of no existing arrangements between GHS
or any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of the shares offered by this prospectus.
At the time a particular offer of shares is made, a prospectus supplement, if required, will be distributed that will set forth the names
of any agents, underwriters or dealers and any compensation from the Selling Security Holder, and any other required information.
We will pay the expenses incident to the registration,
offering, and sale of the shares to GHS. We have agreed to indemnify GHS and certain other persons against certain liabilities in connection
with the offering of shares of common stock offered hereby, including liabilities arising under the Securities Act or, if such indemnity
is unavailable, to contribute amounts required to be paid in respect of such liabilities. GHS has agreed to indemnify us against liabilities
under the Securities Act that may arise from certain written information furnished to us by GHS specifically for use in this prospectus
or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities.
GHS has represented to us that at no time prior
to the EFA has GHS or its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly,
any short sale (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of our common stock or any hedging transaction
, which establishes a net short position with respect to our common stock. GHS agreed that during the term of the EFA, it, its agents,
representatives or affiliates will not enter into or effect, directly or indirectly, any of the foregoing transactions.
We have advised GHS that it is required to comply
with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes the selling stockholder, any affiliated
purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing, or attempting to
induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete.
Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution
of that security. All of the foregoing may affect the marketability of the securities offered by this prospectus.
This offering will terminate on the date that
all shares offered by this prospectus have been sold by GHS or November 9, 2023, whichever occurs sooner.
Our common stock is quoted on the OTC Markets
under the symbol “DPLS.”
The Selling Security Holder is an “underwriter”
within the meaning of Section 2(a)(11) of the Securities Act.
The Selling Security Holder and any broker-dealers
or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities
Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale
of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The Selling Security
Holder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to
distribute the securities.
Because the Selling Security Holder is deemed
to be an “underwriter” within the meaning of the Securities Act, it will be subject to the prospectus delivery requirements
of the Securities Act, including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. The Selling Security Holder has advised
us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale securities by the Selling
Security Holder.
We agreed to keep this prospectus effective until
the earlier of (i) the date on which the securities may be resold by the Selling Security Holder without registration and without regard
to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for us to be in compliance with the current
public information requirement under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities
have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities
will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in
certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the
Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities
with respect to the Common Stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution.
In addition, the Selling Security Holder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder,
including Regulation M, which may limit the timing of purchases and sales of the Common Stock by the Selling Security Holder or any other
person. We will make copies of this prospectus available to the Selling Security Holder and have informed the Selling Security Holder
of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).
SHARES ELIGIBLE FOR FUTURE SALE
The sale of a substantial number of shares of
our Common Stock, or the perception that such sales could occur, could adversely affect prevailing market prices for our Common Stock.
In addition, any such sale or perception could make it more difficult for us to sell equity, or equity related, securities in the future
at a time and price that we deem appropriate. If and when this Registration Statement becomes effective, we might elect to adopt a stock
option plan and file a Registration Statement under the Securities Act registering the shares of Common Stock reserved for issuance thereunder.
Following the effectiveness of any such Registration Statement, the shares of Common Stock issued under such plan, other than shares held
by affiliates, if any, would be immediately eligible for resale in the public market without restriction.
The sale of shares of our Common Stock which
are not registered under the Securities Act, known as “restricted” shares, typically are effected under Rule 144. As of
April 11, 2022, we had outstanding an aggregate of 5,379,471,416 shares of Common Stock of which approximately 116,972,640 shares are
restricted Common Stock. All our shares of Common Stock might be sold under Rule 144 after having been held for six months. No prediction
can be made as to the effect, if any, that future sales of “restricted” shares of our Common Stock, or the availability of
such shares for future sale, will have on the market price of our Common Stock or our ability to raise capital through an offering of
our equity securities.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY
COMPENSATION PLANS
As of December 31, 2021, the Company had no
securities authorized for issuance under equity compensation plans either approved or not approved by the Company’s shareholders.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Dismissal of
Principal Independent Accountant
On January 24, 2022,
we informed Boyle CPA, the Company’s independent registered public accounting firm (“Boyle”), of our decision
(approved by the Board of Directors) to dismiss Boyle as our independent registered public accounting firm effective as of January 24,
2022. Boyle was not dismissed for any cause.
None of the reports of Boyle on our financial
statements for the year ended December 31, 2020 contained an adverse opinion or disclaimer of opinion, or was qualified or modified as
to uncertainty, audit scope or accounting principles, other than all such reports contained
statements indicating there is substantial doubt about our ability to continue as a going concern.
There were no disagreements
between the Company and Boyle, for the fiscal year ended December 31, 2020 and any subsequent interim period through January 24, 2022
(date of dismissal) on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of Boyle, would have caused them to make reference to the subject matter of the disagreement
in connection with its report.
Engagement
of New Principal Independent Accountant
On January 24, 2022, we engaged Urish Popeck
& Co., LLC (“Urish”) our independent registered public accounting firm for the year ended December 31, 2021.
During our two most recent fiscal years, and
any subsequent interim period prior to engaging Urish, neither we nor anyone on our behalf consulted Urish regarding either:
(i) the application
of accounting principles to a specified transaction regarding the Company, either completed or proposed; or the type of audit opinion
that might be rendered on our financial statements; or (ii) any matter regarding the Company that was either the subject of a disagreement
or a reportable event.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
OF SECURITIES ACT LIABILITIES
We have entered into indemnification agreements
with each of our directors, executive officers and other key employees. The indemnification agreements will require us to indemnify our
directors to the fullest extent permitted by Delaware law. We have agreed to indemnify each of our directors and certain officers against
certain liabilities, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have
been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or
paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter
has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
LEGAL MATTERS
The legality of the issuance of the shares of
Common Stock offered by this Prospectus will be passed upon for us by Business Legal Advisors, LLC, Draper, Utah.
EXPERTS
No expert or counsel named in this prospectus
as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered
or upon other legal matters in connection with the registration or offering of the Common Stock was employed on a contingency basis, or
had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents
or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or
principal underwriter, voting trustee, director, officer, or employee.
The financial statements of DarkPulse, Inc.
as of December 31, 2020, which include an explanatory paragraph relating to our ability to continue as a going concern, included in this
Prospectus have been audited by Boyle, an independent auditor, as stated in their report appearing herein. Such financial statements
have been so included in reliance upon the reports of such firm given its authority as experts in accounting and auditing.
The financial statements of DarkPulse, Inc.
as of December 31, 2021, which include an explanatory paragraph relating to our ability to continue as a going concern, included in this
Prospectus have been audited by Urish Popeck & Co., LLC, an independent auditor, as stated in their report appearing herein. Such
financial statements have been so included in reliance upon the reports of such firm given its authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form
S-1 under the Securities Act (SEC File No. 333-261453) relating to the shares of common stock being offered by this prospectus,
and reference is made to such registration statement. This prospectus constitutes the prospectus of DarkPulse, Inc., filed as part of
the registration statement, and it does not contain all information in the registration statement, as certain portions have been omitted
in accordance with the rules and regulations of the SEC.
Upon the effective date of the registration statement
of which this prospectus is a part, we will be required to file reports and other documents with the SEC. We do not presently intend to
voluntarily furnish you with a copy of our Prospectus. You may read and copy any materials we file with the SEC at the public reference
room of the SEC at 100 F Street, NE., Washington, DC 20549, between the hours of 10:00 a.m. and 3:00 p.m., except federal holidays and
official closings, at the Public Reference Room. You may obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. Our SEC filings are also available to you on the Internet website for the SEC at http://www.sec.gov.
DARKPULSE, INC.
Index to Financial Statements
As of December 31, 2021 and 2020
and for the Years Ended December 31, 2021 and
2020
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Shareholders and Board of Directors
Of DarkPulse, Inc.
Opinion on
the Financial Statements
We have audited
the accompanying consolidated balance sheet of DarkPulse, Inc. and its subsidiaries (the “Company”) as of December 31, 2021,
the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for the year ended
December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results
of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted
in the United States of America.
Substantial Doubt about the
Company’s Ability to Continue as a Going Concern – See also Critical Audit Matters Section Below
The accompanying consolidated
financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated
financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency at December 31, 2021.
These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these
matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Basis for
Opinion
These consolidated
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe
that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below
are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated
to the audit committee and that: (1) relate) to accounts or disclosures that are material to the consolidated financial statements and
(2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Accounting for Embedded Derivative Liabilities
Related to Convertible Debentures
As described in Note 6 to the financial statements,
the Company had convertible debentures that required accounting considerations and significant estimates.
The Company determined that variable conversion
features issued in connection with certain convertible debentures required derivative liability classification. These variable conversion
features were initially measured at fair value and subsequently have been remeasured to fair value at each reporting period. The Company
determined the fair value of the embedded derivatives using the Black-Scholes-Merton option pricing model. The value of the embedded derivative
liabilities related to the convertible debentures was $533,753 at December 31, 2021.
We identified the accounting considerations and
related valuations, including the related fair value determinations of the embedded derivative liabilities of such as a critical audit
matter.
Our audit procedures related to the Company’s
accounting considerations and significant estimate included the following, among others:
| · | We reviewed the accounting considerations made
by the Company in determining the nature of the various features; |
| · | We evaluated of the potential derivatives and
potential bifurcation in the instruments; |
| · | We evaluated the determination of the fair value
of the various debt and equity instruments and the conversion features that include valuation models and assumptions utilized by management
against current accounting guidance. |
| · | We tested the mathematical accuracy of management’s
calculations related to the estimate. |
Auditing these elements is especially challenging
and requires auditor judgement due to the nature and extent of audit effort required to address these matters, including the extent of
specialized skill or knowledge needed.
Going Concern Uncertainty – See also
Going Concern Uncertainty explanatory paragraph above
As described further in Note 3 to the consolidated
financial statements, the Company has suffered recurring losses from operations and does not have an established source of revenues sufficient
to cover its operating costs. The ability of the Company to continue as a going concern is dependent on executing its business plan and
ultimately to attain profitable operations. Accordingly, the Company has determined that these factors raise substantial doubt as to the
Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. Management
intends to continue to fund its business by way of public or private offerings of the Company’s stock or through loans from private
investors, in order satisfy the Company’s obligations as they come due for at least one year from the financial statement issuance
date. However, the Company has not concluded that these plans alleviate the substantial doubt related to its ability to continue as a
going concern.
We determined the Company’s ability to continue
as a going concern is a critical audit matter due to the estimation and uncertainty regarding the Company’s available capital and
the risk of bias in management’s judgments and assumptions in their determination. Our audit procedures related to the Company’s
assertion on its ability to continue as a going concern included the following, among others:
| · | We performed testing procedures such as analytical procedures
to identify conditions and events that indicate that there could be substantial doubt about the Company’s ability to continue
as a going concern for a reasonable period of time. |
| · | We reviewed and evaluated management's plans
for dealing with adverse effects of these conditions and events. |
| · | We inquired of Company management and reviewed
company records to assess whether there are additional factors that contribute to the uncertainties disclosed. |
| · | We assessed whether the Company’s determination
that there is substantial doubt about its ability to continue as a going concern was adequately disclosed. |
Revenue Recognition
The Company recognizes revenue upon transfer of
control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for
those services.
Significant judgment is exercised by the Company
in determining revenue recognition for customer agreements, and include the pattern of delivery (i.e., timing of when revenue is recognized)
for each distinct performance obligation.
The related audit effort in evaluating management’s
judgments in determining revenue recognition for customer agreements required a high degree of auditor judgment.
Our principal audit procedures related to the
Company’s revenue recognition for customer agreements included the following:
| · | We gained an understanding of internal controls
related to revenue recognition. |
| · | We evaluated management’s significant accounting
policies for reasonableness. |
| · | We selected a sample of revenues recognized and
performed the following procedures: |
| o | Obtained and read contract source documents for each selection and other documents that were part of the
agreement, if applicable. |
| o | Assessed the terms in the customer agreement and evaluated the appropriateness of management’s application
of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions. |
| o | We tested the mathematical accuracy of management’s calculations
of revenue and the associated timing of revenue recognized in the financial statements. |
Business Combinations – Valuation
of Intangible Assets
As described in note 4 of the Consolidated Financial
Statements, the Company completed the acquisitions of 100% of Optilan Guernsey Limited and Optilan Holdco 2 Limited (Optilan) and TJM
Electronics West for $694,527 and $450,000, respectively and 60% of Wildlife Specialists LLC, Remote Intelligence, LLC and TerraData Unmanned,
PLLC for $1,478,000 and $1,478,000, and $600,000 respectively (collectively referred to as the “Acquisitions”) and accounted
for as business combinations. The acquired intangible assets included Optilan Holdco 3, Limited tradename for valued at $4,033,638. The
Company recorded the acquired intangible assets at fair value on the date of acquisition considering a discounted cash flow methodology.
The methods used to estimate the fair value of acquired intangible assets involve assumptions. The assumptions applied by management in
estimating the fair value of acquired intangible assets included income projections and discount rates.
The principal considerations for our determination
that performing procedures relating to the valuation of intangible assets in the Acquisitions is a critical audit matter are (1) there
was a degree in significant auditor judgement and subjectivity in applying procedures to the fair value of the intangible assets acquired
due to the judgment by management when developing estimates and (2) audit effort was required relating to the estimates, projections,
discount rates, and weighted average cost of capital utilized by the Company. In addition, the audit effort involved the use of professionals
with specialized skill and knowledge to assist in performing these procedures and evaluating the conclusions.
Our principal audit procedures to evaluate the
valuation of intangible assets included the following:
| · | We read the purchase agreements used in the underlying
acquisitions and utilized by the Company to allocate the purchase price. |
| · | We obtained the valuation reports prepared by
management’s third-party expert. |
| · | Utilized professionals with specialized skill
and knowledge to evaluate the reasonableness of the methodology, assumptions, including the discount rate and weighted average cost of
capital, as compared to their experience and publically available market data. |
| · | Considered the reasonableness of the overall
allocation of the total purchase price. |
/s/ Urish Popeck & Co., LLC
We have served as the Company's auditor since
2021.
Pittsburgh,
PA
April 15, 2022
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Shareholders and Board of Directors of
DarkPulse, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of DarkPulse, Inc. (the “Company”) as of December 31, 2020, the related consolidated statements of operations,
stockholders’ deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
Substantial Doubt About the
Company’s Ability to Continue as a Going Concern
As discussed
in Note 3 to the consolidated financial statements, the Company’s net losses, lack of revenues, and working capital deficiency raise
substantial doubt about its ability to continue as a going concern for one year from the issuance of these financial statements. Management’s
plans are also described in Note 3. The financial statements do not include adjustments that might result from the outcome of this uncertainty.
Basis of Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with standards
of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to fraud or error. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Boyle CPA, LLC
We have served as the Company’s auditor from 2019 through 2022
Bayville, NJ
April 15, 2021
DARKPULSE, INC.
Consolidated Balance Sheets
| |
| | | |
| | |
| |
December 31, | |
| |
2021 | | |
2020 | |
ASSETS | |
| | |
| |
| |
| | |
| |
CURRENT ASSETS: | |
| | | |
| | |
Cash | |
$ | 3,658,846 | | |
$ | 337 | |
Accounts receivable, net | |
| 4,223,990 | | |
| – | |
Inventory | |
| 865,019 | | |
| – | |
Unbilled revenue | |
| 497,773 | | |
| – | |
Other current assets | |
| 181,000 | | |
| – | |
TOTAL CURRENT ASSETS | |
| 9,426,628 | | |
| 337 | |
| |
| | | |
| | |
NON-CURRENT ASSETS: | |
| | | |
| | |
Property and equipment, net | |
| 2,370,711 | | |
| – | |
Operating lease right-of-use assets | |
| 2,038,106 | | |
| – | |
Patents, net | |
| 342,962 | | |
| 393,990 | |
Intangible assets | |
| 3,886,588 | | |
| – | |
Goodwill | |
| 17,088,501 | | |
| – | |
Other assets, net | |
| 282,884 | | |
| 91,464 | |
TOTAL NON-CURRENT ASSETS | |
| 26,009,752 | | |
| 485,454 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 35,436,380 | | |
$ | 485,791 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
| | | |
| | |
| |
| | | |
| | |
CURRENT LIABILITIES: | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 7,844,271 | | |
$ | 1,089,869 | |
Convertible notes, net of discount $0 and $35,525 respectively | |
| 378,263 | | |
| 931,158 | |
Notes payable | |
| 2,000,000 | | |
| – | |
Customer deposits | |
| 2,802,809 | | |
| – | |
Derivative liability | |
| 533,753 | | |
| 1,220,877 | |
Contract liabilities | |
| 3,216,562 | | |
| – | |
Operating lease liabilities - current | |
| 747,422 | | |
| – | |
Other current liabilities | |
| 2,024,433 | | |
| – | |
| |
| | | |
| | |
TOTAL CURRENT LIABILITIES | |
| 19,547,513 | | |
| 3,241,904 | |
| |
| | | |
| | |
NON-CURRENT LIABILITIES: | |
| | | |
| | |
Secured debenture | |
| 1,172,364 | | |
| 1,176,092 | |
Operating lease liabilities – non-current | |
| 2,474,530 | | |
| – | |
Other liabilities – non-current | |
| 676,331 | | |
| – | |
TOTAL NON-CURRENT LIABILITIES | |
| 4,323,225 | | |
| 1,176,092 | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
| 23,870,738 | | |
| 4,417,996 | |
| |
| | | |
| | |
Commitments and contingencies | |
| – | | |
| – | |
| |
| | | |
| | |
STOCKHOLDERS’ DEFICIT: | |
| | | |
| | |
Convertible preferred stock - Class D (par value $0.01; 100,000
shares authorized; 88,235 issued and outstanding at December 31, 2021 and, 2020, respectively) | |
| 883 | | |
| 883 | |
Common stock (par value $0.0001), 20,000,000,000 shares authorized,
5,197,821,885 and 4,088,762,151 shares issued and outstanding at December 31, 2021 and, 2020, respectively | |
| 519,782 | | |
| 408,876 | |
Treasury stock, 100,000 shares at December 31, 2021 and 2020 | |
| (1,000 | ) | |
| (1,000 | ) |
Paid-in capital in excess of par value | |
| 20,248,703 | | |
| 1,805,813 | ) |
Non-controlling interest in variable interest entity and subsidiary | |
| 2,358,227 | | |
| (12,439 | ) |
Accumulated other comprehensive income | |
| (284,463 | ) | |
| 315,832 | |
Accumulated deficit | |
| (11,276,490 | ) | |
| (6,450,170 | ) |
| |
| | | |
| | |
TOTAL STOCKHOLDERS’ DEFICIT | |
| 11,565,642 | | |
| (3,932,205 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
$ | 35,436,380 | | |
$ | 485,791 | |
See accompanying notes to consolidated financial
statements.
DARKPULSE, INC.
Consolidated Statements
of Operations
| |
| | | |
| | |
| |
For the Year Ended | |
| |
December 31, | |
| |
2021 | | |
2020 | |
REVENUES | |
$ | 7,783,340 | | |
$ | – | |
COST OF GOODS SOLD | |
| 6,685,210 | | |
| – | |
GROSS PROFIT | |
| 1,098,130 | | |
| – | |
| |
| | | |
| | |
OPERATING EXPENSES: | |
| | | |
| | |
Selling, general and administrative | |
| 3,918,967 | | |
| 149,259 | |
Salaries, wages and payroll taxes | |
| 2,653,683 | | |
| 187 | |
Professional fees | |
| 2,930,245 | | |
| 50,415 | |
Depreciation and amortization | |
| 258,306 | | |
| 51,028 | |
Debt transaction expenses | |
| 184,950 | | |
| 7,850 | |
TOTAL OPERATING EXPENSES | |
| 9,946,150 | | |
| 258,739 | |
| |
| | | |
| | |
OPERATING LOSS | |
| (8,848,020 | ) | |
| (258,739 | ) |
| |
| | | |
| | |
OTHER INCOME (EXPENSE): | |
| | | |
| | |
Interest expense | |
| (130,359 | ) | |
| (135,064 | ) |
Gain (Loss) on change in fair market value of derivative liabilities | |
| 687,124 | | |
| 54,623 | |
Gain (Loss) on convertible notes | |
| (35,525 | ) | |
| (3,889 | ) |
Gain on forgiveness of debt | |
| 3,488,860 | | |
| 67,227 | |
Foreign currency exchange rate variance | |
| 11,600 | | |
| – | |
| |
| | | |
| | |
TOTAL OTHER INCOME (EXPENSE) | |
| 4,021,700 | | |
| (17,103 | ) |
| |
| | | |
| | |
NET LOSS | |
| (4,826,320 | ) | |
| (275,842 | ) |
Net loss attributable to non-controlling interests in variable interest entity
and subsidiary | |
| 133,702 | | |
| – | |
Net loss attributable to Company stockholders | |
$ | (4,692,618 | ) | |
$ | (275,842 | ) |
LOSS PER SHARE | |
| | | |
| | |
Basic and Diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
WEIGHTED AVERAGE SHARES OUTSTANDING: | |
| | | |
| | |
Basic and Diluted | |
| 4,775,929,690 | | |
| 2,323,180,245 | |
See accompanying notes to consolidated financial
statements.
DARKPULSE, INC.
Consolidated Statements
of Comprehensive Loss
| |
| | |
| |
| |
For the Year Ended | |
| |
December 31, | |
| |
2021 | | |
2020 | |
| |
| | |
| |
NET LOSS | |
$ | (4,692,618 | ) | |
$ | (275,842 | ) |
| |
| | | |
| | |
OTHER COMPREHENSIVE LOSS | |
| | | |
| | |
Unrecognized Gain (Loss) on Foreign Exchange | |
| 26,539 | | |
| (20,943 | ) |
COMPREHENSIVE LOSS | |
$ | (4,666,079 | ) | |
$ | (296,785 | ) |
See accompanying notes to consolidated financial
statements.
DARKPULSE, INC.
Consolidated Statement
of Stockholders' Deficit
For the Years Ended December 31, 2021 and 2020
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
Preferred Stock | | |
Common Stock | | |
Treasury | | |
Paid in Capital in Excess of Par | | |
Non- Controlling Interest in | | |
Accumulated Other Comprehensive | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Stock | | |
Value | | |
Subsidiary | | |
Income | | |
Deficit | | |
Deficit | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance, December 31, 2019 | |
| 88,235 | | |
$ | 883 | | |
| 1,392,042,112 | | |
$ | 13,920,421 | | |
$ | (1,000 | ) | |
$ | (11,877,864 | ) | |
$ | (12,439 | ) | |
$ | 336,775 | | |
$ | (6,174,328 | ) | |
$ | (3,807,552 | ) |
Conversion of convertible notes | |
| – | | |
| – | | |
| 2,696,720,039 | | |
| 26,967,200 | | |
| – | | |
| (26,794,968 | ) | |
| – | | |
| – | | |
| – | | |
| 172,232 | |
Change to Par Value | |
| – | | |
| – | | |
| – | | |
| (40,478,745 | ) | |
| | | |
| 40,478,745 | | |
| – | | |
| – | | |
| – | | |
| – | |
Closing of DarkPulse East LLC | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (100 | ) | |
| – | | |
| – | | |
| – | | |
| (100 | ) |
Foreign currency adjustment | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (20,943 | ) | |
| – | | |
| (20,943 | ) |
Net loss | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (275,842 | ) | |
| (275,842 | ) |
Balance, December 31, 2020 | |
| 88,235 | | |
$ | 883 | | |
| 4,088,762,151 | | |
$ | 408,876 | | |
$ | (1,000 | ) | |
$ | 1,805,813 | | |
$ | (12,439 | ) | |
$ | 315,832 | | |
$ | (6,450,170 | ) | |
$ | (3,932,205 | ) |
Conversion of convertible notes | |
| – | | |
| – | | |
| 908,659,678 | | |
| 90,866 | | |
| – | | |
| 1,610,853 | | |
| – | | |
| – | | |
| – | | |
| 1,701,719 | |
Common stock issued for cash | |
| – | | |
| – | | |
| 179,974,598 | | |
| 17,997 | | |
| | | |
| 14,575,330 | | |
| | | |
| – | | |
| – | | |
| 14,593,327 | |
Common stock issued for acquisitions | |
| – | | |
| – | | |
| 15,000,000 | | |
| 1,500 | | |
| | | |
| 1,654,500 | | |
| 2,370,666 | | |
| – | | |
| – | | |
| 4,026,666 | |
Stock based compensation | |
| – | | |
| – | | |
| 5,425,453 | | |
| 543 | | |
| | | |
| 602,207 | | |
| | | |
| – | | |
| – | | |
| 602,750 | |
Foreign currency adjustment | |
| – | | |
| – | | |
| – | | |
| – | | |
| | | |
| – | | |
| – | | |
| (600,295 | ) | |
| – | | |
| (600,295 | ) |
Net loss | |
| – | | |
| – | | |
| – | | |
| – | | |
| | | |
| – | | |
| – | | |
| – | | |
| (4,826,320 | ) | |
| (4,826,320 | ) |
Balance, December 31, 2021 | |
| 88,235 | | |
$ | 883 | | |
| 5,197,821,885 | | |
$ | 519,782 | | |
$ | (1,000 | ) | |
$ | 20,248,703 | | |
$ | 2,358,227 | | |
$ | (284,463 | ) | |
$ | (11,276,490 | ) | |
$ | 11,565,642 | |
See accompanying notes to consolidated financial
statements.
DARKPULSE, INC.
Consolidated Statements
of Cash Flows
| |
| | | |
| | |
| |
For
the Year Ended December
31, | |
| |
2021 | | |
2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net loss | |
$ | (4,826,320 | ) | |
$ | (275,842 | ) |
Adjustments to reconcile net loss to net cash used by operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 129,493 | | |
| 86,607 | |
Loan acquisition costs | |
| (480,450 | ) | |
| 7,850 | |
Stock based compensation | |
| 602,750 | | |
| – | |
Gain on reduction of loan default penalty | |
| – | | |
| (9,900 | ) |
Gain on extinguishment of debt | |
| (3,488,860 | ) | |
| (67,227 | ) |
Operating lease expense | |
| (1,346,808 | ) | |
| – | |
Amortization of debt discount | |
| 515,975 | | |
| 51,739 | |
Derivative liability | |
| (687,124 | ) | |
| (54,624 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| 771,432 | | |
| – | |
Inventory | |
| 1,175,869 | | |
| – | |
Unbilled revenue | |
| 822,031 | | |
| – | |
Contract liability | |
| (922,631 | ) | |
| – | |
Customer deposits | |
| (365,684 | ) | |
| – | |
Accounts payable and accrued expenses | |
| (2,041,131 | ) | |
| 269,589 | |
Operating lease liabilities | |
| 2,451,692 | | |
| – | |
Other current liabilities | |
| (3,672,703 | ) | |
| – | |
Net cash used by operating activities | |
| (11,363,470 | ) | |
| 8,192 | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Purchases of property and equipment | |
| (754,961 | ) | |
| – | |
Business acquisitions, net of cash received | |
| (583,319 | ) | |
| – | |
Capitalized patents | |
| (191,420 | ) | |
| (4,969 | ) |
Deposits | |
| (159,453 | ) | |
| – | |
Net cash used by investing activities | |
| (1,689,153 | ) | |
| (4,969 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds from sale of common stock | |
| 14,593,327 | | |
| – | |
Proceeds from convertible debentures | |
| 1,102,700 | | |
| 40,000 | |
Repayments of convertible debentures | |
| (384,600 | ) | |
| – | |
Proceeds from related party notes payable | |
| – | | |
| (44,096 | ) |
Proceeds from notes payable | |
| 2,000,000 | | |
| – | |
Net cash provided by financing activities | |
| 17,311,427 | | |
| (4,096 | ) |
NET INCREASE (DECREASE) IN CASH | |
| 4,258,804 | | |
| (873 | ) |
Effect of exchange rate on cash | |
| (600,295 | ) | |
| – | |
CASH, beginning of year | |
| 337 | | |
| 1,210 | |
CASH, end of year | |
$ | 3,658,846 | | |
$ | 337 | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid during the year ended December 31: | |
| | | |
| | |
Interest | |
$ | – | | |
$ | – | |
Income taxes | |
$ | – | | |
$ | – | |
Non-cash finance and investing activities during the year ended December 31: | |
| | | |
| | |
Issuance of common stock for convertible notes payable and interest | |
| 181,560 | | |
| – | |
Issuance of common stock for Wildlife Specialists and Remote Intelligence | |
| 1,654,500 | | |
| – | |
Non-controlling interest for Wildlife Specialists and Remote Intelligence | |
| 2,370,666 | | |
| – | |
See accompanying notes to consolidated financial
statements.
DARKPULSE, INC.
Notes to the Consolidated
Financial Statements
For the Years ended December 31, 2021 and 2020
NOTE 1 – BASIS OF FINANCIAL STATEMENT
PRESENTATION
Organization and Description of Business
DarkPulse, Inc. (“DPI” or “Company”)
is a technology-security company incorporated in 1989 as Klever Marketing, Inc. (“Klever”). Its’ wholly-owned subsidiary,
DarkPulse Technologies Inc. (“DPTI”), originally started as a technology spinout from the University of New Brunswick, Fredericton,
Canada. The Company’s security and monitoring systems will initially be delivered in applications for border security, pipelines,
the oil and gas industry and mine safety. Current uses of fiber optic distributed sensor technology have been limited to quasi-static,
long-term structural health monitoring due to the time required to obtain the data and its poor precision. The Company’s patented
BOTDA dark-pulse sensor technology allows for the monitoring of highly dynamic environments due to its greater resolution and accuracy.
On April 27, 2018, Klever entered into an Agreement
and Plan of Merger (the “Merger Agreement” or the “Merger”) involving Klever as the surviving parent corporation
and acquiring a privately held New Brunswick corporation known as DarkPulse Technologies Inc. as its wholly owned subsidiary. On July
18, 2018, the parties closed the Merger Agreement, as amended on July 7, 2018, and the name of the Company was subsequently changed to
DarkPulse, Inc. With the change of control of the Company, the Merger is being be accounted for as a recapitalization in a manner similar
to a reverse acquisition.
On July 20, 2018, the Company filed a Certificate
of Amendment to its Certificate of Incorporation with the State of Delaware, changing the name of the Company to DarkPulse, Inc. The
Company filed a corporate action notification with the Financial Industry Regulatory Authority (FINRA), and the Company's ticker symbol
was changed to DPLS.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies
consistently applied in the preparation of the accompanying financial statements are as follows:
Basis of Presentation and Principles of
Consolidation
The Company’s consolidated financial statements
are prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”). The consolidated
financial statements of the Company include the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions
have been eliminated in consolidation.
Our consolidated financial statements as of December
31, 2021 and 2020 include the accounts of DarkPulse Inc. and its subsidiaries:
DarkPulse Technologies Inc. (“DPTI”),
a New Brunswick, Canada corporation, a wholly owned subsidiary, incorporated December 16, 2010.
DPTI owns 100% of DarkPulse Technology Holdings
Inc., a New York corporation, incorporated July 6, 2017.
DPTI indirectly owns 37.572% of DarkPulse Technologies
International Inc., ("DPTINY") a New York corporation, incorporated on September 7, 2017. On or about September 18, 2017, DPTI
entered into a shareholder agreement with three investors, whereby DPTI would own 50.2% of DPTINY and the investors would own 49.8%.
On or about October 3, 2017, another investor entered into an agreement with DPTINY to fund it $37,500 for a 0.5% equity interest in
DPTINY. On December 26, 2017, DPTI’s CEO incorporated another corporation named DarkPulse Technologies International Inc., ("DPTIDel")
in the State of Delaware. On or about April 16, 2018, seven investors and DPTI entered into a new agreement whereby it was agreed that
the investors would own 62.428% of DPTIDel, and the September 18, 2017 agreement with respect to DPTINY was considered null and void.
Accordingly, the funding of $37,500 to DPTINY in October 2017 has been converted to an equity interest in DPTIDel as of April 2018. As
of April 16, 2018, DPTI owns approximately 37.572% of the shares of common stock of DPTIDel and 100% of the issued shares of Series A
Preferred Stock of DPTIDel, pursuant to which the Company controls both DPTIDel and DPTINY.
On August 9, 2021, the Company entered into a
Share Purchase Agreement with Optilan Guernsey Limited and Optilan Holdco 2 Limited (the “Sellers”), pursuant to which the
Company purchased from the Sellers all of the issued and outstanding equity interests of Optilan HoldCo 3 Limited, a private company
incorporated in England and Wales (“Optilan”) for £1.00 and also a commitment to enter into the Subscription (as defined
below). As of August 9, 2021, the Company owns all of the equity interests of Optilan.
On August 30, 2021, the Company closed two
separate Membership Interest Purchase Agreements with Remote Intelligence, Limited Liability Company, a Pennsylvania limited
liability company (“RI”) and Wildlife Specialists, LLC, a Pennsylvania limited liability company
(“WS”) pursuant to which the Company agreed to pay to the majority shareholder of each of RI and WS an aggregate
of 15,000,000
shares of the Company’s Common Stock and $1,000,000
in exchange for 60%
ownership of each of RI and WS.
On September 8, 2021, the Company entered into
and closed the Stock Purchase Agreement with TJM Electronics West, Inc., an Arizona corporation (“TJM”), and
TJM’s shareholders, pursuant to which we agreed to purchase all of the equity interests in TJM in exchange for $450,000.
Effective October 1, 2021 the Company entered
into and closed the Membership Purchase Agreement with TerraData Unmanned, PLLC, a Florida limited liability company (“TerraData”),
and Justin Dee, the sole shareholder of TerraData, pursuant to which the Company agreed to purchase 60%
of the equity interests in TerraData in exchange for 3,725,386
shares of the Company’s Common Stock and $400,000.
Use of Estimates
In preparing the consolidated financial statements,
management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of
the statements of financial condition, and revenues and expenses for the years then ended. Actual results may differ significantly from
those estimates. Significant estimates made by management include, but are not limited to, the assumptions used to calculate stock-based
compensation, derivative liabilities, preferred deemed dividend and common stock issued for services.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with high
credit quality financial institutions. The Company’s account at this institution is insured by the Federal Deposit Insurance
Corporation (“FDIC”) up to $250,000.
To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of
the financial institution in which it holds deposits.
Foreign Currency Translation
The Company’s reporting currency is US
Dollars. The accounts of one of the Company’s subsidiaries is maintained using the appropriate local currency, British Pound (“GBP”)
as the functional currency. The accounts of one of the Company’s subsidiaries is maintained using the appropriate local currency,
Canadian Dollar (“CAD”) as the functional currency. All assets and liabilities are translated into U.S. Dollars at balance
sheet date, shareholders' equity is translated at historical rates and revenue and expense accounts are translated at the average exchange
rate for the year or the reporting period. The translation adjustments are reported as a separate component of stockholders’ equity,
captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency are included in the statements of operations.
The relevant translation rates are as
follows: for the year ended December 31, 2021 closing rate at 1.353583
US$: GBP, average rate at 1.375671
US$:GBP and for the Optilan acquisition closing rate at 1.38138 US$: GBP.
The relevant translation rates are as follows:
for the year ended December 31, 2021 closing rate at 1.2794 US$: CAD, average rate at 1.2534 US$:CAD and for the year ended December
31, 2020 closing rate at 1.2754 US$: CAD, average rate at 1.3388 US$:CAD.
Long-Lived Assets and Goodwill
The Company accounts for long-lived assets in
accordance with the provisions of ASC 360-10-35, Property, Plant and Equipment, Impairment or Disposal of Long-lived Assets. This accounting
standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an
asset to future undiscounted net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value
of the asset.
The Company accounts for goodwill and intangible
assets in accordance with ASC 350, Intangibles – Goodwill and Other. Goodwill represents the excess of the purchase price of an
entity over the estimated fair value of the assets acquired and liabilities assumed. ASC 350 requires that goodwill and other intangibles
with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value
of an asset has decreased below its carrying value. During the fourth quarter of 2020, the Company adopted ASU No. 2017-04, Intangibles
– Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance simplifies the accounting for goodwill
impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment
will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of
goodwill. The adoption of this standard had no material impact on the Consolidated Financial Statements. During fiscal 2021 and 2020,
the Company recorded no impairments.
Intangible Assets - Intrusion Detection Intellectual
Property
The Company relies on patent laws and restrictions
on disclosure to protect its intellectual property rights. As of December 31, 2021, the Company held three U.S. and foreign patents on
its intrusion detection technology, which expire in calendar years 2025 through 2034 (depending on the payment of maintenance fees).
The DPTI issued patents cover a System and Method
for Brillouin Analysis, a System and Method for Resolution Enhancement of a Distributed Sensor, and a Flexible Fiber Optic Deformation
System Sensor and Method. Maintenance of intellectual property rights and the protection thereof is important to our business. Any patents
that may be issued may not sufficiently protect the Company's intellectual property and third parties may challenge any issued patents.
Other parties may independently develop similar or competing technology or design around any patents that may be issued to the Company.
The Company cannot be certain that the steps it has taken will prevent the misappropriation of its intellectual property, particularly
in foreign countries where the laws may not protect proprietary rights as fully as in the United States. Further, the Company may be
required to enforce its intellectual property or other proprietary rights through litigation, which, regardless of success, could result
in substantial costs and diversion of management's attention. Additionally, there may be existing patents of which the Company is unaware
that could be pertinent to its business, and it is not possible to know whether there are patent applications pending that the Company's
products might infringe upon, since these applications are often not publicly available until a patent is issued or published.
For the year ended December 31, 2021, the Company
had patent amortization costs on its intrusion detection technology totaling $51,028. Patents costs are being amortized over the remaining
life of each patent, which is from 7 to 16 years.
The DPTI issued patents cover a System and Method
for Brillouin Analysis, a System and Method for Resolution Enhancement of a Distributed Sensor, and a Flexible Fiber Optic Deformation
System Sensor and Method. Maintenance of intellectual property rights and the protection thereof is important to our business. Any patents
that may be issued may not sufficiently protect the Company's intellectual property and third parties may challenge any issued patents.
Other parties may independently develop similar or competing technology or design around any patents that may be issued to the Company.
The Company cannot be certain that the steps it has taken will prevent the misappropriation of its intellectual property, particularly
in foreign countries where the laws may not protect proprietary rights as fully as in the United States. Further, the Company may be
required to enforce its intellectual property or other proprietary rights through litigation, which, regardless of success, could result
in substantial costs and diversion of management's attention. Additionally, there may be existing patents of which the Company is unaware
that could be pertinent to its business, and it is not possible to know whether there are patent applications pending that the Company's
products might infringe upon, since these applications are often not publicly available until a patent is issued or published.
The following is a summary
of activity related to the DPTI patents for the year ended December 31, 2021:
Intangible Assets | |
| | |
Balance at January 1, 2021 | |
$ | 393,990 | |
Additions | |
| – | |
Amortization | |
| (51,028 | ) |
Balance at December 31, 2021 | |
$ | 342,962 | |
The following is a summary of the DPTI patents
as of December 31, 2021:
| |
2021 | |
Historical cost | |
$ | 904,269 | |
Accumulated amortization | |
| (561,307 | ) |
Carrying Value | |
$ | 342,962 | |
Future expected amortization of intangible
assets is as follows:
Future expected amortization of intangible assets | |
| | |
Year Ending December 31, | |
| |
2022 | |
$ | 51,028 | |
2023 | |
| 51,028 | |
2024 | |
| 51,028 | |
2025 | |
| 51,028 | |
2026 | |
| 51,028 | |
Thereafter | |
| 87,822 | |
Total | |
$ | 342,962 | |
Property and Equipment
Property and equipment are carried at historical
cost less accumulated depreciation. Depreciation is based on the estimated service lives of the depreciable assets and is calculated
using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized. Fully depreciated
assets are retained in the property and equipment, and accumulated depreciation accounts until they are removed from service. When property
and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are
removed from the accounts and any gain or loss is included in operations. Repairs and maintenance are expensed as incurred.
The estimated useful lives of property and equipment
are generally as follows:
Schedule of estimated useful lives | |
| | |
| |
Years | |
Office furniture and fixtures | |
| 4 | |
Plant and equipment | |
| 4-8 | |
Leasehold Improvements | |
| 10 | |
Motor Vehicles | |
| 3 | |
Revenue Recognition
The Company’s revenues are generated primarily
from the sale of our products, which consist primarily of advanced technology solutions for integrated communications and security systems.
At contract inception, we assess the goods and services promised in the contract with customers and identify a performance obligation
for each. To determine the performance obligation, we consider all products and services promised in the contract regardless of whether
they are explicitly stated or implied by customary business practices. The timing of satisfaction of the performance obligation is not
subject to significant judgment. We measure revenue as the amount of consideration expected to be received in exchange for transferring
goods and services. We generally recognize product revenues at the time of shipment, provided that all other revenue recognition criteria
have been met.
The Company recognizes revenue when its customer
obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for
those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606,
we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract;
(iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize
revenue when (or as) we satisfy a performance obligation. The five-step model is applied to contracts when it is probable that we will
collect the consideration we are entitled to in exchange for the goods or services transferred to the customer. At contract inception,
once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and
determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize revenue
in the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation
is satisfied.
In accordance with ASU No. 2016-12, Revenue
from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedient, which is to (1) clarify the objective
of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected from customers
for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash consideration is
contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that
occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining
the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarify that
a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under
legacy GAAP before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic
606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. The amendments
of this ASU are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. There was
no impact as a result of adopting this ASU on the financial statements and related disclosures. Based on the terms and conditions of
the product arrangements, the Company believes that its products and services can be accounted for separately as its products and services
have value to the Company’s customers on a stand-alone basis. When a transaction involves more than one product or service, revenue
is allocated to each deliverable based on its relative fair value; otherwise, revenue is recognized as products are delivered or as services
are provided over the term of the customer contract.
Contract liabilities is shown separately in the
unaudited consolidated balance sheets as current liabilities. At December 31, 2021 and December 31, 2020, we had contract liabilities
of $3,216,562 and $0, respectively.
Cost of Product Sales and Services
Cost of sales consists primarily of materials,
airtime and overhead costs incurred internally and amounts incurred to contract manufacturers to produce our products, airtime and other
implementation costs incurred to install our products and train customer personnel, and customer service and third-party original equipment
manufacturer costs to provide continuing support to our customers. There are certain costs which are deferred and recorded as prepaids,
until such revenue is recognized. Refer to revenue recognition above as to what constitutes deferred revenue.
Concentration of Credit Risk
The Company has no significant concentrations
of credit risk.
Related Parties
The Company accounts for related party transactions
in accordance with ASC 850 (“Related Party Disclosures”). A party is considered to be related to the Company if the party
directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company.
Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of
the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence
the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing
its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties
or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one
or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Leases
Effective January 1, 2019, the Company accounts
for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating
or financing leases, and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated
by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing
rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the
lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line
rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset
results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred.
In calculating the right of use asset and lease
liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial terms
of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over
the lease term.
Derivative Financial Instruments
The Company evaluates the embedded conversion
feature within its convertible debt instruments under ASC 815-15 and ASC 815-40 to determine if the conversion feature meets the definition
of a liability and, if so, whether to bifurcate the conversion feature and account for it as a separate derivative liability. 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 in the statements of operations. For stock-based derivative
financial instruments, the Company uses a lattice model, in accordance with ASC 815-15 “Derivative and Hedging” to value
the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument
liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument
could be required within 12 months after the balance sheet date.
Beneficial Conversion Features
The Company evaluates the conversion feature
for whether it was beneficial as described in ASC 470-30. The intrinsic value of a beneficial conversion feature inherent to a convertible
note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon
conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance
to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term,
the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is
measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in
the financing transaction, if any, to the fair value of the shares of common stock at the commitment date to be received upon conversion.
Fair Value of Financial Instruments
The Company measures
its financial assets and liabilities in accordance with the requirements of FASB ASC 820, “Fair Value Measurements and Disclosures”.
As defined in FASB ASC 820, the fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of similar
entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about
risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or
generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 established
a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs
(level 3 measurement) as follows:
Level 1 – Quoted prices are available in
active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset
or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists
of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 – Pricing inputs are other than
quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes
those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard
models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current
market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these
assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are
supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include
non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level 3 – Pricing inputs include significant
inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that
result in management’s best estimate of fair value.
Income Taxes
The Company accounts for income taxes pursuant
to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”) which requires, among other things,
an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes
it is more likely than not that the net deferred asset will not be realized.
The Company follows the provision of ASC 740-10
related to Accounting for Uncertain Income Tax Positions. When tax returns are filed, there may be uncertainty about the merits of positions
taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of
a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes
it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes,
if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more likely than
not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount
measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with
any associated interest and penalties that would be payable to the taxing authorities upon examination.
The Company believes its tax positions are all
more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25, “Definition
of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the
purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion
and examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity
would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based
solely on the basis of its technical merits and the statute of limitations remains open. The federal and state income tax
returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they are filed.
The Company's U.S. subsidiaries were incorporated
in 2017, and tax returns have not yet been filed. The Company does not anticipate a tax liability for the years 2021 and 2020. The Company
has filed tax returns in Canada for the year ended December 31, 2018, and they are still subject to audit.
Stock-based Compensation
Stock-based compensation is accounted for based
on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of
the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director
is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement
of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Pursuant to ASC Topic 718, for share-based payments
to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized
over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain.
The Company initially records compensation expense based on the fair value of the award at the reporting date. Further, ASC Topic 718,
provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification
accounting in Topic 718, such as the repricing of share options, which would revalue those options and the accounting for the cancellation
of an equity award whether a replacement award or other valuable consideration is issued in conjunction with the cancellation. If not,
the cancellation is viewed as a replacement and not a modification, with a repurchase price of $0.
Income (Loss) Per Common Share
The Company accounts for earnings per share pursuant
to ASC 260, Earnings per Share, which requires disclosure on the financial statements of "basic" and "diluted" earnings
(loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common
shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average
number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year.
In periods where the Company has a net loss, all dilutive securities are excluded.
Schedule of antidilutive shares | |
| | | |
| | |
| |
| December
31, 2021 | | |
| December
31, 2020 | |
Convertible preferred stock | |
| – | | |
| – | |
Stock Options | |
| – | | |
| – | |
Stock Warrants | |
| – | | |
| – | |
Recently Issued Accounting Pronouncements
In October 2016, the FASB issued ASU 2016-16,
“Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception
that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until
the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019,
including interim periods within those fiscal years. Early adoption of the update is permitted. The adoption of ASU 2016-16 did not have
a material impact on the consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04
Intangibles-Goodwill and Other (“ASC 350”): Simplifying the Accounting for Goodwill Impairment (“ASU 2017-04”).
ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the
implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing
date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in
determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under ASU 2017-04, an entity
should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.
An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value;
however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity
should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill
impairment loss, if applicable. ASU 2017-04 is effective for annual or any interim goodwill impairment tests for fiscal years beginning
after December 15, 2019. The adoption of ASU 2017-04 did not have a material impact on the consolidated financial statements.
In July 2021, the FASB issued ASU No. 2021-05,
Lessors—Certain Leases with Variable Lease Payments (Topic 842), Which requires a lessor to classify a lease with variable
lease payments that do not depend on an index or rate (hereafter referred to as “variable payments”) as an operating lease
on the commencement date of the lease if specified criteria are met. ASU 2021-05 is effective for the fiscal year beginning after December
15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s
condensed consolidated financial statements upon the adoption of this ASU.
In November 2021, the FASB issued ASU No. 2021-08,
Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, issued
by the Financial Accounting Standards Board. This ASU requires entities to recognize and measure contract assets and contract liabilities
acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The update will
generally result in the recognition of contract assets and contract liabilities at amounts consistent with those recorded by the acquiree
immediately before the acquisition date rather than at fair value. The Company expects that there would be no material impact on the
Company’s condensed consolidated financial statements upon the adoption of this ASU.
Although there are several other new accounting
pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe
any of these accounting pronouncements has had or will have a material impact on its financial position or results of operations.
NOTE 3 – GOING CONCERN
As shown in the accompanying financial statements,
the Company generated net losses of $4,826,320 and $275,842 during the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, the Company’s
current liabilities exceeded its current assets by $10,120,885. As of December 31, 2021, the Company had $3,658,846 of cash.
The Company will require additional funding during
the next twelve months to finance the growth of its current operations and achieve its strategic objectives. These factors, as well as
the uncertain conditions that the Company faces relative to capital raising activities, create substantial doubt as to the Company’s
ability to continue as a going concern. The Company is seeking to raise additional capital principally through private placement offerings
and is targeting strategic partners in an effort to finalize the development of its products and begin generating revenues. The ability
of the Company to continue as a going concern is dependent upon the success of future capital offerings or alternative financing arrangements
or expansion of its operations. The accompanying financial statements do not include any adjustments that might be necessary should
the Company be unable to continue as a going concern. Management is actively pursuing additional sources of financing sufficient to generate
enough cash flow to fund its operations through calendar year 2022. However, management cannot make any assurances that such financing
will be secured.
NOTE 4 – BUSINESS ACQUISITIONS
Optilan Holdco 3 Limited
On August 9, 2021, the Company entered into a
Share Purchase Agreement with Optilan Guernsey Limited and Optilan Holdco 2 Limited (the “Sellers”), pursuant to which the
Company purchased from the Sellers all of the issued and outstanding equity interests of Optilan HoldCo 3 Limited, a private company
incorporated in England and Wales (“Optilan”) for £1.00 and also a commitment to enter into the Subscription (as defined
below). As of August 9, 2021, the Company owns all of the equity interests of Optilan.
The Company has accounted for the purchase using
the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the
underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the
estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed
liabilities for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at December 31, 2021:
Schedule of fair value of assets and liabilities in acquisition |
|
|
|
|
|
|
|
| |
| | |
(Amounts in US$’s) |
|
|
Amounts Recognized as of Acquisition Date |
|
|
|
Measurement Period Adjustments (1) |
| |
Fair Value | |
Cash |
|
$ |
736,177 |
|
|
$ |
(6,000 |
) | |
$ | 730,177 | |
Accounts receivable |
|
|
4,619,381 |
|
|
|
– |
| |
| 4,619,381 | |
Inventory |
|
|
2,040,887 |
|
|
|
– |
| |
| 2,040,887 | |
Property & equipment |
|
|
1,393,274 |
|
|
|
– |
| |
| 1,393,274 | |
Right-of-use assets |
|
|
1,385,825 |
|
|
|
(694,527 |
) | |
| 691,298 | |
Unbilled revenue |
|
|
540,321 |
|
|
|
779,483 |
| |
| 1,319,804 | |
Intangible assets: |
|
|
|
|
|
|
|
| |
| | |
Trade name |
|
|
– |
|
|
|
4,033,638 |
| |
| 4,033,638 | |
Goodwill |
|
|
12,181,350 |
|
|
|
(1,830,489 |
) | |
| 10,350,861 | |
Total assets |
|
|
22,891,215 |
|
|
|
2,288,105 |
| |
| 25,179,320 | |
Accounts payable |
|
|
11,622,018 |
|
|
|
(174,846 |
) | |
| 11,447,172 | |
Contract deposits |
|
|
3,168,493 |
|
|
|
– |
| |
| 3,168,493 | |
Contract liabilities, current |
|
|
4,139,193 |
|
|
|
– |
| |
| 4,139,193 | |
Lease liabilities, current |
|
|
141,730 |
|
|
|
– |
| |
| 141,730 | |
Other current liabilities |
|
|
2,496,725 |
|
|
|
3,157,478 |
| |
| 5,654,203 | |
Lease liabilities, noncurrent |
|
|
628,529 |
|
|
|
– |
| |
| 628,529 | |
Total purchase consideration |
|
$ |
694,527 |
|
|
$ |
(694,527 |
) | |
$ | – | |
Wildlife Specialists, LLC and Remote Intelligence,
LLC
On August 30, 2021, the Company closed two separate
Membership Interest Purchase Agreements (the “MPAs”) with Remote Intelligence, Limited Liability Company, a Pennsylvania
limited liability company (“RI”) and Wildlife Specialists, LLC, a Pennsylvania limited liability company (“WS”)
pursuant to which the Company agreed to pay to the majority shareholder of each of RI and WS an aggregate of 15,000,000
shares of the Company’s Common Stock, $500,000 to be paid on the closing date, and an additional $500,000 to be paid 12
weeks from closing date in exchange for 60%
ownership of each of RI and WS. RI and WS are now subsidiaries of the Company.
The Company has accounted for the purchase using
the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the
underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the
estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed
liabilities for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at December 31, 2021:
Schedule of Condensed Consolidated Balance Sheet | |
| | |
WILDLIFE SPECIALISTS | |
| |
| |
Consideration | |
Cash | |
$ | 500,000 | |
Common stock | |
| 978,000 | |
Purchase price | |
$ | 1,478,000 | |
The allocation of the total purchase price to
the tangible and intangible assets acquired and liabilities assumed by DarkPulse based on the estimated fair values as of August 29,
2021 was as follows:
Schedule of fair value of assets and liabilities in acquisition |
|
|
|
|
|
|
|
| |
| | |
WILDLIFE SPECIALISTS |
|
|
Amounts |
|
|
|
Measurement |
| |
| |
(Amounts in US$’s) |
|
|
Recognized as
of Acquisition
Date |
|
|
|
Period
Adjustments
(1) |
| |
Fair Value | |
Cash |
|
$ |
33,910 |
|
|
$ |
(6,098 |
) | |
$ | 27,812 | |
Accounts receivable |
|
|
161,866 |
|
|
|
170,486 |
| |
| 332,352 | |
Other current assets |
|
|
600 |
|
|
|
20,947 |
| |
| 21,547 | |
Property & equipment |
|
|
99,490 |
|
|
|
(77,945 |
) | |
| 21,545 | |
Goodwill |
|
|
1,191,085 |
|
|
|
1,597,593 |
| |
| 2,788,678 | |
Total assets |
|
|
1,486,951 |
|
|
|
1,704,983 |
| |
| 3,191,934 | |
Assumed liabilities |
|
|
393,651 |
|
|
|
334,950 |
| |
| 728,601 | |
Non-controlling interest |
|
|
– |
|
|
|
985,333 |
| |
| 985,333 | |
Total Consideration for 60% of equity interests |
|
$ |
1,478,000 |
|
|
$ |
– |
| |
$ | 1,478,000 | |
Schedule of Condensed Consolidated Balance Sheet | |
| | |
REMOTE INTELLIGENCE | |
| |
| |
Consideration | |
Cash | |
$ | 500,000 | |
Common stock | |
| 978,000 | |
Purchase price | |
$ | 1,478,000 | |
The allocation of the total purchase price to
the tangible and intangible assets acquired and liabilities assumed by the Company based on the estimated fair values as of August 29,
2021 was as follows:
Schedule of fair value of assets and liabilities in acquisition |
|
|
|
|
|
|
|
| |
| | |
REMOTE INTELLIGENCE |
|
|
Amounts |
|
|
|
|
| |
| |
(Amounts in US$’s) |
|
|
Recognized
as of
Acquisition
Date |
|
|
|
Measurement
Period
Adjustments
(1) |
| |
Fair Value | |
Cash |
|
$ |
6,158 |
|
|
$ |
(5,800 |
) | |
$ | 358 | |
Accounts receivable |
|
|
24,036 |
|
|
|
16,024 |
| |
| 40,060 | |
Property & equipment |
|
|
111,636 |
|
|
|
76,710 |
| |
| 188,346 | |
Goodwill |
|
|
1,729,800 |
|
|
|
1,080,103 |
| |
| 2,809,903 | |
Total assets |
|
|
1,871,630 |
|
|
|
1,167,037 |
| |
| 3,038,667 | |
Assumed liabilities |
|
|
393,630 |
|
|
|
181,704 |
| |
| 575,334 | |
Non-controlling interest |
|
|
– |
|
|
|
985,333 |
| |
| 985,333 | |
Total Consideration for 60% of equity interests |
|
$ |
1,478,000 |
|
|
$ |
– |
| |
$ | 1,478,000 | |
TJM Electronics West, Inc.
On September 8,
2021, the Company entered into and closed the Stock Purchase Agreement with TJM Electronics West, Inc., an Arizona corporation
(“TJM”), and TJM’s shareholders, pursuant to which we agreed to purchase all of the equity interests in TJM
in exchange for $450,000.
TJM is now a wholly-owned subsidiary of the Company.
The Company has accounted for the purchase using
the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the
underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the
estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed
liabilities for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at December 31, 2021:
Schedule of fair value of assets and liabilities in acquisition | |
| | |
| |
Fair Value | |
Accounts receivable | |
$ | 3,400 | |
Property & equipment | |
| 91,051 | |
Goodwill | |
| 355,549 | |
Total assets | |
| 450,000 | |
Total Consideration | |
$ | 450,000 | |
TerraData Unmanned, PLLC.
Effective October 1, 2021 the Company entered
into and closed the Membership Purchase Agreement (the “TerraData MPA”) with TerraData Unmanned, PLLC, a Florida limited
liability company (“TerraData”), and Justin Dee, the sole shareholder of TerraData, pursuant to which the Company
agreed to purchase 60%
of the equity interests in TerraData in exchange for 3,725,386
shares of the Company’s Common Stock and $400,000,
subject to adjustments as defined in the TerraData MPA, to be paid within 12 weeks of closing. TerraData is now a subsidiary of the Company.
The Company has accounted for the purchase using
the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the
underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the
estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed
liabilities for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at December 31, 2021:
Schedule of Condensed Consolidated Balance Sheet | |
| | |
| |
| | |
| |
Consideration | |
Cash | |
$ | 400,000 | |
Common stock | |
| 200,000 | |
Purchase price | |
$ | 600,000 | |
The allocation of the total purchase price to
the tangible and intangible assets acquired and liabilities assumed by the Company based on the estimated fair values as of October 1,
2021 was as follows:
Schedule of fair value of assets and liabilities in acquisition | |
| | |
(Amounts in US$'s) | |
Fair Value | |
Cash | |
$ | 8,691 | |
Goodwill | |
| 992,049 | |
Total assets | |
| 1,000,740 | |
Assumed liabilities | |
| 740 | |
Non-controlling interest | |
| 400,000 | |
Total Consideration for 60% of equity interests | |
$ | 600,000 | |
Unaudited Supplemental Pro Forma Data
Unaudited pro forma results of operations for
the nine months ended December 31, 2021 and 2020 as though the Company acquired Optilan, Wildlife Specialists, Remote Intelligence, TJM
Electronic West and TerraData Unmanned (the “Acquired Companies”) on the first day of each fiscal year are set forth below.
Proforma
results of operations
| |
| | |
| |
| |
Year Ended December 31, | |
| |
2021 | | |
2020 | |
Pro forma revenues | |
$ | 23,329,213 | | |
$ | 45,344,847 | |
Pro forma operating income (loss) | |
$ | 11,477,923 | | |
$ | (16,627,266 | ) |
Pro forma net income (loss) | |
$ | 11,264,238 | | |
$ | (11,308,866 | ) |
Pro forma net income (loss) attributable to DarkPulse | |
$ | 11,912,054 | | |
$ | (11,367,321 | ) |
NOTE 5 – REVENUE
The following table is a summary of the Company’s
timing of revenue recognition for the years ended December 31, 2021 and 2020:
Schedule of timing of revenue recognition | |
| | | |
| | |
| |
Years Ended | |
| |
December 31, | |
| |
2021 | | |
2020 | |
Timing of revenue recognition: | |
| | |
| |
Services and products transferred at a point in time | |
$ | 7,783,340 | | |
$ | – | |
Services and products transferred over time | |
| – | | |
| – | |
Total revenue | |
$ | 7,783,340 | | |
$ | – | |
The Company disaggregates revenue by source and
geographic destination to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
Revenue by source consisted of the following
for the years ended December 31, 2021 and 2020:
Schedule of revenue by source consisted | |
| | | |
| | |
| |
Years Ended | |
| |
December 31, | |
| |
2021 | | |
2020 | |
Revenue by products and services: | |
| | | |
| | |
Products | |
$ | 1,533,378 | | |
$ | – | |
Services | |
| 6,249,962 | | |
| – | |
Total revenue | |
$ | 7,783,340 | | |
$ | – | |
Revenue by geographic destination consisted of
the following for the for the years ended December 31, 2021 and 2020:
Schedule of revenue by geographic destination | |
| | | |
| | |
| |
Years Ended | |
| |
December 31, | |
| |
2021 | | |
2020 | |
Revenue by geography: | |
| | | |
| | |
North America | |
$ | 535,407 | | |
$ | – | |
International | |
| 7,247,933 | | |
| – | |
Total revenue | |
$ | 7,783,340 | | |
$ | – | |
Contract Balances
The Company records contract assets when it has
a right to consideration and records accounts receivable when it has an unconditional right to consideration. Contract liabilities consist
of cash payments received (or unconditional rights to receive cash) in advance of fulfilling performance obligations. As of December
31, 2021, the Company did not have a contract assets balance.
The following table is a summary of the Company’s
opening and closing balances of contract liabilities related to contracts with customers.
Schedule of contract liabilities related to contracts with customers | |
| | |
| |
Total | |
Balance at December 31, 2020 | |
$ | – | |
Additions through advance billings to or payments from vendors | |
| – | |
Additions through business acquisition | |
| 4,139,193 | |
Revenue recognized from current period advance billings to or payments from vendors | |
| – | |
Revenue recognized from amounts acquired through business acquisition | |
| (922,631 | ) |
Balance at December 31, 2021 | |
$ | 3,216,562 | |
NOTE 6 – CONVERTIBLE DEBT SECURITIES
The Company uses the Black-Scholes Model to calculate
the derivative value of its convertible debt. The valuation result generated by this pricing model is necessarily driven by the value
of the underlying common stock incorporated into the model. The values of the common stock used were based on the price at the date of
issue of the debt security as of December 31, 2021. Management determined the expected volatility between 475.55-624.25%, a risk free
rate of interest between 0.10-0.13%, and contractual lives of the debt varying from zero months to eight months. Management made the
determination to use an expected life rather than contractual life for the calculations for the matured debt as of December 31, 2021.
The expected life is equal to the contractual life extended by one year which vary from two to seven months. The table below details
the Company's outstanding convertible notes, with totals for the face amount, amortization of discount, initial loss, change in the fair
market value, and the derivative liability.
Schedule of convertible debt | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Face | | |
Debt | | |
Initial | | |
Change | | |
Derivative Balance | |
| |
Amount | | |
Discount | | |
Loss | | |
in FMV | | |
12/31/2021 | |
| |
$ | 90,228 | | |
$ | – | | |
$ | 58,959 | | |
$ | 19,840 | | |
$ | 128,370 | |
| |
| 162,150 | | |
| – | | |
| 74,429 | | |
| 35,654 | | |
| 230,692 | |
| |
| 72,488 | | |
| – | | |
| 11,381 | | |
| 15,938 | | |
| 103,130 | |
| |
| 53,397 | | |
| – | | |
| 7,850 | | |
| (16,767 | ) | |
| 71,561 | |
Subtotal | |
| 378,263 | | |
| – | | |
| 152,619 | | |
| 54,665 | | |
| 533,753 | |
Transaction expense | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
| |
$ | 378,263 | | |
$ | – | | |
$ | 152,619 | | |
$ | 54,665 | | |
$ | 533,753 | |
Financings
On October 7, 2020, the Company entered into
a securities purchase agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) issuing to Geneva a convertible promissory
note in the aggregate principal amount of $47,850 with a $4,350 original issue discount and $3,500 in transactional expenses due to Geneva
and its counsel. The note bears interest at 9% per annum and may be converted into common shares of the Company's common stock at a conversion
price equal to 70% of the lowest trading price of the Company's common stock during the 20 prior trading days. The Company received $40,000
net cash. On April 16, 2021, Geneva converted $47,850 of principal and $2,153 into 8,065,040 shares of common stock.
On January 4, 2021, the Company entered into
a securities purchase agreement with Geneva issuing to Geneva a convertible promissory
note in the aggregate principal amount of $42,350 with a $3,850 original issue discount and $3,500 in transactional expenses due to Geneva
and its counsel. The note bears interest at 8% per annum and may be converted into common shares of the Company's common stock at a conversion
price equal to 70% of the lowest trading price of the Company's common stock during the 20 prior trading days. The Company received $35,000
net cash. On July 12, 2021, Geneva converted $42,350 of principal and $1,540 into 1,784,146 shares of common stock.
On February 3, 2021, the Company entered into
a securities purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of $94,200
with a $15,700
original issue discount and $3,500
in transactional expenses due to Geneva and its counsel. The note bears interest at 4.5%
per annum and may be converted into common shares of the Company's common stock at a conversion price equal to 81% of the lowest two
trading prices of the Company's common stock during the 10 prior trading days. The Company received $75,000
net cash. On July 14, 2021, the Company repaid $94,200 of principal.
On February 18, 2021, the Company entered
into a securities purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount
of $76,200
with a $12,700
original issue discount and $3,500
in transactional expenses due to Geneva and its counsel. The note bears interest at 4.5%
per annum and may be converted into common shares of the Company's common stock at a conversion price equal to 81% of the lowest two
trading prices of the Company's common stock during the 10 prior trading days. The Company received $60,000
net cash. On July 14, 2021, the Company repaid $76,200 of principal.
On April 5, 2021, the Company entered into a
securities purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of
$64,200
with a $10,700
original issue discount and $3,500
in transactional expenses due to Geneva and its counsel. The note bears interest at 4.5%
per annum and may be converted into common shares of the Company's common stock at a conversion price equal to 81% of the lowest two
trading prices of the Company's common stock during the 10 prior trading days. The Company received $50,000
net cash. On July 14, 2021, the Company repaid $64,200 of principal.
On April 26, 2021, the Company entered a
Securities Purchase Agreement and Registration Rights with FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC, a Delaware limited liability
company (the “FirstFire”), pursuant to which the Company issued to FirstFire a Convertible Promissory Note in the
principal amount of $825,000 (the
“FirstFire Note”). The purchase price of the FirstFire Note is $750,000.
The FirstFire Note matures on January
26, 2022 upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the FirstFire Note at 10%
per annum guaranteed until the FirstFire Note becomes due and payable, whether at maturity or upon acceleration or by prepayment or
otherwise. The FirstFire Note is convertible at any time after 180 days from issuance, upon the election of the FirstFire, into
shares of the Company’s Common Stock at $0.015 per
share. The FirstFire Note is subject to various “Events of Default,” which are disclosed in the FirstFire Note. Upon the
occurrence of an “Event of Default,” the conversion price would become $0.005. On November 17, 2021, FirstFire converted $825,000 of principal and $61,875 of interest into 177,375,000 shares
of common stock.
On December 31, 2021, the Company commenced an
action against FirstFire Global Opportunities Fund, LLC, and Eli Fireman (“Fireman”) in the United States District Court for
the Southern District of New York. The complaint alleges that FirstFire is an unregistered dealer acting in violation of Section 15(a)
of the Securities Exchange Act of 1934 (the “Act”), and that the Company is entitled to rescissionary relief from certain
convertible promissory notes and securities purchase agreements entered into by the Company and FirstFire pursuant to Section 29(b) of
the Act. The complaint also asserts claims against Fireman for control person liability under Section 20(a) of the Act, unjust enrichment
of FirstFire, and constructive trust against FirstFire.
On May 19, 2021, the Company entered into a Stipulation
of Settlement with four note holders pursuant to which the Company agreed to pay $173,000 to the note holders.
On June 3, 2021, the Company entered into a
Settlement and Mutual Release Agreement with Auctus Fund, LLC. Pursuant to the Agreement, the Auctus agreed to convert the
Promissory Note issued on September 25, 2018 by the Company to the Lender in the principal amount of $100,000 (the
“Auctus Note”) into 12,500,000 shares of the Company’s Common stock (the “Auctus
Shares”) as consideration for full and complete satisfaction of and settlement of the Auctus Note, which also terminates
all obligations owing under both the Auctus Note and the corresponding Securities Purchase Agreement dated September 25, 2018
between the Company and Auctus. Auctus also agreed to limit the resales of the Auctus Shares in the public market to no more than 2,500,000 shares
per calendar week until all of the Auctus Shares have been sold.
On July 14, 2021, the Company entered a
Securities Purchase Agreement (the “GS SPA”) with GS Capital Partners, LLC pursuant to which the Company issued
to the Lender a 6% Redeemable Note in the principal amount of $2,000,000 (the
“GS Note”). The purchase price of the GS Note is $1,980,000.
The GS Note matures on July 14,
2022 upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the GS Note at 6%
per annum until the GS Note becomes due and payable. The GS Note is subject to various “Events of Default,” which are
disclosed in the GS Note. Upon the occurrence of an “Event of Default,” the interest rate on the GS Note will be 18%.
The GS Note is not convertible into shares of the Company’s Common Stock and is not dilutive to existing or future
shareholders and the Company used a portion of the proceeds of the GS Note to retire convertible debt. As of December 31, 2021,
$2,000,000 remains outstanding.
As of December 31, 2021 and 2020
respectively, there was $378,263
and $931,158 of convertible
debt outstanding, net of debt discount of $0,
and $35,525.
As of December 31, 2021 and 2020 respectively, there was derivative liability of $533,753
and $1,220,880 related to
convertible debt securities.
NOTE 7 - DEBENTURE
DPTI issued a convertible Debenture to the University
(see Note 1) in exchange for the Patents assigned to the Company, in the amount of Canadian $1,500,000, or US $1,491,923 on December
16, 2010, the date of the Debenture. On April 24, 2017 DPTI issued a replacement secured term Debenture in the same C$1,500,000 amount
as the original Debenture. The interest rate is the Bank of Canada Prime overnight rate plus 1% per annum. The Debenture had an initial
required payment of Canadian $42,000 (US$33,385) due on April 24, 2018 for reimbursement to the University of its research and development
costs, and this has been paid. Interest-only maintenance payments are due annually starting after April 24, 2018. Payment of the principal
begins on the earlier of (a) three years following two consecutive quarters of positive earnings before interest, taxes, depreciation
and amortization, (b) six years from April 24, 2017, or (c) in the event DPTI fails to raise defined capital amounts or secure defined
contract amounts by April 24 in the years 2018, 2019, and 2020. The Company has raised funds in excess of the amount required for 2020,
2019 and 2018. The principal repayment amounts will be due quarterly over a six year period in the amount of Canadian Dollars $62,500.
Based on the exchange rate between the Canadian Dollar and the U.S. Dollar on December 31, 2018, the quarterly principal repayment amounts
will be US$48,447. The Debenture is secured by the Patents assigned by the University to DPTI by an Assignment Agreement on December
16, 2010. DPTI has pledged the Patents, and granted a lien on them pursuant to an Escrow Agreement dated April 24, 2017, between DPTI
and the University.
The Debenture was initially recorded at the $1,491,923
equivalent US Dollar amount of Canadian $1,500,000 as of December 16, 2010, the date of the original Debenture. The liability is being
adjusted quarterly based on the current exchange value of the Canadian dollar to the US dollar at the end of each quarter. The adjustment
is recorded as unrealized gain or loss in the change of the value of the two currencies during the quarter. The amounts recorded as an
unrealized gain (loss) for the years ended December 31, 2021 and 2020, were $20,941 and $20,941 respectively. These amounts are included
in Accumulated Other Comprehensive Loss in the Equity section of the consolidated balance sheet, and as Unrealized Loss on Foreign Exchange
on the consolidated statement of comprehensive loss. The Debenture also includes a provision requiring DPTI to pay the University a 2% royalty on sales of any and all products or services which incorporate the Patents for a period of five years from April
24, 2018.
For the years ended December 31, 2021 and 2020, the Company recorded
interest expense of $52,538 and $52,538, respectively.
As of December 31, 2021, the debenture liability totaled $1,172,364,
all of which was long term.
Future minimum required payments over the
next 5 years and thereafter are as follows:
Future minimum required payments | |
| | |
Period ending December 31, | |
| |
2022 | |
$ | – | |
2023 | |
| – | |
2024 | |
| – | |
2025 | |
| – | |
2026 and after | |
| 1,172,364 | |
Total | |
$ | 1,172,364 | |
NOTE 8 – LEASES
The Company adopted ASC 842
“Leases” using the modified retrospective approach, electing the practical expedient that allows the Company not to
restate its comparative periods prior to the adoption of the standard on January 1, 2019. As such, the disclosures required under
ASC 842 are not presented for periods before the date of adoption.
The following was included in our balance sheet
as of December 31, 2021 and 2020:
Schedule of operating leases | |
| | | |
| | |
| |
December 31, | |
Operating leases | |
2021 | | |
2020 | |
| |
| | |
| |
Assets | |
| | | |
| | |
ROU operating lease assets | |
$ | 2,038,106 | | |
$ | – | |
| |
| | | |
| | |
Liabilities | |
| | | |
| | |
Current portion of operating lease | |
$ | 747,422 | | |
$ | – | |
Operating lease, net of current portion | |
$ | 2,474,530 | | |
$ | – | |
Total operating lease liabilities | |
$ | 3,221,952 | | |
$ | – | |
The weighted average remaining lease term and
weighted average discount rate at December 31, 2021 were as follows:
Schedule of weighted average remaining lease term and weighted average discount rate | |
| | |
Weighted average remaining lease term (years) | |
December
31, 2021 | |
Operating leases | |
| 8.25 | |
Weighted average discount rate | |
| | |
Operating leases | |
| 6.00% | |
Operating Leases
On January 12, 2021, the Company’s newly
acquired subsidiary entered into an operating lease agreement to rent office space in Mumbai, India. This three-year agreement commenced
January 12, 2021 with an annual rent of approximately $50,000.
On May 27, 2021, the Company’s newly acquired
subsidiary entered into an operating lease agreement to rent office space in Warwick, United Kingdom. This ten-year agreement commenced
May 27, 2021 with an annual rent of approximately $85,000 with the first six months rent free.
On August 31, 2021, the Company’s newly
acquired subsidiary entered into an operating lease agreement to rent office space in Tempe, Arizona. This five-year agreement commenced
August 31, 2021 with an annual rent of approximately $192,000.
On October 20, 2021, the Company’s newly
acquired subsidiary entered into an operating lease agreement to rent office space in Warwick, United Kingdom. This ten-year agreement
commenced October 20, 2021 with an annual rent of approximately $200,000 with the first six months rent free.
The following table reconciles future minimum
operating lease payments to the discounted lease liability as of December 31, 2021:
Schedule of future minimum operating lease payments | |
| | |
2022 | |
$ | 405,924 | |
2023 | |
| 498,401 | |
2024 | |
| 463,402 | |
2025 | |
| 472,343 | |
2026 and later | |
| 1,751,345 | |
Total lease payments | |
| 3,591,415 | |
Less imputed interest | |
| (369,463 | ) |
Total lease obligations | |
| 3,221,952 | |
Less current lease obligations | |
| (747,422 | ) |
Long-term lease obligations | |
$ | 2,474,530 | |
NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accrued liabilities consist of the following as of December 31:
Schedule of accounts payable and accrued liabilities | |
| | | |
| | |
| |
2021 | | |
2020 | |
Accounts payable | |
$ | 7,227,129 | | |
$ | 519,899 | |
Accrued liabilities | |
| 617,142 | | |
| 569,970 | |
| |
$ | 7,844,271 | | |
$ | 1,089,869 | |
NOTE 10 – INCOME TAXES
The domestic and foreign components of loss before
(benefit) provision for income taxes were as follows:
Schedule
of income components
| |
2021 | | |
2020 | |
Domestic: | |
$ | (4,285,237 | ) | |
$ | (169,282 | ) |
Foreign: | |
| (541,083 | ) | |
| (106,560 | ) |
Total income (loss) before income taxes | |
$ | (4,826,320 | ) | |
$ | (275,842 | ) |
The provision (benefit) for income taxes for
the years ended December 31, 2021 and 2020 differs from the amount which would be expected as a result of applying the statutory tax
rates to the losses before income taxes due primarily to the valuation allowance to fully reserve net deferred tax assets.
The following table summarizes the significant
differences between statutory rates for the years ended December 31, 2021 and 2020:
Statutory tax rate | |
| | | |
| | |
| |
2021 | | |
2020 | |
Statutory tax rate: | |
| | | |
| | |
U.S. | |
| 21.00% | | |
| 21.00% | |
State taxes | |
| 2.19% | | |
| 3.63% | |
Foreign rate differential | |
| 0.46% | | |
| 0.00% | |
Other | |
| (1.81)% | | |
| 0.00% | |
Change in valuation allowance: | |
| (21.84)% | | |
| (24.63)% | |
| |
| –% | | |
| –% | |
The Company’s deferred tax assets and liabilities as of December
31, 2021 and 2020 are as follows:
Deferred Tax assets and liabilities | |
| | | |
| | |
| |
2021 | | |
2020 | |
Deferred Tax (Liabilities): | |
| | | |
| | |
Net operating losses | |
$ | 2,356,871 | | |
$ | 1,351,897 | |
Intangible assets | |
| (170,119 | ) | |
| – | |
Right of use asset | |
| (319,752 | ) | |
| – | |
Stock based compensation | |
| 498,571 | | |
| – | |
Less: Valuation allowance | |
| (2,365,571 | ) | |
| (1,351,897 | ) |
Deferred tax assets (liabilities) | |
$ | – | | |
$ | – | |
The Company has approximately $7,448,199
of federal and state net operating loss carryforwards as of December 31, 2021, which will not expire but will be limited to 80%
utilization. The company also has net operating losses in the United Kingdom of $1,414,454
which will not expire and $636,852
of net operating loss carryforwards in Canada which will begin to expire in 2038.
The Company records a tax valuation
allowance when it is more likely than not that it will not be able to recover the value of its deferred tax assets. For the years
ended December 31, 2021 and 2020, the Company calculated its estimated annualized effective tax rate at 0%
and 0%,
respectively, for both the United States, Canada and the United Kingdom. The Company had no
income tax expense on its losses for the years ended December 31, 2021 and 2020, respectively.
The Company recognizes the financial statement
benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following
an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest
benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company
recognizes interest accrued on uncertain tax positions as well as interest received from favorable tax settlements within interest expense.
The Company recognizes penalties accrued on unrecognized tax benefits within selling, general and administrative expenses. As of December
31, 2021 and 2020, the Company had no uncertain tax positions.
The Company does not anticipate any
significant changes to the total amounts of unrecognized tax benefits in the next twelve months. The Company files income tax
returns in New Brunswick, Canada, and the U.S. federal, New York, and Delaware jurisdictions and the United Kingdom jurisdictions. Tax years 2011
to current remain open to examination by Canadian authorities; the tax year 2018 remains open to examination by U.S.
authorities.
NOTE 11 – PREFERRED STOCK
In accordance with the Company’s bylaws,
the Company has authorized a total of 2,000,000 shares of preferred stock, par value $0.01 per share, for all classes. As of December
31, 2021 and 2020 respectively, there were 88,235 and 88,235 total preferred shares issued and outstanding for all classes.
On December 23, 2021, pursuant to the approval of the Board of Directors
and a majority vote of the holders of Series D Preferred Stock, the Company amended the Certificate of Designation for the Series D Preferred
Stock so that each share of Series D Stock is convertible, at the sole and exclusive election of the holder, into two shares of Common
Stock of the Company.
NOTE 12 – COMMON STOCK
In accordance with the Company’s bylaws,
the Company has authorized a total of 20,000,000,000 shares of common stock, par value $0.0001 per share. As of December 31, 2021 and
2020, there were 5,197,821,885 and 4,088,762,156 common shares issued and outstanding.
On February 18, 2020, the majority stockholders
holding a majority of the issued and outstanding voting shares of the Company amended the Company’s Certificate of Incorporation
to amend the par value of the Company’s common stock from $0.01 to $0.0001.
On January 14, 2021, the Company issued an aggregate
of 100,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $28,000.
On January 25, 2021, the Company issued an aggregate
of 150,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $42,000.
On February 1, 2021, the Company issued an aggregate
of 30,999,995 shares of common stock upon the conversion of convertible debt, as issued on February 12, 2019, in the amount of $8,116.
On February 11, 2021, the Company issued an aggregate
of 100,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $56,000.
On February 18, 2021, the Company issued an aggregate
of 220,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $75,436
for principal and $39,638 for interest.
On April 15, 2021, the Company issued an aggregate
of 8,065,040 shares of common stock upon the conversion of convertible debt, as issued on October 7, 2020, in the amount of $47,850 and
interest of $2,153.25.
On April 30, 2021, the Company issued 60,000,000
shares of common stock as compensation for loan acquisition costs associated with the note issued on the same date for the amount of
$825,000.
On June 4, 2021, the Company issued an aggregate
of 12,500,000 shares of common stock upon the conversion of convertible debt, as issued on September 25, 2018, in the amount of $76,656.83
and interest of $260.61.
On July 12, 2021, the Company issued an aggregate
of 1,784,146 shares of common stock upon the conversion of convertible debt, as issued on January 12, 2021, in the amount of $42,350.
On July 14, 2021, the Company issued an aggregate
of 45,037,115 shares of common stock upon the conversion of convertible debt, as issued on October 7, 2020, in the amount of $93,864
and interest of $26,246.
On July 19, 2021, the Company issued an aggregate
of 2,898,382 shares of common stock upon the conversion of convertible debt, as issued on October 7, 2020, in the amount of $10,497 and
interest of $6,748.
On August 25, 2021, the Company issued 31,799,260
shares of common stock for $3,000,000.
On August 31, 2021, the Company issued 27,297,995
shares of common stock for $3,000,000.
On September 22, 2021, the Company issued 25,630,272
shares of common stock for $2,000,000.
On September 30, 2021, the Company issued 15,000,000
shares of common stock pursuant to two separate Membership Interest Purchase Agreements with Remote Intelligence, and Wildlife Specialists,
LLC.
On September 30, 2021, the Company issued 3,194,081
shares of common stock as compensation valued at $250,000
for loan acquisition costs associated with proceeds raised.
On October 1, 2021, the Company issued 37,187,289
shares of common stock for $3,000,000.
On October 15, 2021, the Company issued 14,282,304
shares of common stock for $1,055,000.
On October 22, 2021, the Company issued 1,596,594
shares of common stock as compensation valued at $250,000
for loan acquisition costs associated with proceeds raised.
On October 25, 2021, the Company issued 634,778
shares of common stock as compensation valued at $250,000
for loan acquisition costs associated with proceeds raised.
On November 17, 2021, the Company issued an aggregate
of 177,375,000 shares of common stock upon the conversion of convertible debt, as issued on April 30, 2021, in the amount of $825,000
and interest of $61,875.
On December 21, 2021, the Company issued an aggregate
of 43,777,478 shares of common stock for $2,538,327.
At December 31, 2021, the Company had 1,589,257,888
in common shares reserved for issuance for convertible debt securities.
NOTE 13 – STOCK OPTIONS
As of December 31, 2021 and 2020, the Company
had no outstanding stock options.
NOTE 14 – COMMITMENTS AND CONTINGENCIES
Potential Royalty Payments
The Company, in consideration of the terms of
the debenture to the University of New Brunswick, shall pay to the University a two percent royalty on sales of any and all products
or services, which incorporate the Company's patents for a period of five years from April 24, 2018.
Legal Matters
DarkPulse, Inc. v. Twitter, Inc.
On January 24, 2022, the Company filed a petition
in the Supreme Court of the State of New York County of New York to compel a disclosure from Twitter, Inc. The petition sought to compel
Twitter, Inc. to disclose the owner and operator of the “Investor News” Twitter account (@newsfilterio) so the Company could
commence an action for damages arising from false, misleading, and untrue statements made by the Investor News.
On February 23, 2022, the Court ordered Twitter
to release information concerning the owner and operator of the Investor News account to the Company. The
Company will continue to pursue and expose the identities of those individuals or groups and shall take any and all legal action to pursue
the violators.
Carebourn Capital, L.P. v. DarkPulse, Inc.
As disclosed in greater detail in the Company’s
Form 10-Q, filed November 15, 2021, the Company remains in active litigation with Carebourn Capital, L.P. (“Carebourn”).
The remainder of this disclosure will address all material updates since the aforementioned Form 10-Q.
On November 1, 2021, the Company filed a motion
to compel Carebourn to produce certain documents and supplement its responses to certain interrogatories.
On September 27, 2021, Carebourn filed a declaratory
judgment and a motion for declaratory judgment, dismissal of the Company’s claims, and summary judgment (“Dispositive Motion”).
On February 15, 2022, the Court rendered its
decision on the aforesaid motions, denying the Dispositive Motion in its entirety and granting in part, and denying in part, the Company’s
motion to compel. Pursuant to the Court’s ruling in the Company’s favor on its motion to compel, the Court has awarded the
Company attorneys’ costs and fees in connection with the successful portions of its motion to compel.
On January 19, 2022, the Company filed a motion
for enforcement of a protective order. It is the Company’s position that Carebourn has violated a protective order that was entered
into by the parties and seeks to protect confidential information exchanged during the litigation. The Court has not yet rendered a decision
on this motion.
On March 24, 2022, Carebourn filed a Motion to
Compel against DarkPulse, alleging that DarkPulse failed to fulfill its discovery obligations by not producing a privilege log. DarkPulse
contends that Carebourn’s motion is meritless and premature.
The Company remains committed to actively litigating
its claims for relief under the Securities Exchange Act of 1934.
More Capital, LLC v. DarkPulse, Inc. et al
As disclosed in greater detail in the Company’s
Form 10-Q, filed November 15, 2021, the Company remains in active litigation with More Capital, LLC (“More”). The remainder
of this disclosure will address all material updates since the aforementioned Form 10-Q.
On October 27, 2021, the Company served its initial
discovery requests, consisting of interrogatories, requests for admission, and requests for production, on More.
On November 24, 2021, More served its responses
to the Company’s initial discovery requests. After reviewing More’s responses, it is the Company’s position that More’s
responses are false, misleading, untrue, and/or evasive.
On February 28, 2022, the Company filed its motion
to compel More to produce certain documents and supplement or otherwise modify its responses to certain interrogatories and requests
for admission. DarkPulse’s motion will be heard on April 14, 2022.
On March 9, 2022, More filed a motion for summary
judgment against the Company. The Company’s opposition is being filed on or before March 23, 2022, and More’s motion will
be heard on April 6, 2022.
The Company remains committed to actively litigating
its claims for relief under the Securities Exchange Act of 1934.
Goodman et al. v. DarkPulse, Inc.
As disclosed in greater detail in the Company’s
Form 10-Q, filed November 15, 2021, the Company remains in active litigation with Stephen Goodman (“Goodman”), Mark Banash
(“Banash”), and David Singer (“Singer”) (Goodman, Banash, and Singer together, the “Series D Plaintiffs”).
The remainder of this disclosure will address all material updates since the aforementioned Form 10-Q.
On August 20, 2021, the Company and the Series
D Plaintiffs entered into a stipulation, pursuant to which the Company withdrew its motion to dismiss and the Company was provided with
an extended period of time to respond to the complaint.
On September 8, 2021, the Company filed its Answer
and Counterclaims, wherein the Company alleges counterclaims arising from various breaches of fiduciary duties by the Series D Plaintiffs
while they were employed as officers of the Company.
On December 9, 2021, the parties participated
in private mediation. No understanding of settlement was reached at the conclusion thereof.
The Company remains committed to actively litigating
its claims and defenses against the Series D Plaintiffs.
DarkPulse, Inc. v. FirstFire Global Opportunities
Fund, LLC, and Eli Fireman (SDNY)
On December 31, 2021, the Company commenced an
action against FirstFire Global Opportunities Fund, LLC (“FirstFire”), and Eli Fireman (“Fireman”) (FirstFire
and Fireman together, the “FirstFire Parties”) in the United States District Court for the Southern District of New York.
The complaint alleges that FirstFire is an unregistered dealer acting in violation of Section 15(a) of the Securities Exchange Act of
1934 (the “Act”), and that the Company is entitled to rescissionary relief from certain convertible promissory notes and
securities purchase agreements entered into by the Company and FirstFire pursuant to Section 29(b) of the Act. The complaint also asserts
claims against Fireman for control person liability under Section 20(a) of the Act, unjust enrichment of FirstFire, and constructive
trust against FirstFire.
On January 14, 2022, the Company moved for entry
of a temporary restraining order and award of a preliminary injunction against FirstFire to enjoin them from selling or attempting to
sell, transfer, or otherwise dispose of the 177,275,000 common shares the Company believed were in FirstFire’s possession pursuant
to a certain note.
On January 14, 2022, the Court denied the Company’s
order to show cause seeking a temporary restraining order.
Following expedited briefing by the parties,
on January 21, 2022, the Court denied the Company’s motion for preliminary injunction.
On March 14, 2022, the FirstFire Parties filed
their letter request for a motion to dismiss the Company’s complaint. The Company responded to the FirstFire Parties’ letter
on March 17, 2022. As of the filing date, the Court has not yet issued a decision on the FirstFire Parties letter request to file its
motion to dismiss.
FirstFire Global Opportunities Fund, LLC v.
DarkPulse, Inc. (Del. Chancery Court)
On December 13, 2021, FirstFire Global Opportunities
Fund, LLC (“FirstFire”) commenced an action against the Company in the Court of Chancery of the State of Delaware. The complaint
seeks declaratory judgment of the issuance of 177,375,000 shares of Company common stock pursuant to a certain convertible promissory
note.
On January 4, 2022, the Company filed a motion
to dismiss FirstFire’s complaint.
On February 11, 2022, the Company filed its opening
memorandum of law in support of its motion to dismiss. The Company’s memorandum argues that FirstFire the certain convertible promissory
note that the issuance was made under is void ab initio as it violates New York’s criminal usury laws, and that FirstFire improperly
amended the governing law provision of the void convertible note to evade being declared void ab initio and, instead, continue to enforce
the unlawful transaction.
On March 14, 2022, FirstFire filed a notice of
voluntary dismissal of its complaint.
As of December 31, 2021, DarkPulse views the
aforesaid FirstFire Delaware Chancery matter as fully closed.
DarkPulse, Inc. v. EMA Financial, LLC et al
On January 4, 2022, the Company commenced an
action against EMA Financial, LLC (“EMA”), EMA Group, Inc. (“EMA Group”), and Felicia Preston (“Preston”)
(EMA, EMA Group, and Preston together, the “EMA Parties”) in the United States District Court for the Southern District of
New York. The complaint alleges that EMA is an unregistered dealer acting in violation of Section 15(a) of the Securities Exchange Act
of 1934 (the “Act”), and that the Company is entitled to rescissionary relief from certain convertible promissory notes and
securities purchase agreements entered into by the Company and EMA pursuant to Section 29(b) of the Act. The complaint also asserts claims
against Preston for control person liability under Section 20(a) of the Act, unjust enrichment of EMA, EMA Group, and Preston, and constructive
trust against the EMA Parties.
On March 28, 2022, the Company filed its first
amended complaint against the EMA Parties. The amended complaint alleges the same causes of action asserted in the initial complaint—(1)
that EMA is an unregistered dealer acting in violation of Section 15(a) of the Act and, pursuant to Section 29(b) of the Act, the Company
is entitled to rescissionary relief from certain convertible promissory notes and securities purchase agreements entered into by the
Company and EMA, (2) that Preston is liable pursuant to Section 20(a) of the Act, and (3) unjust enrichment—along with two claims:
that the EMA Parties, first, violated and, second conspired to violate the Racketeer Influenced and Corrupt Organizations (RICO) Act
for engaging in the collection of an unlawful debt.
The Company remains committed to actively litigating
its claims for relief under the Securities Exchange Act of 1934.
From time to time, we may become involved in
litigation relating to claims arising out of our operations in the normal course of business. We are not currently involved in any pending
legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which
we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on our
business, financial condition and operating results.
COVID-19
On March 11, 2020, the World Health Organization
announced that infections of the novel Coronavirus (COVID-19) had become pandemic, and on March 13, the U.S. President announced a National
Emergency relating to the disease. There is a possibility of continued widespread infection in the United States and abroad, with the
potential for catastrophic impact. National, state and local authorities have required or recommended social distancing and imposed or
are considering quarantine and isolation measures on large portions of the population, including mandatory business closures. These measures,
while intended to protect human life, are expected to have serious adverse impacts on domestic and foreign economies of uncertain severity
and duration. Some economists are predicting the United States will soon enter a recession. The sweeping nature of the coronavirus pandemic
makes it extremely difficult to predict how the Company’s business and operations will be affected in the longer run, but we expect
that it may materially affect our business, financial condition and results of operations. The extent to which the coronavirus impacts
our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may
emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. Moreover,
the coronavirus outbreak has begun to have indeterminable adverse effects on general commercial activity and the world economy, and our
business and results of operations could be adversely affected to the extent that this coronavirus or any other epidemic harms the global
economy generally and/or the markets in which we operate specifically. Any of the foregoing factors, or other cascading effects of the
coronavirus pandemic that are not currently foreseeable, could materially increase our costs, negatively impact our revenues and damage
the Company’s results of operations and its liquidity position, possibly to a significant degree. The duration of any such impacts
cannot be predicted.
NOTE 15 – RELATED PARTY TRANSACTIONS
The Company follows
subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party
transactions. Pursuant to Section 850-10-20 the related parties include a) affiliates of the Company; b) Entities for which investments
in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of
Section 825-10-15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as
pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e)
management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the
management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing
its own separate interests; and g) Other parties that can significantly influence the management or operating policies of the transacting
parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that
one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The financial statements
shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other
similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated
or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s)
involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each
of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects
of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements
are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts
due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of
settlement.
During the years ended December 31, 2021 and
2020, the Company’s Chief Executive Officer advanced personal funds in the amount of $593 and $68,254 for Company expenses.
NOTE 16 – SUBSEQUENT EVENTS
On January 12, 2022, the Company issued 23,372,430
shares of common stock for $1,150,000.
On January 21, 2022, the Company issued 33,454,988
shares of common stock for $1,150,000.
On February 7, 2022, the Company issued 16,040,411
shares of common stock for $500,000.
On March 7, 2022, the Company issued 75,798,921
shares of common stock for $2,500,000.
On March 23, 2022, the Company issued 29,257,395
shares of common stock for $1,500,000.
On April 11, 2022, the Company issued 23,746,816
shares of common stock for $1,000,000.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13 - Other Expenses of Issuance and Distribution
We estimate that expenses in connection with the
distribution described in this Registration Statement (other than brokerage commissions, discounts or other expenses relating to the sale
of the shares by the Selling Security Holder) will be as set forth below. We will pay all of the expenses with respect to the distribution,
and such amounts, with the exception of the SEC registration fee, are estimates.
|
| |
Amount
to Be Paid | |
SEC registration fee | |
$ | 2,823.00 | |
State filing fees | |
$ | 500.00 | |
Edgarizing costs | |
$ | 500.00 | |
Accounting fees and expenses | |
$ | 1,000.00 | |
Legal fees and expenses | |
$ | 15,000.00 | |
Total | |
$ | 19,823.00 | |
Item 14 - Indemnification of Directors and
Officers
Under our Certificate of Incorporation, our directors
have no personal liability to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except (i) for any
breach of the duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL as it may from time to time be amended or any successor
provision thereto, or (iv) for any transaction from which a director derives an improper personal benefit.
We do not maintain any policy of directors’
and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of
a judgment under any circumstances.
Item 15 - Recent Sales of Unregistered Securities
Convertible Notes
On January 10, 2019, we entered into a Securities
Purchase Agreement with GS Capital Partners, LLC, (“GS Capital”) issuing
a convertible redeemable note in the principal amount of $65,000. The note may be converted
into common shares of our common stock at a conversion price equal to the lower of $0.25, or 70% of the lowest trading price of our common
stock during the 20 prior trading days.
On February 12, 2019, we entered into a securities
purchase agreement with Crown Bridge Partners, LLC (“Crown”) issuing
a convertible promissory note in the aggregate principal amount of up to $35,000. The note may be converted into common shares of our
common stock at a conversion price equal 70% of the lowest trading price of our common stock during the 20 prior trading days.
On April 23, 2019, we entered into a securities
purchase agreement with GS Capital issuing to GS Capital a convertible promissory note in the aggregate principal amount of $40,000. The
note bears interest at 8% per annum and may be converted into common shares of our common stock at a conversion price equal to 70% of
the average of the three lowest trading prices of our common stock during the 20 prior trading days.
On May 3, 2019, we entered into a securities purchase
agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) issuing to Geneva a convertible promissory note in the
aggregate principal amount of $64,000. The note bears interest at 9% per annum and may be converted into common shares of our common stock
at a conversion price equal to 70% of the lowest trading price of our common stock during the 20 prior trading days.
On January 10, 2019, we entered into a Securities
Purchase Agreement with GS Capital issuing a convertible redeemable note in the principal
amount of $65,000. The note may be converted into common shares of our common stock at a conversion
price equal to the lower of $0.25, or 70% of the lowest trading price of our common stock during the 20 prior trading days.
On February 12, 2019, we entered into a securities
purchase agreement with Crown issuing a convertible promissory note in the aggregate principal amount of up to $35,000. The note may be
converted into common shares of our common stock at a conversion price equal 70% of the lowest trading price of our common stock during
the 20 prior trading days.
On April 23, 2019, we entered into a securities
purchase agreement with GS Capital issuing to GS Capital a convertible promissory note in the aggregate principal amount of $40,000. The
note bears interest at 8% per annum and may be converted into common shares of our common stock at a conversion price equal to 70% of
the average of the three lowest trading prices of our common stock during the 20 prior trading days.
On May 3, 2019, we entered into a securities purchase
agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of $64,000. The note bears interest
at 9% per annum and may be converted into common shares of our common stock at a conversion price equal to 70% of the lowest trading price
of our common stock during the 20 prior trading days.
On October 7, 2020, we entered into a securities
purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of $47,850. The note
bears interest at 9% per annum and may be converted into common shares of our common stock at a conversion price equal to 70% of the lowest
trading price of our common stock during the 20 prior trading days.
On September 2, 2020, we entered into a securities
purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of $47,850. The note
bears interest at 9% per annum and may be converted into common shares of our common stock at a conversion price equal to 70% of the lowest
trading price of our common stock during the 20 prior trading days.
On January 4, 2021, we entered into a securities
purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of $42,350. The note
bears interest at 8% per annum and may be converted into common shares of our common stock at a conversion price equal to 70% of the lowest
trading price of our common stock during the 20 prior trading days.
On February 3, 2021, we entered into a securities
purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of $94,200. The note
bears interest at 4.5% per annum and may be converted into common shares of our common stock at a conversion price equal to 81% of the
lowest two trading prices of our common stock during the 10 prior trading days.
On February 18, 2021, we entered into a securities
purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of $76,200. The note
bears interest at 4.5% per annum and may be converted into shares of our common stock at a conversion price equal to 81% of the lowest
two trading prices of our common stock during the 10 prior trading days.
On April 26, 2021, we entered a Securities Purchase
Agreement with FirstFire Global Opportunities Fund LLC, (“FirstFire”) pursuant
to which we issued to FirstFire a Convertible Promissory Note in the principal amount of $825,000. The note matures on January 26, 2022
upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the note at 10% per annum guaranteed until
the note becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The note is convertible at any
time after 180 days from issuance, upon the election of FirstFire, into shares of our Common Stock at $0.015 per share. A finder’s
fee of $15,000 was paid to J.H. Darbie Co. pursuant to our agreement.
Each of the notes above were sold in
reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation
D under the Securities Act, based in part on the representations of the investor. Unless stated above, there were no sales commissions
paid pursuant to this transaction and general solicitation was not used in connection with the offers and sales of these securities.
Note Conversions
On April 29, 2020, we issued an aggregate of 68,571,429
shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $4,800.
On May 4, 2020, we issued an aggregate of 72,857,143
shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $5,100.
On June 9, 2020, we issued an aggregate of 75,714,286
shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $5,300.
On July 9, 2020, we issued an aggregate of 80,000,000
shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $5,600.
On July 16, 2020, we issued an aggregate of 82,857,143
shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $5,800.
On July 28, 2020, we issued an aggregate of 82,857,143
shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $5,800.
On August 3, 2020, we issued an aggregate of 91,428,571
shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $6,400.
On August 6, 2020, we issued an aggregate of 91,428,571
shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $6,400.
On August 10, 2020, we issued an aggregate of
91,428,571 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $6,400.
On August 13, 2020, we issued an aggregate of
91,428,571 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $6,400.
On August 18, 2020, we issued an aggregate of
110,000,000 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $7,700.
On August 20, 2020, we issued an aggregate of
115,714,286 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $8,100.
On August 31, 2020, we issued an aggregate of
115,714,286 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $8,100.
On September 1, 2020, we issued an aggregate of
115,714,286 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $8,100.
On September 1, 2020, we issued an aggregate of
119,157,924 shares of common stock upon the conversion of interest of convertible debt, as issued on July 17, 2018, in the amount of $6,315.
On September 1, 2020, we issued an aggregate of
85,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $7,000.
On September 2, 2020, we issued an aggregate of
123,474,262 shares of common stock upon the conversion of interest of convertible debt, as issued on September 24, 2018, in the amount
of $4,439.
On September 3, 2020, we issued an aggregate of
115,714,286 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $8,100.
On September 11, 2020, we issued an aggregate
of 115,714,286 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $8,100.
On September 30, 2020, we issued an aggregate
of 158,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 25, 2018, in the amount of $5,257.
On October 7, 2020, we issued an aggregate of
161,428,571 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $11,800.
On October 7, 2020, we issued an aggregate of
169,000,000 shares of common stock upon the conversion of convertible debt, as issued on February 12, 2019, in the amount of $6,855.
On October 7, 2020, we issued an aggregate of
143,519,000 shares of common stock upon the conversion of convertible debt, as issued on September 25, 2018, in the amount of $4,677.
On October 12, 2020, we issued an aggregate of
142,374,429 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $600 in principal
and $9,366 in interest.
On October 22, 2020, we issued an aggregate of
77,623,000 shares of common stock upon the conversion of convertible debt, as issued on September 25, 2018, in the amount of $2,041.
On January 14, 2021 we issued an aggregate of
100,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $28,000.
On January 25, 2021, we issued an aggregate of
150,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $42,000.
On February 1, 2021, we issued an aggregate of
30,999,995 shares of common stock upon the conversion of convertible debt, as issued on February 12, 2019, in the amount of $8,116.
On February 11, 2021, we issued an aggregate of
100,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $56,000.
On February 18, 2021, we issued an aggregate of
220,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $75,436
for principal and $39,638 for interest.
On April 15, 2021, we issued an aggregate of 8,065,040
shares of common stock upon the conversion of convertible debt, as issued on October 7, 2020, in the amount of $47,850 and interest of
$2,153.25.
On June 3, 2021, we entered into a Settlement
and Mutual Release Agreement with Auctus Fund, LLC, (“Auctus”) pursuant to which Auctus agreed to convert the note
issued on September 25, 2018 by us to it in the principal amount of $100,000 into 12,500,000 shares of our Common stock as consideration
for full and complete satisfaction of and settlement of the note, which also terminates all obligations owing under both the Note and
the corresponding Securities Purchase Agreement dated September 25, 2018 between the Company and Auctus.
On July 12, 2021, the Company issued an aggregate
of 1,784,146 shares of common stock upon the conversion of convertible debt, as issued on January 12, 2021, in the amount of $42,350.
On July 14, 2021, the Company issued an aggregate
of 45,037,115shares of common stock upon the conversion of convertible debt, as issued on October 7, 2020, in the amount of $93,864 and
interest of $26,246.
On July 19, 2021, we issued an aggregate of 2,898,382
shares of common stock upon the conversion of convertible debt, as issued on October 7, 2020, in the amount of $10,497 and interest of
$6,748.
On November 17, 2021, we issued an aggregate of
177,375,000 shares of common stock upon the conversion of convertible debt, as issued on April 26, 2021, which converted all principal
and accrued and unpaid interest. The lender has agreed to return 118,254,000 shares
due to an error in the conversion.
The shares issued pursuant to the note conversions
were issued in reliance upon the exemption from securities registration afforded by Section 4(a)(2)
of the Securities Act and Rule 506(b) of Regulation D under the Securities Act, based in part on the representations of the investor.
There were no sales commissions paid pursuant to this transaction.
Shares Issued
Under Equity Financing Agreement
Equity Finance Agreement with GHS
On November 9, 2021,
we entered an Equity Financing Agreement with GHS, pursuant to which GHS agreed to purchase up to $30,000,000 in shares of our Common
Stock, from time to time over the Contract Period after effectiveness of the Registration Statement of the underlying shares of Common
Stock.
Pursuant to the Equity Financing Agreement,
on December 21, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us 43,777,478 shares of Common
Stock for total proceeds to us, net of discounts, of $2,548,326, at an effective price of $0.0696 per share (the “First EFA
Closing”). We received approximately $2,296,469 in net proceeds from the First EFA Closing after deducting the fees and other
estimated offering expenses payable by us. We used the net proceeds from the Second Closing for working capital and for general corporate
purposes. 251857
Pursuant to the Equity Financing Agreement,
on January 12, 2022, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us 23,372,430 shares of Common
Stock for total proceeds to us, net of discounts, of $1,150,000, at an effective price of $0.054124 per share (the “Second EFA
Closing”). We received approximately $1,033,975 in net proceeds from the Second EFA Closing after deducting the fees and other
estimated offering expenses payable by us. We used the net proceeds from the Second EFA Closing for working capital and for general corporate
purposes. 116025
Pursuant to the Equity Financing Agreement,
on January 21, 2022, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us 33,454,988 shares of Common
Stock for total proceeds to us, net of discounts, of $1,150,000, at an effective price of $0.037812 per share (the “Third EFA
Closing”). We received approximately $1,033,975 in net proceeds from the Third EFA Closing after deducting the fees and other
estimated offering expenses payable by us. We used the net proceeds from the Third EFA Closing for working capital and for general corporate
purposes. 116025
Pursuant to the Equity Financing Agreement,
on February 7, 2022, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us 16,040,411 shares of Common
Stock for total proceeds to us, net of discounts, of $500,000, at an effective price of $0.0342884 per share (the “Fourth EFA
Closing”). We received approximately $448,975 in net proceeds from the Fourth EFA Closing after deducting the fees and other
estimated offering expenses payable by us. We used the net proceeds from the Fourth EFA Closing for working capital and for general corporate
purposes.51025
Pursuant to the Equity Financing Agreement,
on March 23, 2022, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us 29,257,395 shares of Common Stock
for total proceeds to us, net of discounts, of $1,500,000, at an effective price of $0.056396 per share (the “Fifth EFA Closing”).
We received approximately $1,348,975 in net proceeds from the Fifth EFA Closing after deducting the fees and other estimated offering
expenses payable by us. We used the net proceeds from the Fifth EFA Closing for working capital and for general corporate purposes.151025
Pursuant to the Equity Financing Agreement,
on April 11, 2022, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us 23,746,816 shares of Common Stock
for total proceeds to us, net of discounts, of $1,000,000, at an effective price of $0.04211091 per share (the “Sixth EFA Closing”).
We received approximately $898,975 in net proceeds from the Sixth EFA Closing after deducting the fees and other estimated offering expenses
payable by us. We used the net proceeds from the Sixth EFA Closing for working capital and for general corporate purposes.101025
The shares issued in reliance upon the exemption
from securities registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D under the Securities Act,
based in part on the representations of the investor. There were $786,982 in sales commissions paid to J.H. Darbie & Co., LLC pursuant
to these transactions.
Private Sales
On February 21, 2022, we sold 75,798,921 shares
of our Common Stock at $0.032982 per share to a single investor for total consideration of $2,500,000.
On March 3, 2022, we sold 16,579,569 shares
of our Common Stock at $0.0301576 per share to a single investor for total consideration of $500,000.
On March 14, 2022, we sold 5,617,347 shares
of our Common Stock at $0.071208 per share to a single investor for total consideration of $400,000.
The shares issued in reliance upon the exemption
from securities registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D under the Securities Act,
based in part on the representations of the investor.
Shares Issued for Services
On February 16, 2021, we entered into a Consulting
Agreement effective December 23, 2020 with Kenneth Brooks Davidson. Pursuant to the agreement, we have engaged Mr. Davidson as our Director,
U.S. Operations for Oil and Gas & Renewables. During the term of the Agreement, the Consultant is entitled to monthly awards of 6,250
shares of our Common Stock and, after at least 24 months from the effective date of the Agreement the possibility of a bonus award of
up to 75,000 shares of our Common Stock.
The issuance
was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Shares Issued for Acquisitions
On August 30, 2021, the Company closed the MPAs
with RI and WS pursuant to which the Company agreed to pay to the majority shareholder of each of RI and WS an aggregate of 15,000,000
shares of the Company’s Common Stock, in exchange for 60% ownership of each of RI and WS.
The issuance
was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Miscellaneous Issuances
Pursuant to a Finder’s
Fee Agreement with J.H. Darbie & Co., Inc. (“J.H. Darbie”), from October 4, 2021 to October 25, 2021, we issued
to J.H. Darbie an aggregate of 5,425,453 shares of common stock.
The issuances
wwere made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Item 16 - Exhibits
The following exhibits are included with this
Prospectus:
Exhibit
Number |
|
Exhibit Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing
Date |
|
Filed
Here-
with |
2.1 |
|
Form of Agreement and Plan of Merger by and between Klever Marketing, Inc., DarkPulse Technologies Inc. and DPTH Acquisition Corporation dated April 27, 2018 |
|
8-K |
|
000-18730 |
|
2.1 |
|
5/1/18 |
|
|
2.2 |
|
Form of Amendment No. 1 to Agreement and Plan of Merger by and between Klever Marketing, Inc., DarkPulse Technologies Inc. and DPTH Acquisition Corporation dated June 29, 2018 |
|
8-K/A |
|
000-18730 |
|
2.1 |
|
7/13/18 |
|
|
2.3 |
|
Form of Amendment No. 2 to Agreement and Plan of Merger by and between Klever Marketing, Inc., DarkPulse Technologies Inc. and DPTH Acquisition Corporation dated August 17, 2018, effective as of July 18, 2018 |
|
8-K |
|
000-18730 |
|
2.1 |
|
8/21/18 |
|
|
3.1 |
|
Restated Certificate of Incorporation of Klever Marketing, Inc. a Delaware corporation |
|
10-KSB |
|
000-18730 |
|
3.01 |
|
6/20/97 |
|
|
3.2 |
|
Bylaws |
|
10-KSB |
|
000-18730 |
|
3.02 |
|
6/20/97 |
|
|
3.3 |
|
Amended Bylaws |
|
10-KSB |
|
000-18730 |
|
3.03 |
|
3/29/01 |
|
|
3.4 |
|
Certificate of Amendment to Certificate of Incorporation |
|
8-K |
|
000-18730 |
|
3.1 |
|
7/24/18 |
|
|
3.5 |
|
Certificate of Designation of Series D Preferred Stock |
|
8-K |
|
000-18730 |
|
3.2 |
|
7/24/18 |
|
|
3.6 |
|
Certificate of Amendment to Certificate of Incorporation filed February 5, 2019 |
|
10-K |
|
000-18730 |
|
3.05 |
|
4/15/21 |
|
|
3.7 |
|
Certificate of Amendment to Certificate of Incorporation filed February 20, 2020 |
|
10-K |
|
000-18730 |
|
3.06 |
|
4/15/21 |
|
|
3.8 |
|
Certificate
of Amendment for Series D Preferred Stock filed December 23, 2021 |
|
8-K |
|
000-18730 |
|
3.01 |
|
12/27/21 |
|
|
4.1 & 10.1 |
|
Convertible Promissory Note dated July 14, 2018 |
|
10-Q |
|
000-18730 |
|
99.1 |
|
8/15/18 |
|
|
4.2 & 10.2 |
|
Convertible Promissory Note dated July 14, 2018 |
|
10-Q |
|
000-18730 |
|
99.2 |
|
8/15/18 |
|
|
4.3 & 10.3 |
|
Convertible Promissory Note dated July 14, 2018 |
|
10-Q |
|
000-18730 |
|
99.3 |
|
8/15/18 |
|
|
4.4 & 10.4 |
|
Convertible Promissory Note dated July 14, 2018 |
|
10-Q |
|
000-18730 |
|
99.4 |
|
8/15/18 |
|
|
4.5 & 10.5 |
|
Convertible Promissory Note dated July 17, 2018, effective July 18, 2018 |
|
10-Q |
|
000-18730 |
|
99.5 |
|
8/15/18 |
|
|
4.6 & 10.6 |
|
Convertible Promissory Note dated July 24, 2018, and effective July 27, 2018 |
|
10-Q |
|
000-18730 |
|
99.6 |
|
8/15/18 |
|
|
4.7 & 10.7 |
|
Convertible Promissory Note dated August 20, 2018, effective August 24, 2018 |
|
8-K |
|
000-18730 |
|
10.1 |
|
8/27/18 |
|
|
4.8 & 10.8 |
|
Convertible Promissory Note issued to EMA dated September 25, 2018, effective September 28, 2018 |
|
8-K |
|
000-18730 |
|
10.1 |
|
10/5/18 |
|
|
4.9 & 10.9 |
|
Convertible Promissory Note issued to Auctus dated September 25, 2018, effective September 27, 2018 |
|
8-K |
|
000-18730 |
|
10.2 |
|
10/5/18 |
|
|
4.10 & 10.10 |
|
Convertible Promissory Note issued to FirstFire dated September 24, 2018, and effective October 9, 2018 |
|
8-K |
|
000-18730 |
|
10.1 |
|
10/15/18 |
|
|
4.11 & 10.11 |
|
8% Convertible Redeemable Note issued to GS Capital Partners, LLC dated January 10, 2019 |
|
8-K |
|
000-18730 |
|
4.1 |
|
1/15/19 |
|
|
4.12 & 10.12 |
|
Form of Convertible Promissory Note issued to Crown Bridge Partners, LLC dated February 5, 2019 |
|
8-K |
|
000-18730 |
|
4.1 |
|
2/14/19 |
|
|
4.13 & 10.13 |
|
Convertible Promissory Note issued to Geneva Roth Remark Holdings, Inc. dated September 2, 2020 |
|
10-K |
|
000-18730 |
|
4.13 |
|
4/15/21 |
|
|
4.14 & 10.14 |
|
Convertible Promissory Note Issued as of April 26, 2021 to FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC |
|
10-Q |
|
000-18730 |
|
4.1 |
|
8/16/21 |
|
|
4.15 & 10.15 |
|
6% Redeemable Note dated July 14, 2021 issued to GS Capital Partners, LLC in the principal amount of $2,000,000 |
|
10-Q |
|
000-18730 |
|
4.1 |
|
11/15/21 |
|
|
5.1 |
|
Legal Opinion of Business Legal Advisors, LLC |
|
|
|
|
|
|
|
|
|
X |
10.16 |
|
Securities Purchase Agreement dated July 14, 2021 with GS Capital Partners, LLC |
|
10-Q |
|
000-18730 |
|
10.1 |
|
11/15/21 |
|
|
10.17 |
|
Securities Purchase Agreement by and between DarkPulse, Inc. and GS Capital Partners, LLC dated January 10, 2019 |
|
8-K |
|
000-18730 |
|
10.1 |
|
1/15/19 |
|
|
10.18 |
|
Form of Securities Purchase Agreement between DarkPulse, Inc. and Crown Bridge Partners, LLC dated February 5, 2019 |
|
8-K |
|
000-18730 |
|
10.1 |
|
2/14/19 |
|
|
10.19 |
|
Securities Purchase Agreement with Geneva Roth Remark Holdings, Inc. dated September 2, 2020 |
|
10-K |
|
000-18730 |
|
10.03 |
|
4/15/21 |
|
|
10.20 |
|
Consulting Agreement effective December 23, 2020 with Faisal Farooqui |
|
10-K |
|
000-18730 |
|
10.04 |
|
4/15/21 |
|
|
10.21 |
|
Assignment Agreement with the University of New Brunswick, Canada |
|
10-K |
|
000-18730 |
|
10.05 |
|
4/15/21 |
|
|
10.22 |
|
Convertible Debenture (Secured) Issued April 24, 2017 |
|
10-K |
|
000-18730 |
|
10.06 |
|
4/15/21 |
|
|
10.23 |
|
Finder’s Fee Agreement dated January 8, 2021 with J.H. Darbie & Co., Inc. |
|
10-Q |
|
000-18730 |
|
10.1 |
|
5/17/21 |
|
|
10.24 |
|
Securities Purchase Agreement dated as of April 26, 2021 with FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC |
|
10-Q |
|
000-18730 |
|
10.1 |
|
8/16/21 |
|
|
10.25 |
|
Registration Rights Agreement dated April 26, 2021 to FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC |
|
10-Q |
|
000-18730 |
|
10.2 |
|
8/16/21 |
|
|
10.26 |
|
Heads of Terms with Remote Intelligence LLC and Unleash Live, Inc. dated May 10, 2021 |
|
10-Q |
|
000-18730 |
|
10.3 |
|
8/16/21 |
|
|
10.27 |
|
Consulting Agreement with Dr. Joseph Catalino Jr. dated May 17, 2021 |
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10-Q |
|
000-18730 |
|
10.4 |
|
8/16/21 |
|
|
10.28 |
|
Settlement and Mutual Release Agreement with Auctus Fund, LLC dated June 3, 2021 |
|
10-Q |
|
000-18730 |
|
10.5 |
|
8/16/21 |
|
|
10.29 |
|
Letter of Intent with Remote Intelligence, Limited Liability Company dated June 8, 2021 |
|
10-Q |
|
000-18730 |
|
10.6 |
|
8/16/21 |
|
|
10.30 |
|
Letter of Intent with Wildlife Specialists, LLC dated June 8, 2021 |
|
10-Q |
|
000-18730 |
|
10.7 |
|
8/16/21 |
|
|
10.31 |
|
Teaming Agreement with Crae-Con Construction Inc. dated June 22, 2021 |
|
10-Q |
|
000-18730 |
|
10.8 |
|
8/16/21 |
|
|
10.32 |
|
Teaming Agreement with SurSafe LLC dated June 24, 2021 |
|
10-Q |
|
000-18730 |
|
10.9 |
|
8/16/21 |
|
|
10.33 |
|
Letter of Intent with TerraData Unmanned, PLLC dated June 25, 2021 |
|
10-Q |
|
000-18730 |
|
10.10 |
|
8/16/21 |
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|
10.34 |
|
Consulting Agreement dated effective July 22, 2021 with Rick Gibson |
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10-Q |
|
000-18730 |
|
10.2 |
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11/15/21 |
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10.35 |
|
Engagement Agreement and Terms and Conditions dated August 3, 2021 with Energy & Industrial Advisory Partners, LLC |
|
10-Q |
|
000-18730 |
|
10.3 |
|
11/15/21 |
|
|
10.36 |
|
Letter of Intent dated June 8, 2021 with Remote Intelligence, Limited Liability Company |
|
10-Q |
|
000-18730 |
|
10.4 |
|
11/15/21 |
|
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10.37 |
|
Letter of Intent dated June 8, 2021 with Wildlife Specialists, LLC |
|
10-Q |
|
000-18730 |
|
10.5 |
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11/15/21 |
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10.38 |
|
Share Purchase Agreement dated August 9, 2021with Optilan Guernsey Limited and Optilan Holdco 2 Limited |
|
10-Q |
|
000-18730 |
|
10.6 |
|
11/15/21 |
|
|
10.39 |
|
Subscription Agreement August 9, 2021 with Optilan HoldCo 3 Limited |
|
10-Q |
|
000-18730 |
|
10.7 |
|
11/15/21 |
|
|
10.40 |
|
Letter of Intent dated effective August 18, 2021 with TJM Electronics West, Inc. |
|
10-Q |
|
000-18730 |
|
10.8 |
|
11/15/21 |
|
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10.41 |
|
Membership Interest Purchase Agreement dated August 30, 2021 with Remote Intelligence, Limited Liability Company |
|
10-Q |
|
000-18730 |
|
10.9 |
|
11/15/21 |
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10.42 |
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Membership Interest Purchase Agreement dated August 30, 2021 with Wildlife Specialists, LLC |
|
10-Q |
|
000-18730 |
|
10.10 |
|
11/15/21 |
|
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10.43 |
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Letter of Intent dated June 25, 2021 with TerraData Unmanned, PLLC |
|
10-Q |
|
000-18730 |
|
10.11 |
|
11/15/21 |
|
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10.44 |
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Amendment No. 1 to Letter of Intent with TerraData Unmanned, PLLC dated effective August 24, 2021 |
|
10-Q |
|
000-18730 |
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10.12 |
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11/15/21 |
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10.45 |
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Amendment No. 2 to Letter of Intent with TerraData Unmanned, PLLC dated effective September 3, 2021 |
|
10-Q |
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000-18730 |
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10.13 |
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11/15/21 |
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10.46 |
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Amendment to Letter of Intent with TJM Electronics West, Inc. dated effective August 31, 2021 |
|
10-Q |
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000-18730 |
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10.14 |
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11/15/21 |
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10.47 |
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Stock Purchase Agreement dated September 8, 2021 with TJM Electronics West, Inc. |
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10-Q |
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000-18730 |
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10.15 |
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11/15/21 |
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10.48 |
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Research Agreement dated September 21, 2021 with the Arizona Board of Regents |
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10-Q |
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000-18730 |
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10.16 |
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11/15/21 |
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10.49 |
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Membership Purchase Agreement with TerraData Unmanned, PLLC dated effective October 1, 2021 |
|
S-1 |
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333-261453 |
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10.48 |
|
12/1/21 |
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10.50 |
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Teaming Agreement with CADG Engineering Pte Ltd dated effective October 5, 2021 |
|
S-1 |
|
333-261453 |
|
10.49 |
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12/1/21 |
|
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10.51 |
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Equity Financing Agreement with GHS Investments LLC dated November 9, 2021 |
|
S-1 |
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333-261453 |
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10.50 |
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12/1/21 |
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10.52 |
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Registration Rights Agreement with GHS Investments LLC dated November 9, 2021 |
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S-1 |
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333-261453 |
|
10.51 |
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12/1/21 |
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10.53 |
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Investor Relations Agreement dated December 15, 2021 with RedChip Companies,
Inc. |
|
10-K |
|
000-18730 |
|
10.53 |
|
4/15/22 |
|
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16.1 |
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Letter from Boyle CPA Dated January 28, 2022 Regarding Change in Certifying
Accountant |
|
8-K |
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000-18730 |
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16.1 |
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1/28/22 |
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21.1 |
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List of Subsidiaries |
|
S-1 |
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333-261453 |
|
21.1 |
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12/1/21 |
|
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23.1 |
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Consent of Boyle CPA, independent registered public accounting firm |
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|
X |
23.2 |
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Consent of Urish Popeck & Co., LLC, independent registered public accounting firm |
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|
X |
23.3 |
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Consent of Attorney (included in Exhibit 5.1) |
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-- |
101.INS |
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Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive
Data File (formatted in Inline XBRL, and included in exhibit 101). |
Item 17 - Undertakings
(A) The undersigned Registrant hereby undertakes:
(1) |
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to: |
|
|
|
(i) |
To include any prospectus required by Section 10(a)(3) of the Securities Act; |
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|
|
(ii) |
Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
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(iii) |
Include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
|
|
(2) |
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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(3) |
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
|
|
(4) |
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
(B) The issuer is subject to Rule 430C (ss. 230.
430C of this chapter): Each prospectus filed pursuant to Rule 424(b)(ss. 230.424(b) of this chapter) as part of a registration statement
relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule
430A (ss. 230. 430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is
part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the in New York City, New York on April 20, 2022.
DARKPULSE, INC.
By: |
/s/ Dennis O’Leary |
|
|
Dennis O’Leary |
|
|
Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer and Principal Financial Officer) |
|
Date: |
April 20, 2022 |
|
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
By: |
/s/ Dennis O’Leary |
|
|
Dennis O’Leary, Director |
|
Date: |
April 20, 2022 |
|
By: |
/s/ Dr. Anthony Brown |
|
|
Dr. Anthony Brown, Director |
|
Date: |
April 20, 2022 |
|
By: |
/s/ Carl Eckel |
|
|
Carl Eckel, Director |
|
Date: |
April 20, 2022 |
|
300,000,000 Shares of Common Stock
DARKPULSE, INC.
PROSPECTUS
_____________, 2022
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