| PROSPECTUS |
Filed Pursuant to Rule
424(b)(4)
Registration No. 333-261453 |
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 November 26, 2021, the last reported sale price
of our Common Stock on the OTC Markets was $0.0891.
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 December 13, 2021
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 is a technology-security company incorporated in 1989 as
Klever Marketing, Inc ("Klever"). Its principal wholly-owned
subsidiary, DarkPulse Technologies Inc. ("DPTI"),
originally started as a technology spinout from the University of
New Brunswick, Fredericton, Canada. DPI is comprised of two
security platforms: Fiber and Ultra-High Sensitivity Sensors
("UHSS").
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, 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.”
The Company’s 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. The Company’s patented BOTDA dark-pulse sensor
technology allows for the monitoring of highly dynamic environments
due to its greater resolution and accuracy.
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
the Company 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 the Company’s 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 two percent
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.
The Company has recently completed several acquisitions.
Our Business
The Company offers a full suite of engineering, installation and
security management solutions to industries and governments.
Coupled with our patented BOTDA dark-pulse technology (the
“DarkPulse Technology”), DarkPulse provides its 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.
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:
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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 the Company not
only to enter existing markets, but more importantly, to open new
market opportunities with new applications. The Company intends 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 |
|
5,154,044,407
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 |
|
5,454,044,407
shares of Common Stock. |
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|
| Use of
Proceeds |
|
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 |
|
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 |
|
The
Company’s Common Stock is quoted on the OTC Markets quotation
service platform under the symbol “DPLS.” |
The number of shares of Common Stock outstanding is based on an
aggregate of 5,154,044,407
shares outstanding as of November 22, 2021 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 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 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.
Further, all employees, including our specialized technical staff,
are working from home or in a virtual environment. The Company
always maintains the ability for team members to work virtual and
we will continue to stay virtual, until the applicable State and or
the Federal government indicate the environment is safe to return
to work.
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.
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, 2020
and 2019, 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, no sales recorded to date, 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 or
relatively small supply partners; |
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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 complete the
full development and marketing of our DarkPulse Technology-based
systems, and we will need to obtain additional financing in order
to complete our business plan. We currently have minimal
operations and we are not currently generating revenue or net
income.
Our business plan calls for significant expenses in connection with
developing our DarkPulse Technology-based systems and paying our
current obligations. We will require additional financing to
execute its business plan through raising additional capital and/or
beginning to generate revenue.
Obtaining additional financing is subject to a number of factors,
including investor 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 sale of private equity capital or
through a convertible debt instrument. Any sale 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.
Product development is a long, expensive and uncertain
process.
The development of our DarkPulse Technology-based systems is a
costly, complex and time-consuming process, and the investment in
product development often involves a long wait until a return, if
any, is achieved on such investment. We continue to make
significant investments in research and development relating to our
DarkPulse Technology-based systems and our other businesses.
Investments in new technology and processes are inherently
speculative.
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:
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ineffective
distribution and marketing; |
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lack of sufficient
cooperation from our partners; and |
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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:
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designing and
developing products using advanced and unproven technologies in
intelligence and homeland security applications that are intended
to operate in high demand, high risk situations; and |
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designing and
developing products to collect, distribute and analyze various
types of information. |
Failure of certain of our products could result in loss of life or
property damage. 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, 2020, 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 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.
On July 1, 2019, the majority stockholders holding a majority of
the issued and outstanding voting shares of the Company approved an
amendment to our Certificate of Incorporation, to increase the
number of authorized shares of Common Stock from 3,000,000,000 to
20,000,000,000. 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 sensor 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 2021 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:
|
· |
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
November 22, 2021 was $0.08931. At that price we would be able to
sell shares to GHS under the EFA at the discounted price of
$0.0875238. At that discounted price, the 300,000,000 shares would
only represent $26,257,140, 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 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 November 22, 2021. 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. |
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.
|
2021: |
|
High |
|
|
Low |
|
| First Quarter |
|
$ |
0.0510 |
|
|
$ |
0.0007 |
|
| Second Quarter |
|
$ |
0.0969 |
|
|
$ |
0.0106 |
|
| Third Quarter |
|
$ |
0.2020 |
|
|
$ |
0.0653 |
|
|
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 |
|
|
2019: |
|
High |
|
|
Low |
|
| First Quarter |
|
$ |
0.0500 |
|
|
$ |
0.0035 |
|
| Second Quarter |
|
$ |
0.0062 |
|
|
$ |
0.0005 |
|
| Third Quarter |
|
$ |
0.0008 |
|
|
$ |
0.0001 |
|
| Fourth Quarter |
|
$ |
0.0003 |
|
|
$ |
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
November 26, 2021, was $0.092 and $0.0863, respectively, based upon
bids that represent prices quoted by broker-dealers on the OTC
Markets.
Approximate Number of Equity Security Holders
As of November 22, 2021, there were approximately 939 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, 2020, 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, Inc., a Delaware corporation (the “Company”), is
a technology-security 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 BOTDA dark-pulse technology (the
“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, 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. 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
Optilan
Telecommunications, Energy, Rail, Critical Network Infrastructure,
Pipeline Integrity Systems, Renewables and Security. Headquartered
in Coventry, 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 is well equipped to provide
solutions that meet your unique requirements. We custom manufacture
NDAA compliant drones and unmanned ground crawlers to meet the
needs of our customers. Aerial based data collection is a powerful
new tool for your industry, and TerraData is prepared to be your
partner. TerraData Unmanned, 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 our
partners at DarkPulse and our subsidiary companies. We 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.
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 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 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 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 April 26, 2021, we entered a Securities Purchase Agreement (the
“FirstFire SPA”) and Registration Rights Agreement (the
“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 will become $0.005. In the event of a DTC “chill”
on our shares, an additional discount of 10% will apply to the
conversion price while the “chill” is in effect. Upon the issuance
of the FirstFire Note, we have initially agreed to reserve
550,000,000 shares of Common Stock.
The Registration Rights Agreement provides that we shall (i) use
our best efforts to file with the Commission an S-1 Registration
Statement within 90 days of the date of the Registration Rights
Agreement to register the shares into which the FirstFire Note is
convertible; and (ii) have the Registration Statement declared
effective by the SEC within 180 days after the date the
Registration Statement is filed with the SEC.
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.
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, during the nine
months ended September 30, 2021, the Company reported a net loss of
$1,924,311. As of September 30, 2021, the Company’s current
liabilities exceeded its current assets by $12,139,502. As of
September 30, 2021, the Company had $2,564,492 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 Three and Nine
Months Ended September 30, 2021 and 2020
Revenues
For the three months ended September 30, 2021, total revenues were
$3,500,970 compared to $0 for the same period in 2020, an increase
of $3,500,970. This increase primarily consisted of revenues of
$3,380,633 from the acquisition of Optilan in August 2021and
$97,283 from the acquisition of Wildlife Specialists in August
2021.
For the nine months ended September 30, 2021, total revenues were
$3,500,970 compared to $0 for the same period in 2020, an increase
of $3,500,970. This increase primarily consisted of revenues of
$3,380,633 from the acquisition of Optilan in August 2021and
$97,283 from the acquisition of Wildlife Specialists in August
2021.
Cost of Goods Sold and Gross Profit
For the three months ended September 30, 2021, cost of goods sold
were $2,767,229 compared to $0 for the same period in 2020, an
increase of $2,767,229.
Gross profit for the three months ended September 30, 2021 was
$733,731 with a gross profit margin of 21% compared to $0 for the
same period in 2020 with no gross profit margin.
For the nine months ended September 30, 2021, cost of goods sold
were $2,767,229 compared to $0 for the same period in 2020, an
increase of $2,767,229.
Gross profit for the nine months ended September 30, 2021 was
$733,731 with a gross profit margin of 21% compared to $0 for the
same period in 2020 with no gross profit margin.
Operating Expenses
Selling, general and administrative expenses for three months ended
September 30, 2021 increased by $372,158 to $406,940 from $34,782
of 1,070% for the three months ended September 30, 2020.
General and administrative expenses for nine months ended September
30, 2021 increased by $410,927 to $531,793 from $120,866 or 340%
for the nine months ended September 30, 2020.
Payroll related expenses for three months ended September 30, 2021,
increased by $1,007,453 to $1,007,453 from $0 for the three months
ended September 30, 2020. The increase primarily consisted of an
increase to the numbers of employees inherited from our various
acquisitions.
Payroll related for nine months ended September 30, 2021, increased
by $1,007,266 to $1,007,453 from $187 for the nine months ended
September 30, 2020. The increase primarily consisted of an increase
to the numbers of employees inherited from our various acquisitions
in the most recent three months period.
Professional fees for three months ended September 30, 2021,
increased by $1,680,600 to $1,680,600 from $0 for the three months
ended September 30, 2020. This increase primarily consisted of
increased legal expenditures associated with the increase in
litigation.
Professional fees for nine months ended September 30, 2021,
increased by $1,853,275 to $1,901,572 from $48,297 for the nine
months ended September 30, 2020. This increase primarily consisted
of increased legal expenditures associated with the increase in
litigation.
Depreciation and amortization for three months ended September 30,
2021, increased by $78,465 to $91,222 from $12,757 for the three
months ended September 30, 2020. This increase is primarily due to
the increase in depreciable assets we acquired from new
acquisitions.
Depreciation and amortization for nine months ended September 30,
2021, increased by $78,465 to $116,736 from $38,271 for the three
months ended September 30, 2020. This increase is primarily due to
the increase in depreciable assets we acquired from new
acquisitions.
Other Income (Expense)
For the three months ended September 30, 2021, other income
$798,654 compared to other expense of $126,483 for the same period
in 2020, an increase in income of $925,137. This increase primarily
consisted of $785,240 of gain related to the extinguishment of
debt, $434,206 of gain on convertible notes, $153,360 of gain on
foreign currency exchange rate variance offset by an increase in
interest expense of $283,388 due to increased borrowings and
$163,281 increase in the fair value of the Company’s derivative
instruments.
For the nine months ended September 30, 2021, other income
$1,084,462 compared to other expense of $180,940 for the same
period in 2020, an increase in income of $1,265,402. This increase
primarily consisted of $785,240 of gain related to the
extinguishment of debt, $781,203 of gain on convertible notes,
$153,360 of gain on foreign currency exchange rate variance offset
by an increase in interest expense of $573,448 due to increased
borrowings and $121,047 increase in the fair value of the Company’s
derivative instruments.
Net Income (Loss)
As a result of the above, we reported a net loss of $1,686,830 for
the three months ended September 30, 2021 compared to a net loss of
$174,022 for the three months ended September 30, 2020.
Additionally, as a result of the above, we reported a net loss of
$1,924,311 for the nine months ended September 30, 2021 compared to
a net loss of $388,561 for the nine months ended September 30,
2020.
For the Years Ended
December 31, 2020 and 2019
Revenues
As of December 31, 2020, the Company has not generated any
operating revenues.
Operating Expenses
Operating expenses for the year ended December 31, 2020 decreased
by $287,497 or 52.6% to $258,739 from $546,236 for the year ended
December 31, 2019. The primary reason for the overall decrease in
general and administrative expense in the current year is a
decrease in payroll and compensation of $168,758.
General and administrative expenses for the year ended December 31,
2020 decreased by $33,824 or 18.5% to $149,259 from $183,083 for
the year ended December 31, 2019. The primary reason for the
overall decrease in general and administrative expense in the
current year is a decrease in professional fees.
Payroll and compensation expenses for the year ended December 31,
2020 decreased to $187 from $168,945 or 99.9% for the year ended
December 31, 2019. The primary reason for the overall decrease in
payroll and compensation expense in the current year is a decrease
in employees and a reduction in stock-based compensation.
Amortization expenses for the years ended December 31, 2020 and
2019 remained constant at $51,028.
Legal expenses for the year ended December 31, 2020 decreased
$50,415 from $118,281 for the year ended December 31, 2019. The
increase is related to ongoing litigation as described in more
detail in Note 12 of the attached financial statements.
Debt transaction expenses for the year ended December 31, 2020
decreased $17,050 or 68.5% from $24,900 to $7,850. The primary
reason for the decrease is related to the decrease in convertible
notes entered into during 2020.
Other Income (Expense)
Total other expenses totaled $17,102 and $1,279,233 for the years
ended December 31, 2020 and 2019, respectively. The $1,262,131
decrease is primarily attributed to the decrease recognized due to
changes in the fair value of derivative instruments of $422,787,
loss on convertible notes of $401,497 and a decrease in interest
expense of $370,619.
Net Loss
As a result, net loss for the year ended December 31, 2020
decreased by $1,549,627 to $275,842 from $1,825,469 for the year
ended December 31, 2019.
Comprehensive (Loss) Gain
The Company recorded a loss for foreign currency translation
adjustments for the year ended December 31, 2020 of $20,941 and a
loss of $52,905 for the year ended December 31, 2019. The
fluctuations of the increase/decrease are primarily attributed to
the change in the value of the note recognized due to exchange rate
variances. Comprehensive loss was $296,785 as compared to
$1,878,374 for the years ended December 31, 2020 and 2019,
respectively.
Liquidity and Capital Resources
September 30, 2021
Compared to September 30, 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 three months ended September
30, 2021, we had $11,102,700 in new cash proceeds compared to the
three months ended September 30, 2020, when we had no new cash
proceeds.
As of September 30, 2021, we had cash of $2,564,492, compared to
$337 as of December 31, 2020. As of September 30, 2021, our current
liabilities exceeded our current assets by $12,139,503.
December 31, 2020 Compared
to December 31, 2019
Liquidity is the ability of a company to generate funds to support
its current and future operations, satisfy its obligations, and
otherwise operate on an ongoing basis. At December 31, 2020, we had
a cash balance of $337. Our working capital deficit is
approximately $3,241,567 at December 31, 2020.
As of December 31, 2020, we had cash of $337, compared to $1,210 as
of December 31, 2019. The Company currently does not have
sufficient cash to fund its operations for the next 12 months and
will require working capital to complete development, testing and
marketing of its products and to pay for ongoing operating
expenses. The Company anticipates 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 the Company. The Company has 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, 2020, our current liabilities of $3,241,904
exceeded our current assets of $337 by $3,241,567.
Cash Flows from Operating Activities
During the nine months ended September 30, 2021, net cash used by
operating activities was $7,446,593, resulting from our net loss of
$1,924,311 and an increase in expenses related to our convertible
notes payables, including amortization of debt discount of $404,087
and loan acquisition costs of $480,450, increase in stock-based
compensation of $649,334, increase in inventory of $410,836 and
operating lease liabilities of $1,398,068. These increases were
offset by a decrease in derivative liability of $741,789, increase
in accounts payable and accrued expenses of $4,362,016 and an
increase from the gain on the extinguishment of debt of $785,240,
increase in accounts receivable of $893,366, unbilled revenue of
$563,555 and increase in contract liability of $1,439,504.
By comparison, during the nine months ended September 30, 2020, net
cash provided by operating activities was $4,278, resulting from
our net loss of $388,561 and an increase in expenses related to our
convertible notes payables, including amortization of debt discount
of $39,414, increase in derivative liability of $44,684, increase
in accounts payable and accrued expenses of $280,370.
During the year ended December 31, 2020, net cash used by operating
activities was $8,194, resulting from our net loss of $275,842
partially offset by non-cash expenses totaling $14,446 and
increases in accounts payable of $195,951 and accrued liabilities
of $72,892.
By comparison, during the year ended December 31, 2019, net cash
used by operating activities was $171,604, resulting from our net
loss of $1,825,469, partially offset by non-cash expenses totaling
$259,824 and increases in accounts payable of $264,788 and a
decrease in accrued liabilities of $145,234.
Cash Flows from Investing Activities
During the nine months ended September 30, 2021, we had net cash
used in investing activities of $546,765. During the nine months
ended September 30, 2020, we had net cash used in investing
activities of $4,969.
During the year ended December 31, 2020, net cash used by investing
activities was $4,969, of capitalized patents costs of $4,969.
During the year ended December 31, 2019, net cash used by investing
activities was $54,930.
Cash Flows from Financing Activities
During the nine months ended September 30, 2021, net cash provided
by financing activities was $10,718,100, comprised of proceeds from
the sale of common stock from offering of $8,000,000, 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 nine months ended September 30, 2020, we
had no net cash provided by or used in financing activities.
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. During the year ended
December 31, 2019, net cash provided by financing activities was
$155,450, comprised of proceeds from issuance of convertible notes
payable of $180,100, partially offset by repayments of convertible
notes payable of $24,650.
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. Its principal wholly-owned subsidiary, DPTI originally
started as a technology spinout from the University of New
Brunswick, Fredericton, Canada. DPI is comprised of two security
platforms: Fiber and UHSS.
On April 27, 2018, Klever entered into a 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, 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 FINRA and the
Company's ticker symbol was changed to “DPLS.”
The Company’s 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. The Company’s patented BOTDA dark-pulse sensor
technology allows for the monitoring of highly dynamic environments
due to its greater resolution and accuracy.
In December 2010 DPTI entered into an Assignment Agreement with the
University pursuant to which the University sold, transferred, and
assigned to the Company certain patents related to 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 the Debenture to the University. The Patents and the
Debenture were initially recorded in the Company’s 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 two
percent 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.
Our Business
The Company offers a full suite of engineering, installation and
security management solutions to industries and governments.
Coupled with DarkPulse Technology, DarkPulse provides its 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.
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 |
| |
|
|
| |
· |
Applications: Wider range of capabilities than
other systems currently available |
| |
|
|
| |
· |
Power
consumption: Lower power consumption than existing systems allowing
for off-grid installations |
| |
|
|
| |
· |
Integration: Capable of integrating with existing
systems |
| |
|
|
| |
· |
Central station monitoring/cloud-based
GUI |
We believe that these key advantages should allow the Company not
only to enter existing markets, but more importantly, to open new
market opportunities with new applications. The Company intends 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; |
|
· |
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, 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.[1]
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, the Company utilizes its 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. The Company’s future financial condition and
operating results depend on its ability to provide a high-quality
solution as well as increased distribution of the solutions in each
of the markets in which it competes or intends to compete
within.
The markets for the Company’s
products and services are highly competitive and the Company is
confronted by aggressive competition. These markets are
characterized by frequent product introductions and rapid
technological advances. The Company’s 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 the Company 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.
_____________________
[1] Optical Sensing Market by Industry (Aerospace &
Defense, Utilities, Oil & Gas, Medical, Construction, and
Consumer Electronics), Application, Method, and Geography - Global
Forecast to 2023
(https://www.marketsandmarkets.com/Market-Reports/optical-sensing-market-197592599.html?gclid=EAIaIQobChMIzrfanf7P4QIVA0GGCh3jlw7rEAAYASAAEgI9bvD_BwE)
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 Annual Report.
Employees
As of November 30, 2021, we had seven full-time employee and no
part-time employees.
Legal Proceedings
Former Officers
On September 10, 2021, Stephen Goodman, Mark Banash, and David
Singer (the “Former Officers”), all former officers and
employees of the Company, commenced suit against the Company in
Arizona Superior Court, Maricopa County. The complaint alleges the
Company breached the rights of the Former Officers in connection
with Series D preferred stock issued to the Former Officers. The
Company intends to defend itself against the allegations asserted
in the Former Officers’ complaint. if the case progresses the
Company will file countersuits against all plaintiffs.
More Capital,
LLC
On June 29, 2021, More Capital, LLC (“More”) commenced suit
against the Company, et al., in the 4th Judicial District (Hennepin
County District Court) (Minnesota), alleging the Company breached
the terms and conditions of a convertible promissory note and
accompanying securities purchase agreement More and the Company
entered into on August 20, 2018.
On July 20, 2021, the Company filed a motion to dismiss More’s
complaint, arguing that the claims asserted against the Company
fail to state a claim upon which relief can be granted.
The Company intends to defend itself against the allegations
asserted in More’s complaint and interpose the defenses provided
under the Exchange Act, including but not limited to asserting that
More 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 interposing its right to rescind the unlawful
securities contracts in their entirety and, furthermore, seek
rescissionary damages for any unlawful securities transactions
effected by More. The Company contends that its arguments are
brought in good faith, particularly in light of recent SEC
enforcement actions and the SEC’s ongoing investigation against
More, among other parties, for violations of federal securities
laws, including violations of Section 15(a) of the Exchange Act.
See U.S. Securities and Exchange Commission v. Carebourn Capital,
LP et al, Case No. 1:20-cv-07162 (N.D. Ill.).
Carebourn Capital,
L.P.
On January 29, 2021, Carebourn Capital, L.P. (“Carebourn”)
commenced suit against the Company in the 4th Judicial District
(Hennepin County District Court, Minnesota), alleging the Company
breached the terms and conditions of two convertible promissory
notes and accompanying securities purchase agreements Carebourn and
the Company entered into on July 17, 2018 and July 24, 2018,
respectively.
Also on January 29, 2021, Carebourn moved for a temporary
injunction to enjoin the Company from transferring any shares of
its common stock to any third parties. Following submission of
briefing by both parties and oral arguments on Carebourn’s motion,
on March 17, 2021, the Court denied Carebourn’s motion for a
temporary injunction.
On April 14, 2021, Carebourn filed an amended complaint and
asserted new claims. On May 13, 2021, the Company filed a motion to
dismiss Carebourn’s amended complaint, arguing that Carebourn is
conducting itself as an unregistered dealer, in violation of
Section 15(a) of the Exchange Act, and, pursuant to Section 29(b)
of the Securities Act, the Company is entitled to have all
contracts arising under the unlawful securities transaction
declared void ab initio and seek rescissionary damages for any
unlawful securities transactions effected by Carebourn.
As of the date hereof, a ruling has not been issued on the
foregoing motions to dismiss filed by the Company and Standard
Registrar and Transfer Company, Inc., and the Company and Carebourn
are conducting discovery. The Company intends to defend itself
against the allegations asserted in Carebourn’s amended complaint
and interpose the defenses provided under the Act, including but
not limited to asserting that Carebourn is an unregistered dealer
acting in violation of Section 15(a) and, pursuant to Section
29(b), the Company interposing its right to rescind the unlawful
securities contracts in their entirety and, furthermore, seek
rescissionary damages for any unlawful securities transactions
effected by Carebourn.
Recent Developments
Acquisitions
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). Optilan is now a wholly-owned subsidiary of the
Company.
On August 9, 2021, the Company entered into a Subscription
Agreement with Optilan, pursuant to which the Company 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, 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.
On September 8, 2021, the Company 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 the Company 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, 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 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 the Company's 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 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 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 April 5, 2021, we 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 2 trading prices of the
Company's common stock during the 10 prior trading days. The
Company received $50,000 net cash.
On April 26, 2021, we entered a Securities Purchase Agreement (the
“FirstFire SPA”) and Registration Rights Agreement (the
“FirstFire 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 will become $0.005. In the event of a DTC “chill”
on our shares, an additional discount of 10% will apply to the
conversion price while the “chill” is in effect. Upon the issuance
of the FirstFire Note, we have initially agreed to reserve
550,000,000 shares of Common Stock.
The FirstFire Registration Rights Agreement provides that we shall
(i) use our best efforts to file with the Commission an S-1
Registration Statement within 90 days of the date of the FirstFire
Registration Rights Agreement to register the shares into which the
FirstFire Note is convertible; and (ii) have the Registration
Statement declared effective by the SEC within 180 days after the
date the Registration Statement is filed with the SEC.
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 us, 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 the Company’s 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 we 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
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 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 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 15, 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 $0.0812544 per share (the
“Fifth Closing”). We received approximately $1,102,475 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
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.
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.
We have entered into a partnership with Remote Intelligence to
expand our service offerings to include “eye in the sky” drone
capabilities.
We have entered into a partnership with Unleash Live to expand our
service offerings to include AI enhanced image evaluation and
secure private networking capabilities.
Other Events
On August 3, 2021, the Company entered into an Engagement Agreement
and Terms and Conditions (the “EIAP Agreement”) with Energy
& Industrial Advisory Partners, LLC ( “EIAP”). Pursuant
to the EIAP Agreement, the Company has engaged EIAP to serve as an
advisor to the Company 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 the
Company (provided that such two-year period shall be extended by
the same period of time that the Company takes 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), the Company
completes a transaction with the target company or a similar
transaction to the Transaction, then the Company shall pay the
consulting bonus fee at the completion of the transaction.
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 |
Dennis M. O’Leary, Chairman, CEO, President, CFO. Mr.
O’Leary is the Company’s Chief Executive Officer, President, Chief
Financial Officer and Chairman of the Board. Mr. O’Leary founded
DarkPulse Technologies Inc., a wholly-owned subsidiary of the
Company, in 2010. 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. He is the
co-founder and Chairman of DarkPulse Technologies Inc., a firm
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 is not, and has not been during the
past five years, the director of any other public companies.
Dr. Anthony Brown, Director. Dr. Brown 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. We believe that Dr. Brown should serve as a
member of our Board of Directors due to his extensive experience in
the development of Brillouin scattering-based distributed fiber
optic sensing.
Carl Eckel, Director. Mr. Eckel 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. We
believe that Mr. Eckel should serve as a member of our Board of
Directors due to his extensive management experience within the
government and the private sectors in such areas and industries
where the Company’s technology systems may be advantageously
utilized.
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.
Code of Ethics
We have not adopted a formal, written code of ethics due to a small
number of members of management, lack of previous business
operations, and lack of resources. We plan to adopt a Code of
Ethics during the fiscal year ending December 31, 2021.
Audit Committee
As of December 31, 2020, 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
The following table shows the executive compensation paid to our
named executive officers and directors for the years ended December
31, 2020 and 2019.
| Name and Principal
Position |
|
Year Ended Dec
31, |
|
|
Salary (1) |
|
|
Total |
|
| Dennis O’Leary |
|
|
2020 |
|
|
$ |
0 |
|
|
$ |
0 |
|
| Chairman/CEO and Director |
|
|
2019 |
|
|
$ |
18,000 |
|
|
$ |
18,000 |
|
| Dr. Anthony Brown |
|
|
2020 |
|
|
$ |
0 |
|
|
$ |
0 |
|
| Director |
|
|
2019 |
|
|
$ |
0 |
|
|
$ |
0 |
|
| Carl Eckel |
|
|
2020 |
|
|
$ |
0 |
|
|
$ |
0 |
|
| Director |
|
|
2019 |
|
|
$ |
0 |
|
|
$ |
0 |
|
___________________________
(1) The Company accrued $0 and $18,000 for compensation
for Mr. O’Leary during the years ended December 31, 2020 and 2019,
respectively, of which $0 has been paid, respectively.
Equity Awards
As of December 31, 2020, 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 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 5,154,132,642 (5,154,044,407
common plus 88,235 preferred) shares as of November 22, 2021.
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 and executive officers and by the directors
and executive officers as a group. There were no stock options
outstanding as of November 22, 2021. 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 the
Company’s directors, executive officers, and named 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
|
Amount and
Nature of
Beneficial
Ownership(1)
|
Percentage of Beneficial Ownership
Before Offering |
Percentage of Beneficial Ownership
Assuming all Shares are Sold |
|
Dennis O’Leary, CEO and
Director |
- |
67,647 |
21,620,914,482 |
81.29% |
80.38% |
|
Dr. Anthony Brown,
Director |
- |
5,882 |
1,879,968,348 |
27.42% |
26.29% |
|
Carl Eckel, Director |
- |
- |
- |
- |
|
|
>5%
Shareholders |
|
Fantastic Northamerica, LLC
Avenue of the Americas
2nd Floor
New York, NY 10105
|
- |
67,647 |
21,620,914,482 |
81.29% |
80.38% |
|
Dr. Thomas A. Cellucci
42757 Cedar Ridge Blvd.
Chantilly, VA 20152
|
- |
9,412 |
3,008,205,047 |
37.67% |
36.31% |
|
Stephen Goodman
1873 W Dion Drive
Anthem, AZ 85086
|
- |
1,177 |
376,185,437 |
7.03% |
6.65% |
|
Mark Banash
52 Rice Ln
Bedford, NH 03110
|
- |
1,176 |
375,865,824 |
7.02% |
6.64% |
|
David Singer
200 South Ironton St., #109
Aurora, CO 80012
|
- |
1,176 |
375,865,824 |
7.02% |
6.64% |
|
Brunson, Chandler & Jones, PLLC
175 S Main St.
SLC, UT 84111
|
- |
1,175 |
375,546,210 |
7.01% |
6.63% |
*Less than 1%
|
(1) |
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. |
|
(2) |
Includes 67,647 shares of Series D
Preferred Stock are owned by Fantastic Northamerica, LLC which is
owned and controlled by Mr. O’Leary, the Company’s Chief Executive
Officer. |
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.
Accrued Compensation
Dennis O’Leary, the Company’s CEO, accrued $0 and $18,000 for
compensation for the CEO during the years ended December 31, 2020
and 2019, of which $0 and $0 were paid, respectively.
Director Independence
A Director is considered independent if the Board affirmatively
determines that the director (or an immediate family member) does
not have any direct or indirect material relationship with us or
our affiliates or any member of our senior management or his or her
affiliates. The term “affiliate” means any corporation or other
entity that controls, is controlled by, or under common control
with us, evidenced by the power to elect a majority of the Board of
Directors or comparable governing body of such entity. The term
“immediate family member” means spouse, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in law,
brothers- and sisters-in-laws and anyone (other than domestic
employees) sharing the director’s home.
In accordance with these guidelines, the Board has determined that
current Board members Eckel and Brown are independent
directors.
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 5,154,044,407
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.
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 a number of shares
of common stock equal to the number of our outstanding shares of
stock multiplied by 5 ⅔, divided by the number of outstanding
shares of Series D Preferred 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 November 22, 2021, we had
outstanding an aggregate of 5,154,044,407
shares of Common Stock of which approximately 37,448,333 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, 2020, 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
On March 11, 2019 (the “Dismissal Date”), we advised Haynie
& Company (the “Former Auditor”) that it was dismissed
as our independent registered public accounting firm. The decision
to dismiss the Former Auditor as our independent registered public
accounting firm was approved by our Board of Directors.
During the years ended December 31, 2017 and 2016 and through the
Dismissal Date, there were no disagreements with the Former Auditor
on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the Former Auditor’s
satisfaction, would have caused them to make reference thereto in
their reports on our financial statements for such years.
Except as set forth below, during the years ended December 31, 2017
and 2016 and through the Dismissal Date, the reports of the Former
Auditor on our financial statements did not contain any adverse
opinion or disclaimer of opinion, and such reports were not
qualified or modified as to uncertainty, audit scope, or accounting
principle, except that the reports contained a paragraph stating
there was substantial doubt about our ability to continue as a
going concern.
On March 11, 2019, (the “Engagement Date”), we engaged Boyle
CPA, LLC (the “New Auditor”) as its independent registered
public accounting firm for our fiscal year ended December 31, 2018.
The decision to engage the New Auditor as our independent
registered public accounting firm was approved by our Board of
Directors.
During the two most recent fiscal years and through the Engagement
Date, we had not consulted with the New Auditor regarding
either:
|
1. |
application of accounting
principles to any specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on
our financial statements, and neither a written report was provided
to us nor oral advice was provided that the New Auditor concluded
was an important factor considered by us in reaching a decision as
to the accounting, auditing or financial reporting issue; or |
any matter that was either the subject of a disagreement (as
defined in Regulation S-K, Item 304(a)(1)(iv) and the related
instructions) or reportable event (as defined in Regulation S-K,
Item 304(a)(1)(v)).
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, and 2019, which includes an explanatory paragraph relating to
its ability to continue as a going concern, included in this
Prospectus have been audited by Boyle CPA, LLC, an independent
auditor, as stated in their reports 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-_________) 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.
INDEX TO FINANCIAL
STATEMENTS
Audited Financial Statements:
PART I—FINANCIAL
INFORMATION
Item 1. Financial
Statements
DARKPULSE, INC.
CONDENSED CONSOLIDATED
BALANCE SHEETS
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
Audited |
|
| |
|
September 30, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
2,564,492 |
|
|
$ |
337 |
|
| Accounts
receivable, net |
|
|
5,812,003 |
|
|
|
– |
|
| Inventory |
|
|
1,630,051 |
|
|
|
– |
|
| Unbilled
revenue |
|
|
1,103,876 |
|
|
|
– |
|
|
Other current assets |
|
|
137,979 |
|
|
|
– |
|
| TOTAL
CURRENT ASSETS |
|
|
11,248,401 |
|
|
|
337 |
|
| |
|
|
|
|
|
|
|
|
| NON-CURRENT ASSETS: |
|
|
|
|
|
|
|
|
| Property
and equipment, net |
|
|
1,837,399 |
|
|
|
– |
|
|
Operating lease right-of-use assets |
|
|
1,476,771 |
|
|
|
– |
|
| Patents,
net |
|
|
355,719 |
|
|
|
393,990 |
|
| Goodwill |
|
|
15,536,899 |
|
|
|
– |
|
|
Other assets, net |
|
|
282,881 |
|
|
|
91,464 |
|
|
TOTAL NON-CURRENT ASSETS |
|
|
19,489,673 |
|
|
|
485,454 |
|
| |
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
30,738,072 |
|
|
$ |
485,791 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND
STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
| Accounts
payable and accrued expenses |
|
$ |
9,549,305 |
|
|
$ |
1,089,869 |
|
|
Convertible notes, net of discount $111,888 and $39,414 respectively |
|
|
1,091,375 |
|
|
|
931,158 |
|
| Notes
payable |
|
|
2,000,000 |
|
|
|
– |
|
| Customer
deposits |
|
|
4,802,891 |
|
|
|
– |
|
|
Derivative Liability |
|
|
479,088 |
|
|
|
1,220,877 |
|
| Contract
liabilities |
|
|
2,699,688 |
|
|
|
– |
|
|
Operating lease liabilities - current |
|
|
575,446 |
|
|
|
– |
|
|
Other current liabilities |
|
|
2,190,110 |
|
|
|
– |
|
| TOTAL
CURRENT LIABILITIES |
|
|
23,387,903 |
|
|
|
3,241,904 |
|
| |
|
|
|
|
|
|
|
|
| NON-CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
| Secured
debenture |
|
|
1,184,516 |
|
|
|
1,176,092 |
|
|
Operating lease liabilities - non-current |
|
|
1,592,880 |
|
|
|
– |
|
|
TOTAL NON-CURRENT LIABILITIES |
|
|
2,777,396 |
|
|
|
1,176,092 |
|
| |
|
|
|
|
|
|
|
|
| TOTAL
LIABILITIES |
|
|
26,165,299 |
|
|
|
4,417,996 |
|
| |
|
|
|
|
|
|
|
|
| STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
| Common
Stock, Par Value $0.0001, 20,000,000,000
shares authorized 4,922,968,442 and
4,088,762,156
shares issued and outstanding respectively |
|
|
492,297 |
|
|
|
408,876 |
|
| Treasury Stock,
100,000 shares |
|
|
(1,000 |
) |
|
|
(1,000 |
) |
|
Convertible Preferred Stock, Series D, par value $0.01,
100,000
shares authorized,
88,235 shares issued and
outstanding |
|
|
883 |
|
|
|
883 |
|
| Paid in
capital in excess of par value |
|
|
12,327,090 |
|
|
|
1,805,813 |
|
|
Distributions |
|
|
(6,400 |
) |
|
|
– |
|
|
Non-controlling interest in a variable interest entity and
subsidiary |
|
|
(34,113 |
) |
|
|
(12,439 |
) |
|
Accumulated other comprehensive income |
|
|
168,496 |
|
|
|
315,832 |
|
|
Accumulated deficit |
|
|
(8,374,480 |
) |
|
|
(6,450,170 |
) |
|
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
4,572,773 |
|
|
|
(3,932,205 |
) |
| |
|
|
|
|
|
|
|
|
| TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
30,738,072 |
|
|
$ |
485,791 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
DARKPULSE, INC.
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(UNAUDITED)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
THE THREE MONTHS |
|
|
FOR
THE NINE MONTHS |
|
| |
|
ENDED
SEPTEMBER 30, |
|
|
ENDED
SEPTEMBER 30, |
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| REVENUE |
|
$ |
3,500,970 |
|
|
$ |
– |
|
|
$ |
3,500,970 |
|
|
$ |
– |
|
| COST OF GOODS
SOLD |
|
|
2,767,239 |
|
|
|
– |
|
|
|
2,767,239 |
|
|
|
– |
|
| GROSS PROFIT |
|
|
733,731 |
|
|
|
– |
|
|
|
733,731 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling, general
and administrative |
|
|
406,940 |
|
|
|
34,782 |
|
|
|
531,793 |
|
|
|
120,866 |
|
| Salaries, wages
and payroll taxes |
|
|
1,007,453 |
|
|
|
– |
|
|
|
1,007,453 |
|
|
|
187 |
|
| Professional
fees |
|
|
1,680,600 |
|
|
|
– |
|
|
|
1,901,572 |
|
|
|
48,297 |
|
| Depreciation and
amortization |
|
|
91,222 |
|
|
|
12,757 |
|
|
|
116,736 |
|
|
|
38,271 |
|
| Debt
transaction expenses |
|
|
33,000 |
|
|
|
– |
|
|
|
184,950 |
|
|
|
– |
|
| TOTAL OPERATING EXPENSES |
|
|
3,219,215 |
|
|
|
47,539 |
|
|
|
3,742,504 |
|
|
|
207,621 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NET OPERATING LOSS |
|
|
(2,485,484 |
) |
|
|
(47,539 |
) |
|
|
(3,008,773 |
) |
|
|
(207,621 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
expense |
|
|
(320,706 |
) |
|
|
(37,318 |
) |
|
|
(671,290 |
) |
|
|
(97,842 |
) |
| Gain on settlement
of debt |
|
|
785,240 |
|
|
|
– |
|
|
|
785,240 |
|
|
|
1,000 |
|
| Change in fair
market of derivative liabilities |
|
|
(251,133 |
) |
|
|
(87,852 |
) |
|
|
76,363 |
|
|
|
(44,684 |
) |
| Gain/Loss on
convertible notes |
|
|
432,893 |
|
|
|
(1,313 |
) |
|
|
741,789 |
|
|
|
(39,414 |
) |
| Foreign
currency exchange rate variance |
|
|
152,361 |
|
|
|
– |
|
|
|
152,360 |
|
|
|
– |
|
| TOTAL OTHER
INCOME (EXPENSE) |
|
|
798,655 |
|
|
|
(126,483 |
) |
|
|
1,084,462 |
|
|
|
(180,940 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NET LOSS |
|
|
(1,686,829 |
) |
|
|
(174,022 |
) |
|
|
(1,924,311 |
) |
|
|
(388,561 |
) |
|
Net Loss attributable to noncontrolling interests in variable
interest entity and subsidiary |
|
|
15,838 |
|
|
|
– |
|
|
|
15,838 |
|
|
|
– |
|
| Net loss
attributable to Company stockholders |
|
$ |
(1,670,991 |
) |
|
$ |
(174,022 |
) |
|
$ |
(1,908,473 |
) |
|
$ |
(388,561 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LOSS PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic
and Diluted |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| WEIGHTED AVERAGE SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic
and Diluted |
|
|
4,835,935,495 |
|
|
|
2,355,108,904 |
|
|
|
4,679,197,410 |
|
|
|
1,754,933,152 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
DARKPULSE, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
FOR
THE THREE MONTHS |
|
|
FOR
THE NINE MONTHS |
|
| |
|
ENDED
SEPTEMBER 30, |
|
|
ENDED
SEPTEMBER 30, |
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| NET LOSS |
|
$ |
(1,670,991 |
) |
|
$ |
(174,022 |
) |
|
$ |
(1,908,473 |
) |
|
$ |
(388,561 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OTHER COMPREHENSIVE GAIN (LOSS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Gain (Loss) on Foreign Exchange |
|
|
26,539 |
|
|
|
(39,945 |
) |
|
|
(7,524 |
) |
|
|
13,656 |
|
| COMPREHENSIVE
LOSS |
|
$ |
(1,644,452 |
) |
|
$ |
(213,967 |
) |
|
$ |
(1,915,997 |
) |
|
$ |
(374,905 |
) |
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
DARKPULSE, INC.
Consolidated Statement of Stockholders'
Deficit
For the Periods Ended
September 30, 2021 and 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Preferred Stock |
|
|
Common Stock |
|
|
Treasury |
|
|
Paid
in Capital in Excess of Par |
|
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Stock |
|
|
Value |
|
|
|
Balance, December 31, 2020 |
|
|
88,235 |
|
|
$ |
883 |
|
|
|
4,088,762,156 |
|
|
$ |
408,876 |
|
|
$ |
(1,000 |
) |
|
$ |
1,805,813 |
|
|
|
Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
600,999,995 |
|
|
|
60,100 |
|
|
|
– |
|
|
|
189,839 |
|
|
|
Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Balance, March 31, 2021 |
|
|
88,235 |
|
|
$ |
883 |
|
|
|
4,689,762,151 |
|
|
$ |
468,976 |
|
|
$ |
(1,000 |
) |
|
$ |
1,995,652 |
|
|
|
Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
20,565,040 |
|
|
|
2,057 |
|
|
|
– |
|
|
|
124,863 |
|
|
|
Stock based loan acquisition cost |
|
|
– |
|
|
|
– |
|
|
|
60,000,000 |
|
|
|
6,000 |
|
|
|
– |
|
|
|
243,333 |
|
|
|
Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Balance, June 30, 2021 |
|
|
88,235 |
|
|
$ |
883 |
|
|
|
4,770,327,191 |
|
|
$ |
477,033 |
|
|
$ |
(1,000 |
) |
|
$ |
2,363,848 |
|
|
|
Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
49,719,643 |
|
|
|
4,972 |
|
|
|
– |
|
|
|
183,679 |
|
|
|
Issuance of common stock for public offering |
|
|
– |
|
|
|
– |
|
|
|
84,727,527 |
|
|
|
8,473 |
|
|
|
– |
|
|
|
7,991,527 |
|
|
|
Issuance of common stock for Wildlife Specialist acquisition |
|
|
– |
|
|
|
– |
|
|
|
7,500,000 |
|
|
|
750 |
|
|
|
– |
|
|
|
654,380 |
|
|
|
Issuance of common stock for Remote Intelligence acquisition |
|
|
– |
|
|
|
– |
|
|
|
7,500,000 |
|
|
|
750 |
|
|
|
– |
|
|
|
733,975 |
|
|
|
Share-based compensation |
|
|
– |
|
|
|
– |
|
|
|
3,194,081 |
|
|
|
319 |
|
|
|
– |
|
|
|
399,681 |
|
|
| Distributions |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Foreign currency adjustment - NCI |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Balance, September 30, 2021 |
|
|
88,235 |
|
|
$ |
883 |
|
|
|
4,922,968,442 |
|
|
$ |
492,297 |
|
|
$ |
(1,000 |
) |
|
$ |
12,327,090 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December
31, 2019 |
|
|
88,235 |
|
|
$ |
883 |
|
|
|
1,392,042,112 |
|
|
$ |
13,920,421 |
|
|
$ |
(1,000 |
) |
|
$ |
(11,877,864 |
) |
|
|
Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Balance, March 31, 2020 |
|
|
88,235 |
|
|
$ |
883 |
|
|
|
1,392,042,112 |
|
|
$ |
13,920,421 |
|
|
$ |
(1,000 |
) |
|
$ |
(11,877,864 |
) |
|
|
Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
217,142,858 |
|
|
|
2,171,429 |
|
|
|
– |
|
|
|
(2,156,228 |
) |
|
|
Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Balance, June 30, 2020 |
|
|
88,235 |
|
|
$ |
883 |
|
|
|
1,609,184,970 |
|
|
$ |
16,091,850 |
|
|
$ |
(1,000 |
) |
|
$ |
(14,034,092 |
) |
|
|
Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
1,785,632,186 |
|
|
|
17,856,322 |
|
|
|
– |
|
|
|
(17,739,248 |
) |
|
|
Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
| Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Balance, September 30, 2020 |
|
|
88,235 |
|
|
$ |
883 |
|
|
|
3,394,817,156 |
|
|
$ |
33,948,172 |
|
|
$ |
(1,000 |
) |
|
$ |
(31,773,340 |
) |
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
DARKPULSE, INC.
Consolidated Statement of
Stockholders' Deficit
For the Periods Ended
September 30, 2021 and 2020 (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Non-Controlling Interest in |
|
|
Accumulated Other Comprehensive |
|
|
Accumulated |
|
|
Total
Stockholders’ |
|
| |
|
Distributions |
|
|
Subsidiary |
|
|
Income |
|
|
Deficit |
|
|
Deficit |
|
|
Balance, December 31, 2020 |
|
$ |
– |
|
|
$ |
(12,439 |
) |
|
$ |
315,832 |
|
|
$ |
(6,450,170 |
) |
|
$ |
(3,932,205 |
) |
|
Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
249,939 |
|
|
Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
(17,909 |
) |
|
|
– |
|
|
|
(17,909 |
) |
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(51,874 |
) |
|
|
(51,874 |
) |
|
Balance, March 31, 2021 |
|
$ |
– |
|
|
$ |
(12,439 |
) |
|
$ |
297,923 |
|
|
$ |
(6,502,044 |
) |
|
$ |
(3,752,049 |
) |
|
Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
126,920 |
|
|
Stock based loan acquisition cost |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
249,333 |
|
|
Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
(16,154 |
) |
|
|
– |
|
|
|
(16,154 |
) |
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(185,607 |
) |
|
|
(185,607 |
) |
|
Balance, June 30, 2021 |
|
$ |
– |
|
|
$ |
(12,439 |
) |
|
$ |
281,769 |
|
|
$ |
(6,687,651 |
) |
|
$ |
(3,577,557 |
) |
|
Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
188,651 |
|
|
Issuance of common stock for public offering |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
8,000,000 |
|
|
Issuance of common stock for Wildlife Specialist acquisition |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
655,130 |
|
|
Issuance of common stock for Remote Intelligence acquisition |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
734,725 |
|
|
Share-based compensation |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
400,000 |
|
| Distributions |
|
|
(6,400 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(6,400 |
) |
|
Foreign currency adjustment - NCI |
|
|
– |
|
|
|
(21,674 |
) |
|
|
– |
|
|
|
– |
|
|
|
(21,674 |
) |
|
Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
(113,273 |
) |
|
|
– |
|
|
|
(113,273 |
) |
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(1,686,829 |
) |
|
|
(1,686,829 |
) |
|
Balance, September 30, 2021 |
|
$ |
(6,400 |
) |
|
$ |
(34,113 |
) |
|
$ |
168,496 |
|
|
$ |
(8,374,480 |
) |
|
$ |
4,572,773 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December
31, 2019 |
|
$ |
(12,439 |
) |
|
$ |
(12,439 |
) |
|
$ |
336,775 |
|
|
$ |
(6,174,328 |
) |
|
$ |
(3,807,552 |
) |
|
Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
92,646 |
|
|
|
– |
|
|
|
92,646 |
|
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(74,298 |
) |
|
|
(74,298 |
) |
|
Balance, March 31, 2020 |
|
$ |
(12,439 |
) |
|
$ |
(12,439 |
) |
|
$ |
429,421 |
|
|
$ |
(6,248,626 |
) |
|
$ |
(3,789,204 |
) |
|
Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
15,201 |
|
|
Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
(39,047 |
) |
|
|
– |
|
|
|
(39,047 |
) |
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(140,240 |
) |
|
|
(140,240 |
) |
|
Balance, June 30, 2020 |
|
$ |
(12,439 |
) |
|
$ |
(12,439 |
) |
|
$ |
390,374 |
|
|
$ |
(6,388,866 |
) |
|
$ |
(3,953,290 |
) |
|
Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
117,074 |
|
|
Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
(39,945 |
) |
|
|
– |
|
|
|
(39,945 |
) |
| Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(174,022 |
) |
|
|
(174,022 |
) |
|
Balance, September 30, 2020 |
|
$ |
(12,439 |
) |
|
$ |
(12,439 |
) |
|
$ |
350,429 |
|
|
$ |
(6,562,889 |
) |
|
$ |
(4,050,184 |
) |
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
DARKPULSE, INC.
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(UNAUDITED)
| |
|
|
|
|
|
|
|
|
| |
|
FOR
THE NINE MONTHS |
|
| |
|
ENDED
SEPTEMBER 30, |
|
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Net
Loss |
|
$ |
(1,924,311 |
) |
|
$ |
(388,561 |
) |
|
Adjustments to reconcile net loss to net cash used by operating
activities: |
|
|
|
|
|
|
|
|
| Gain on
extinguishment of debt |
|
|
(785,240 |
) |
|
|
– |
|
| Stock based
compensation |
|
|
649,334 |
|
|
|
– |
|
| Operating lease
expense |
|
|
(90,946 |
) |
|
|
– |
|
| Loan acquisition
costs |
|
|
(480,450 |
) |
|
|
(9,900 |
) |
| Derivative
liability |
|
|
(741,789 |
) |
|
|
44,684 |
|
| Amortization of
debt discount |
|
|
404,087 |
|
|
|
39,414 |
|
| Depreciation and
amortization |
|
|
116,736 |
|
|
|
38,271 |
|
| Changes in
operating assets and liabilities: |
|
|
|
|
|
|
– |
|
| Accounts
receivable |
|
|
(893,366 |
) |
|
|
– |
|
| Inventory |
|
|
410,836 |
|
|
|
– |
|
| Unbilled
Revenue |
|
|
(563,555 |
) |
|
|
– |
|
| Customer
Deposits |
|
|
1,634,397 |
|
|
|
– |
|
| Contract
liability |
|
|
(1,439,504 |
) |
|
|
– |
|
| Accounts payable
and accrued expenses |
|
|
(4,362,016 |
) |
|
|
280,370 |
|
| Operating lease
liabilities |
|
|
1,398,068 |
|
|
|
– |
|
| Other
current liabilities |
|
|
(778,874 |
) |
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Net
Cash Used by Operating Activities |
|
|
(7,446,593 |
) |
|
|
4,278 |
|
| |
|
|
|
|
|
|
|
|
| CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Purchases of
property and equipment |
|
|
(78,662 |
) |
|
|
– |
|
| Business
acquisitions, net of cash received |
|
|
(152,683 |
) |
|
|
– |
|
| Deposits |
|
|
(124,000 |
) |
|
|
– |
|
|
Investment in patents |
|
|
(191,420 |
) |
|
|
(4,969 |
) |
| |
|
|
|
|
|
|
|
|
| Net
Cash Used by Investing Activities |
|
|
(546,765 |
) |
|
|
(4,969 |
) |
| |
|
|
|
|
|
|
|
|
| CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Proceeds from sale
of common stock from offering |
|
|
8,000,000 |
|
|
|
– |
|
| Proceeds from
convertible notes payable |
|
|
1,102,700 |
|
|
|
– |
|
| Payments on
convertible notes |
|
|
(384,600 |
) |
|
|
– |
|
|
Proceeds from notes payable |
|
|
2,000,000 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Net
Cash Provided by Financing Activities |
|
|
10,718,100 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Net Cash Increase (Decrease) |
|
|
2,724,742 |
|
|
|
(691 |
) |
| |
|
|
|
|
|
|
|
|
| Effect of exchange rate on cash |
|
|
(160,587 |
) |
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Cash, Beginning of Period |
|
|
337 |
|
|
|
1,210 |
|
| Cash, End of Period |
|
$ |
2,564,492 |
|
|
$ |
519 |
|
| |
|
|
|
|
|
|
|
|
| Supplementary Cash Flow
Information: |
|
|
|
|
|
|
|
|
|
Interest paid in cash |
|
$ |
– |
|
|
$ |
– |
|
| Taxes
paid in cash |
|
$ |
– |
|
|
$ |
– |
|
| |
|
|
|
|
|
|
|
|
| Non-cash finance and investing
activities for the quarter ending September 30: |
|
|
|
|
|
|
|
|
| Issuance of common
stock for convertible notes payable and accrued interest |
|
|
181,560 |
|
|
|
– |
|
| Issuance of common
stock for Wildlife Specialists |
|
|
750 |
|
|
|
– |
|
| Issuance of common
stock for Remote Intelligence |
|
|
750 |
|
|
|
– |
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
DARKPULSE, INC.
Notes to Condensed
Financial Statements
(Unaudited)
NOTE 1 – BASIS OF PRESENTATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated interim financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States for interim
financial statements and do not include all the information and
footnotes required by accounting principles generally accepted in
the United States for complete financial statements. The
information furnished reflects all adjustments, consisting only of
normal recurring items which are, in the opinion of management,
necessary in order to make the financial statements not misleading.
The consolidated financial statements as of December 31, 2020 have
been audited by an independent registered public accounting firm.
The accounting policies and procedures employed in the preparation
of these condensed consolidated financial statements have been
derived from the audited financial statements of the Company for
the year ended December 31, 2020, which are contained in Form 10-K
as filed with the Securities and Exchange Commission on April 15,
2021. The consolidated balance sheet as of December 31, 2020 was
derived from those financial statements.
Basis of
Presentation and Principles of Consolidation
The consolidated financial statements and accompanying notes are
prepared in accordance with generally accepted accounting
principles of the United States of America (“U.S. GAAP”) and the
rules and regulations of the U.S Securities and Exchange Commission
for Interim Financial Information. The condensed consolidated
financial statements of the Company include the Company and its
wholly owned subsidiaries. All intercompany transactions and
balances have been eliminated. All adjustments (consisting of
normal recurring items) necessary to present fairly the Company’s
financial position as of September 30, 2021, and the results of
operations for three and nine months and cash flows for the nine
months ended September 30, 2021 have been included. The results of
operations for the three and nine months ended September 30, 2021
are not necessarily indicative of the results to be expected for
the full year.
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 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.
The Company has recently completed several acquisitions. See Note 2
– Business Acquisitions for more information.
Going
Concern Uncertainty
As shown in the accompanying financial statements, during the nine
months ended September 30, 2021, the Company reported a net loss of
$1,924,311. As of September 30, 2021, the
Company’s current liabilities exceeded its current assets by
$12,139,502. As of September 30,
2021, the Company had $2,564,492 of cash.
The Company 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.
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.
COVID-19
Pandemic
On January 30, 2020, the World Health Organization (WHO) announced
a global health emergency because of a new strain of coronavirus
originating in Wuhan, China (the “COVID-19 outbreak”) and the risks
to the international community as the virus spread globally beyond
the point of origin. On March 20, 2020 the WHO classified the
COVID-19 outbreak as a pandemic, based on the rapid increase in
exposure globally.
The full impact of the COVID-19 outbreak continues to evolve as of
the date of these condensed consolidated financial statements. As
such, it is uncertain as to the full magnitude that the pandemic
will have on the Company’s combined financial condition, liquidity
and future results of operations. Management is actively monitoring
the impact of the global situation on its consolidated financial
condition, liquidity, operations, suppliers, industry and
workforce. Given the daily evolution of the COVID-19 outbreak and
the global responses to curb its spread, the Company is not able to
estimate the effects of the COVID-19 outbreak on its results of
operations, financial condition, or liquidity for fiscal year 2021
beyond the results presented in these condensed consolidated
financial statements and this quarterly report.
Due to the impacts of COVID-19 we have seen an increase in
recruiting and labor costs as well as delays in supply chain.
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 September
30, 2021 and December 31, 2020, we had contract liabilities of
$2,699,688 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.
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.
Intangible
Assets
The Company reviews intangibles held and used for possible
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In
evaluating the fair value and future benefits of its intangible
assets, management performs an analysis of the anticipated
undiscounted future net cash flow of the individual assets over the
remaining amortization period. The Company recognizes an impairment
loss if the carrying value of the asset exceeds the expected future
cash flows.
Goodwill
and other intangible assets
In accordance with ASC 350-30-65, “Intangibles - Goodwill and
Others”, the Company assesses the impairment of identifiable
intangibles whenever events or changes in circumstances indicate
that the carrying value may not be recoverable.
Factors the Company considers to be important which could trigger
an impairment review include the following:
|
· |
Significant
underperformance relative to expected historical or projected
future operating results; |
|
· |
Significant changes in
the manner of use of the acquired assets or the strategy for the
overall business; and |
|
· |
Significant negative
industry or economic trends. |
When the Company determines that the carrying value of intangibles
may not be recoverable based upon the existence of one or more of
the above indicators of impairment and the carrying value of the
asset cannot be recovered from projected undiscounted cash flows,
the Company records an impairment charge. The Company measures any
impairment based on a projected discounted cash flow method using a
discount rate determined by management to be commensurate with the
risk inherent in the current business model. Significant management
judgment is required in determining whether an indicator of
impairment exists and in projecting cash flows.
Foreign
Currency Translation
The Company’s reporting currency is U.S. Dollars. The accounts of
one of the Company’s subsidiaries, Optilan, is maintained using the
appropriate local currency, Great British Pound, 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 three and
nine months ended September 30, 2021, closing rate at 1.3468
US$: GBP, quarterly average rate at
1.3787 US$: GBP.
Income
Taxes
The Company accounts for income taxes in accordance with ASC 740,
Accounting for Income Taxes, as clarified by ASC 740-10, Accounting
for Uncertainty in Income Taxes. Under this method, deferred income
taxes are determined based on the estimated future tax effects of
differences between the financial statement and tax basis of assets
and liabilities given the provisions of enacted tax laws. Deferred
income tax provisions and benefits are based on changes to the
assets or liabilities from year to year. In providing for deferred
taxes, the Company considers tax regulations of the jurisdictions
in which the Company operates, estimates of future taxable income,
and available tax planning strategies. If tax regulations,
operating results or the ability to implement tax-planning
strategies vary, adjustments to the carrying value of deferred tax
assets and liabilities may be required. Valuation allowances are
recorded related to deferred tax assets based on the "more likely
than not" criteria of ASC 740.
ASC 740-10 requires that the Company recognize 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 percent likelihood of being realized upon ultimate settlement
with the relevant tax authority.
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.
Accounting for
Derivatives
The Company evaluates all of its financial instruments to determine
if such instruments are derivatives or contain features that
qualify as embedded derivatives. For derivative financial
instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then
re-valued at each reporting date, with changes in the fair value
reported in the statements of operations. For stock-based
derivative financial instruments, the Company uses a probability
weighted average series Binomial lattice formula pricing models 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 or not net-cash settlement
of the derivative instrument could be required within 12 months of
the balance sheet date.
Fair
Value of Financial Instruments
The carrying amounts of the Company's financial assets and
liabilities, such as cash, prepaid expenses, and accruals
approximate their fair values because of the short maturity of
these instruments. The Company believes the carrying value of its
secured debenture payable approximates fair value because the terms
were negotiated at arm’s length.
Recent
Accounting Pronouncements
There were no new accounting pronouncements issued or proposed by
the Financial Accounting Standards Board during the three months
ended September 30, 2021, and through the date of filing of this
report that the Company believes has had or will have a material
impact on its financial position or results of operations,
including the recognition of revenue, cash flow, the merger that
was consummated on July 18, 2018. The Company has no lease
obligations.
Income
(Loss) Per Common Share
Basic net income (loss) per share of common stock is computed by
dividing net income (loss) by the weighted average number of common
shares outstanding during the period. Diluted net income (loss) per
share of common stock is computed by dividing net income (loss) by
the sum of the weighted average number of common shares outstanding
and the dilutive potential common share equivalents outstanding.
Potential dilutive common share equivalents consist of shares
issuable upon exercise of outstanding convertible preferred stock
and stock options.
For the three and nine months ended September 30, 2021, there were
no stock options outstanding. For the three and nine months ended
September 30, 2021, common stock equivalents related to convertible
preferred stock and convertible debt have not been included in the
calculation of diluted loss per common share because they are
anti-dilutive. Therefore, basic loss per common share is the same
as diluted loss per common share. There are 1,970,029,676 common
shares reserved for the potential conversion of the Company's
convertible debt.
NOTE 2 – 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 and the preliminary acquisition accounting for
the fair value of the assets and liabilities recognized in the
Condensed Consolidated Balance Sheet at September 30,
2021:
| |
|
Fair Value |
|
| Cash |
|
$ |
736,177 |
|
| Accounts receivable |
|
|
4,619,381 |
|
| Inventory |
|
|
2,040,887 |
|
| Unbilled revenue |
|
|
540,321 |
|
| Property & equipment |
|
|
1,393,274 |
|
| Right of use |
|
|
1,385,825 |
|
|
Goodwill |
|
|
12,181,350 |
|
| Total assets |
|
|
22,891,215 |
|
| Accounts
payable |
|
|
11,622,018 |
|
| Contract
deposits |
|
|
3,168,493 |
|
| Contract liabilities, current |
|
|
4,139,193 |
|
| Lease liabilities, current |
|
|
141,730 |
|
| Other current liabilities |
|
|
2,496,725 |
|
| Lease
liabilities, noncurrent |
|
|
628,529 |
|
| Total purchase
consideration |
|
$ |
694,527 |
|
This purchase price allocation is preliminary and is pending the
finalization of the third-party valuation analysis and working
capital, as the Company has not yet completed the detailed
valuation analyses as of the filing date of this Form 10-Q.
Wildlife Specialists, LLC and Remote Intelligence,
LLC
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.
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 and the preliminary acquisition accounting for
the fair value of the assets and liabilities recognized in the
Condensed Consolidated Balance Sheet at September 30,
2021:
|
WILDLIFE SPECIALISTS |
|
Fair Value |
|
| Cash |
|
$ |
33,910 |
|
| Accounts receivable |
|
|
161,866 |
|
| Other current assets |
|
|
600 |
|
| Property & equipment |
|
|
99,490 |
|
|
Goodwill |
|
|
1,191,085 |
|
| Total assets |
|
|
1,486,951 |
|
| Accounts payable |
|
|
151,888 |
|
| Other current
liabilities |
|
|
241,763 |
|
| Total purchase
consideration |
|
$ |
1,478,000 |
|
|
REMOTE INTELLIGENCE |
|
Fair Value |
|
| Cash |
|
$ |
6,158 |
|
| Accounts receivable |
|
|
24,036 |
|
| Property
& equipment |
|
|
111,636 |
|
|
Goodwill |
|
|
1,729,800 |
|
| Total assets |
|
|
1,871,630 |
|
| Accounts payable |
|
|
141,859 |
|
| Other long term
liabilities |
|
|
251,771 |
|
| Total purchase
consideration |
|
$ |
1,478,000 |
|
These purchase price allocations are preliminary and are pending
the finalization of the third-party valuation analysis and working
capital, as the Company has not yet completed the detailed
valuation analyses as of the filing date of this Form 10-Q.
TJM Electronics West, Inc.
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.
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 and the preliminary acquisition accounting for
the fair value of the assets and liabilities recognized in the
Condensed Consolidated Balance Sheet at September 30, 2021:
| |
|
Fair Value |
|
| Accounts receivable |
|
$ |
3,400 |
|
| Property & equipment |
|
|
91,051 |
|
|
Goodwill |
|
|
355,549 |
|
| Total assets |
|
|
450,000 |
|
| Total purchase
consideration |
|
$ |
450,000 |
|
This purchase price allocation is preliminary and is pending the
finalization of the third-party valuation analysis and working
capital, as the Company has not yet completed the detailed
valuation analyses as of the filing date of this Form 10-Q.
NOTE 3 – REVENUE
The following table is a summary of the Company’s timing of revenue
recognition for the three and nine months ended September 30, 2021
and 2020:
| |
|
Three
Months Ended |
|
|
Nine
Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
| Services and products
transferred at a point in time |
|
$ |
3,500,970 |
|
|
$ |
– |
|
|
$ |
3,500,970 |
|
|
$ |
– |
|
| Services and
products transferred over time |
|
|
138 |
|
|
|
– |
|
|
|
328 |
|
|
|
– |
|
| Total
revenue |
|
$ |
3,500,970 |
|
|
$ |
– |
|
|
$ |
3,500,970 |
|
|
$ |
– |
|
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 three and nine
months ended September 30, 2021 and 2020:
| |
|
Three
Months Ended |
|
|
Nine
Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| Revenue by products and services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Products |
|
$ |
1,533,377 |
|
|
$ |
– |
|
|
$ |
1,533,377 |
|
|
$ |
– |
|
| Services |
|
|
1,967,593 |
|
|
|
– |
|
|
|
1,967,593 |
|
|
|
– |
|
| Total
revenue |
|
$ |
3,500,970 |
|
|
$ |
– |
|
|
$ |
3,500,970 |
|
|
$ |
– |
|
Revenue by geographic destination consisted of the following for
the for the three and nine months ended September 30, 2021 and
2020:
| |
|
Three
Months Ended |
|
|
Nine
Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| Revenue by geography: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| North America |
|
$ |
120,336 |
|
|
$ |
– |
|
|
$ |
120,336 |
|
|
$ |
– |
|
| International |
|
|
3,380,634 |
|
|
|
– |
|
|
|
3,380,634 |
|
|
|
– |
|
| Total
revenue |
|
$ |
3,500,970 |
|
|
$ |
– |
|
|
$ |
3,500,970 |
|
|
$ |
– |
|
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 September
30, 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.
| |
|
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 |
|
|
1,439,505 |
|
| Balance at September 30,
2021 |
|
$ |
2,699,688 |
|
NOTE 4 – ACCOUNTS
RECEIVABLE
Accounts receivable consisted of the following as of September 30,
2021 and December 31, 2020:
| |
|
September 30, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| Accounts receivable |
|
$ |
5,812,003 |
|
|
$ |
– |
|
| Less: Allowance
for doubtful accounts |
|
|
– |
|
|
|
– |
|
| Total
accounts receivable |
|
$ |
5,812,003 |
|
|
$ |
– |
|
NOTE 5 – INVENTORY
Inventory consisted of the following as of September 30, 2021 and
December 31, 2020:
| |
|
September 30, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| Raw materials |
|
$ |
209,478 |
|
|
$ |
– |
|
| Work in progress |
|
|
1,401,521 |
|
|
|
– |
|
| Finished
goods |
|
|
19,052 |
|
|
|
– |
|
| Total
inventory |
|
|
1,630,051 |
|
|
|
– |
|
| Reserve |
|
|
– |
|
|
|
– |
|
| Total
inventory, net |
|
$ |
1,630,051 |
|
|
$ |
– |
|
NOTE 6 – PROPERTY AND
EQUIPMENT
Property and equipment consisted of the following as of September
30, 2021 and December 31, 2020:
| |
|
September 30, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| Property and
equipment |
|
$ |
1,775,332 |
|
|
$ |
– |
|
| Leasehold
improvements |
|
|
63,180 |
|
|
|
– |
|
| |
|
|
1,838,512 |
|
|
|
– |
|
| Less -
accumulated depreciation |
|
|
(1,113 |
) |
|
|
– |
|
| |
|
$ |
1,837,399 |
|
|
$ |
– |
|
NOTE 7 – ACCOUNTS PAYABLE AND
ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following as
of September 30, 2021 and December 31, 2020:
| |
|
September 30, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| Accounts payable |
|
$ |
8,946,714 |
|
|
$ |
519,899 |
|
| Accrued
liabilities |
|
|
602,591 |
|
|
|
569,970 |
|
| Total
accounts payable and accrued expenses |
|
$ |
9,549,305 |
|
|
$ |
1,089,869 |
|
NOTE 8 – LEASES
We adopted ASC 842 “Leases” using the modified retrospective
approach, electing the practical expedient that allows us not to
restate our 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 September 30,
2021:
|
Operating leases |
|
September 30,
2021
|
|
| |
|
|
|
| Assets |
|
|
|
|
| ROU operating lease
assets |
|
$ |
1,476,771 |
|
| |
|
|
|
|
| Liabilities |
|
|
|
|
| Current portion of operating
lease |
|
$ |
575,446 |
|
| Operating lease,
net of current portion |
|
$ |
1,592,880 |
|
|
Total operating lease liabilities |
|
$ |
2,168,326 |
|
The weighted average remaining lease term and weighted average
discount rate at September 30, 2021 were as follows:
|
Weighted average remaining lease term (years) |
|
September 30,
2021
|
|
|
Operating leases |
|
|
6.61 |
|
| Weighted average
discount rate |
|
|
|
|
| Operating
leases |
|
|
6.00% |
|
Operating
Leases
On January 12, 2021, the Company’s new 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 new acquired subsidiary entered into
an operating lease agreement to rent office space in Mumbai, 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.
The following table reconciles future minimum operating lease
payments to the discounted lease liability as of September 30,
2021:
|
2021 |
|
|
82,394 |
|
| 2022 |
|
|
330,171 |
|
| 2023 |
|
|
324,910 |
|
| 2024 |
|
|
279,112 |
|
| 2025 and
later |
|
|
842,673 |
|
| Total lease
payments |
|
|
1,859,260 |
|
| Less
imputed interest |
|
|
(391,127 |
) |
| Total lease
obligations |
|
|
1,468,133 |
|
| Less
current obligations |
|
|
(330,171 |
) |
|
Long-term lease obligations |
|
$ |
1,137,962 |
|
NOTE 9 – GOODWILL AND OTHER
INTANGIBLE ASSETS
Goodwill
The following table sets forth the changes in the carrying amount
of goodwill for the nine months ended September 30, 2021:
| |
|
Total |
|
| Balance at December 31, 2020 |
|
$ |
– |
|
| 2021 Acquisitions |
|
|
15,536,899 |
|
| Balance at September 30,
2021 |
|
$ |
15,536,899 |
|
Intangible Assets - Intrusion Detection Intellectual
Property
The Company relies on patent laws and restrictions on disclosure to
protect its intellectual property rights. As of September 30, 2021,
the Company held 3 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 three months ended September 30, 2021 and 2020, the Company
amortized $12,757 and $12,757, respectively. Future amortization of
intangible assets is as follows:
| 2021 |
|
$ |
12,757 |
|
| 2022 |
|
|
51,028 |
|
| 2023 |
|
|
51,028 |
|
| 2024 |
|
|
51,028 |
|
| 2025 |
|
|
51,028 |
|
| Thereafter |
|
|
138,850 |
|
|
Total |
|
$ |
355,719 |
|
NOTE 10 – DEBT
AGREEMENTS
Secured Debenture
DPTI issued a convertible Debenture to the University 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 by April 24, 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 September 30, 2021, the
quarterly principal repayment amounts will be US$49,750. 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 loss for the three months ended September 30, 2021
and 2020, were $16,155 and
$39,047
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 two
percent (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 three months ended September 30, 2021, and 2020, the
Company recorded interest expense of $13,168 and $12,255, respectively.
As of September 30, 2021 the debenture liability totaled $1,184,516, all of which was long
term.
Future minimum required payments over the next 5 years and
thereafter are as follows:
| Period ending September 30, |
|
|
|
|
| 2022 |
|
$ |
– |
|
| 2023 |
|
|
– |
|
| 2024 |
|
|
– |
|
| 2025 |
|
|
– |
|
| 2026
and after |
|
|
1,184,516 |
|
| Total |
|
$ |
1,184,516 |
|
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 September 30, 2021. Management
determined the expected volatility of 359.78%, a risk-free rate of
interest of 0.09%, and contractual lives of the debt varying from
six months to two years. The table below details the Company's nine
outstanding convertible notes, with totals for the face amount,
amortization of discount, initial loss, change in the fair market
value, and the derivative liability.
| |
|
Face |
|
|
Debt |
|
|
Initial |
|
|
Change |
|
|
Derivative
Balance |
|
| |
|
Amount |
|
|
Discount |
|
|
Loss |
|
|
in FMV |
|
|
9/30/2021 |
|
| |
|
$ |
90,228 |
|
|
$ |
– |
|
|
$ |
58,959 |
|
|
$ |
30,042 |
|
|
$ |
108,530 |
|
| |
|
|
162,150 |
|
|
|
– |
|
|
|
74,429 |
|
|
|
42,819 |
|
|
|
195,041 |
|
| |
|
|
72,488 |
|
|
|
– |
|
|
|
11,381 |
|
|
|
(25,482 |
) |
|
|
87,192 |
|
| |
|
|
53,397 |
|
|
|
– |
|
|
|
5,651 |
|
|
|
13,592 |
|
|
|
94,615 |
|
| |
|
|
53,864 |
|
|
|
– |
|
|
|
28,566 |
|
|
|
(69,333 |
) |
|
|
– |
|
| |
|
|
18,613 |
|
|
|
– |
|
|
|
16,558 |
|
|
|
(13,512 |
) |
|
|
– |
|
| |
|
|
40,000 |
|
|
|
– |
|
|
|
10,605 |
|
|
|
(51,397 |
) |
|
|
– |
|
| |
|
|
42,350 |
|
|
|
– |
|
|
|
7,350 |
|
|
|
54,120 |
|
|
|
– |
|
| |
|
|
94,200 |
|
|
|
– |
|
|
|
19,200 |
|
|
|
(105,683 |
) |
|
|
– |
|
| |
|
|
76,200 |
|
|
|
– |
|
|
|
16,200 |
|
|
|
(86,548 |
) |
|
|
– |
|
| |
|
|
64,200 |
|
|
|
– |
|
|
|
14,200 |
|
|
|
(74,788 |
) |
|
|
– |
|
| |
|
|
825,000 |
|
|
|
733,387 |
|
|
|
203,500 |
|
|
|
– |
|
|
|
– |
|
| Subtotal |
|
|
1,584,574 |
|
|
|
733,387 |
|
|
|
466,599 |
|
|
|
(517,087 |
) |
|
|
479,088 |
|
| Transaction
expense |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
$ |
1,584,574 |
|
|
$ |
733,387 |
|
|
$ |
466,599 |
|
|
$ |
(517,087 |
) |
|
$ |
479,088
|
|
On July 14, 2021, the Company entered a Securities Purchase
Agreement (the “GS SPA”) with GS Capital Partners, LLC (the
“Lender”), pursuant to which the Company issued to the Lender a 6%
Redeemable Note in the principal amount of $2,000,000 (the “Note”). The
purchase price of the Note is $1,980,000. The Note matures on July
14, 2022 upon which time all accrued and unpaid interest will be
due and payable. Interest accrues on the Note at 6% per annum until the Note becomes
due and payable. The Note is subject to various “Events of
Default,” which are disclosed in the Note. Upon the occurrence of
an “Event of Default,” the interest rate on the Note will be 18%.
The Note is not convertible into shares of the Company’s Common
Stock and is not dilutive to existing or future shareholders and
the Company plans on using a portion of the proceeds of the Note to
retire existing convertible debt.
As of September 30, 2021 and 2020 respectively, there was 1,584,574 and
$1,072,663 of
convertible debt outstanding, net of debt discount of $965,921, and $1,313, As of September 30,
2021 and 2020 respectively, there was derivative liability of
$893,381 and $1,232,344 related to
convertible debt securities.
NOTE 11 - STOCKHOLDERS'
DEFICIT
As of September 30, 2021,
there were 4,922,968,442 shares of common stock and 88,235 shares
of preferred stock issued and outstanding.
Preferred Stock
In accordance with the Company’s Certificate of Incorporation, 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 September 30, 2021, and December
31, 2020, there were 88,235
total preferred shares issued and outstanding for all classes.
During the three months ended September 30, 2021, the Company
issued no shares of preferred stock.
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 September 30, 2021 and December 31, 2020, there were 4,922,968,442 and
4,088,762,156
common shares issued and outstanding.
During the three months ended September 30, 2021, the Company
issued the following shares of common stock:
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.
Stock Options
During the three months ended September 30, 2021, the Company did
not issue any stock options and had no stock options outstanding
at September 30, 2021.
Public Offerings
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. On September 30, 2021, the Company paid a
$275,000 placement fee to J.H. Darbie
& Co, $125,000 cash and $150,000 with 1,073,730 shares of common
stock.
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. On September
30, 2021, the Company paid a $262,000
placement fee to J.H. Darbie & CO, $112,000
cash and $150,000
with
1,185,771 shares of common stock.
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. On September
30, 2021, the Company paid a $185,000
placement fee to J.H. Darbie & CO, $85,000
cash and $100,000
with
934,580 shares of common stock.
NOTE 12 – 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 three months ended September 30, 2021 and 2020, the
Company’s Chief Executive Officer advanced personal funds in the
amount of $0 and $10,582 for Company expenses. As
of September 30, 2021, the Company’s Chief Executive Officer is
owed a total of $23,980 for advanced personal
funds.
NOTE 13 - COMMITMENTS &
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
Carebourn Capital, L.P.
On January 29, 2021, Carebourn Capital, L.P. (“Carebourn”)
commenced suit against the Company in the 4th Judicial District
(Hennepin County District Court) (Minnesota), alleging the Company
breached the terms and conditions of two convertible promissory
notes and accompanying securities purchase agreements Carebourn and
the Company entered into on July 17, 2018 and July 24, 2018,
respectively.
Also on January 29, 2021, Carebourn moved for a temporary
injunction to enjoin the Company from transferring any shares of
its common stock to any third parties. Following submission of
briefing by both parties and oral arguments on Carebourn’s motion,
on March 17, 2021, the Court denied Carebourn’s motion for a
temporary injunction.
On April 14, 2021, Carebourn filed an amended complaint and
asserted new claims. On May 13, 2021, the Company filed a motion to
dismiss Carebourn’s amended complaint, arguing that Carebourn is
conducting itself as an unregistered dealer, in violation of
Section 15(a) of the Securities and Exchange Act of 1934 (the
“Act”), and, pursuant to Section 29(b) of the Act, the
Company is entitled to have all contracts arising under the
unlawful securities transaction declared void ab initio and seek
rescissionary damages for any unlawful securities transactions
effected by Carebourn.
As of the date hereof, a ruling has not been issued on the
foregoing motions to dismiss filed by the Company and other
defendants. Furthermore, as of the date hereof, the Company and
Carebourn are conducting discovery. The Company intends to defend
itself against the allegations asserted in Carebourn’s amended
complaint and interpose the defenses provided under the Act,
including but not limited to asserting that Carebourn is an
unregistered dealer acting in violation of Section 15(a) and,
pursuant to Section 29(b), the Company interposing its right to
rescind the unlawful securities contracts in their entirety and,
furthermore, seek rescissionary damages for any unlawful securities
transactions effected by Carebourn. The Company contends that its
arguments are brought in good faith, particularly in light of
recent SEC enforcement actions and the SEC’s ongoing investigation
against Carebourn, among other parties, for violations of federal
securities laws, including violations of Section 15(a) of the Act.
See U.S. Securities and Exchange Commission v. Carebourn Capital,
LP et al, Case No. 1:20-cv-07162 (N.D. Ill.).
Former DarkPulse Officers
On September 10, 2021, Stephen Goodman, Mark Banash, and David
Singer (the “Former Officers”), all former officers and
employees of the Company, commenced suit against the Company in
Arizona Superior Court, Maricopa County. The complaint alleges the
Company breached the rights of the Former Officers in connection
with Series D preferred stock issued to the Former Officers. The
Company intends to defend itself against the allegations asserted
in the Former Officers’ complaint. if the case progresses
the Company will file countersuits against all
plaintiffs.
More Capital, LLC
On June 29, 2021, More Capital, LLC (“More”) commenced suit
against the Company, et al., in the 4th Judicial District (Hennepin
County District Court) (Minnesota), alleging the Company breached
the terms and conditions of a convertible promissory note and
accompanying securities purchase agreement More and the Company
entered into on August 20, 2018.
On July 20, 2021, the Company filed a motion to dismiss More’s
complaint, arguing that the claims asserted against the Company
fail to state a claim upon which relief can be granted.
The Company intends to defend itself against the allegations
asserted in More’s complaint and interpose the defenses provided
under the Act, including but not limited to asserting that More 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
interposing its right to rescind the unlawful securities contracts
in their entirety and, furthermore, seek rescissionary damages for
any unlawful securities transactions effected by More. The Company
contends that its arguments are brought in good faith, particularly
in light of recent SEC enforcement actions and the SEC’s ongoing
investigation against More, among other parties, for violations of
federal securities laws, including violations of Section 15(a) of
the Act. See U.S. Securities and Exchange Commission v. Carebourn
Capital, LP et al, Case No. 1:20-cv-07162 (N.D. Ill.).
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.
NOTE 14– SUBSEQUENT
EVENTS
The Company evaluated events occurring after the date of the
accompanying unaudited condensed consolidated balance sheets
through the date the financial statements were issued and has
identified the following subsequent events that it believes require
disclosure:
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.
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.
Boyle CPA, LLC
Certified Public Accountants & Consultants
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 and 2019,
the related consolidated statements of operations, stockholders’
deficit, and cash flows for each of the two years in the period
ended December 31, 2020, 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 2019,
and the results of its operations and its cash flows for each of
the two years in the period ended December 31, 2020, 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 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 U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits 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
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 audits 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 audits provide 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 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
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
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 4 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 $1,220,877 at December 31, 2020.
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. The
principal considerations for our determination were: (1) the
accounting consideration in determining the nature of the various
features (2) the evaluation of the potential derivatives and
potential bifurcation in the instruments, and (3) considerations
related to 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. 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.
Our audit procedures related to management’s conclusion on the
evaluation and related valuation of embedded derivatives, included
the following, among others: (1) evaluating the relevant terms and
conditions of the various financings, (2) assessing the
appropriateness of conclusions reached by the Company with respect
to the accounting for the convertible debt, and the assessment and
accounting for potential derivatives and (3) independently
recomputing the valuations determined by Management.
/s/ Boyle CPA, LLC
We have served as the Company’s auditor since 2019
Bayville, NJ
April 15, 2021
| 361 Hopedale Drive SE |
P (732) 822-4427 |
| Bayville, NJ
08721 |
F (732) 510-0665 |
DARKPULSE, INC.
Consolidated Balance
Sheets
| |
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
| ASSETS |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| CURRENT ASSETS: |
|
|
|
|
|
|
|
|
| Cash |
|
$ |
337 |
|
|
$ |
1,210 |
|
| Prepaid
expenses |
|
|
– |
|
|
|
746 |
|
| |
|
|
|
|
|
|
|
|
| TOTAL CURRENT
ASSETS |
|
|
337 |
|
|
|
1,956 |
|
| |
|
|
|
|
|
|
|
|
| Other assets, net |
|
|
91,464 |
|
|
|
116,495 |
|
| Patents, net |
|
|
393,990 |
|
|
|
445,018 |
|
| |
|
|
|
|
|
|
|
|
| TOTAL
ASSETS |
|
$ |
485,791 |
|
|
$ |
563,469 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
| Accounts
payable |
|
$ |
519,899 |
|
|
$ |
323,948 |
|
| Convertible notes,
net of discount $35,525 and $39,414 respectively |
|
|
931,158 |
|
|
|
1,033,249 |
|
| Derivative
liability |
|
|
1,220,877 |
|
|
|
1,275,500 |
|
| Accrued
liabilities |
|
|
569,970 |
|
|
|
497,078 |
|
| Contract
liability, related party |
|
|
– |
|
|
|
42,000 |
|
| Related
party notes payable |
|
|
– |
|
|
|
44,096 |
|
| |
|
|
|
|
|
|
|
|
| TOTAL
CURRENT LIABILITIES |
|
|
3,241,904 |
|
|
|
3,215,871 |
|
| |
|
|
|
|
|
|
|
|
| Secured
debenture |
|
|
1,176,092 |
|
|
|
1,155,150 |
|
| |
|
|
|
|
|
|
|
|
| TOTAL
LIABILITIES |
|
|
4,417,996 |
|
|
|
4,371,021 |
|
| |
|
|
|
|
|
|
|
|
| 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,
2020 and, 2019, respectively) |
|
|
883 |
|
|
|
883 |
|
| Common
stock (par value $0.0001), 20,000,000,000 shares authorized,
4,088,762,151 and 1,392,042,112 shares issued and outstanding at
December 31, 2020 and, 2019, respectively |
|
|
408,876 |
|
|
|
13,920,421 |
|
| Treasury
stock, 100,000 shares at December 31, 2020 and December 31,
2019 |
|
|
(1,000 |
) |
|
|
(1,000 |
) |
| Paid-in
capital in excess of par value |
|
|
1,805,813 |
|
|
|
(11,877,864 |
) |
|
Non-controlling interest in variable interest entity and
subsidiary |
|
|
(12,439 |
) |
|
|
(12,439 |
) |
|
Accumulated other comprehensive income |
|
|
315,832 |
|
|
|
336,775 |
|
|
Accumulated deficit |
|
|
(6,450,170 |
) |
|
|
(6,174,328 |
) |
| |
|
|
|
|
|
|
|
|
| TOTAL
STOCKHOLDERS’ DEFICIT |
|
|
(3,932,205 |
) |
|
|
(3,807,552 |
) |
| |
|
|
|
|
|
|
|
|
| TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
$ |
485,791 |
|
|
$ |
563,469 |
|
See accompanying notes to consolidated financial statements.
DARKPULSE, INC.
Consolidated
Statements of Operations
| |
|
For
the Year Ended |
|
| |
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
| REVENUES |
|
$ |
– |
|
|
$ |
– |
|
| |
|
|
|
|
|
|
|
|
| OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
| General and
administrative |
|
|
149,259 |
|
|
|
183,083 |
|
| Payroll and
compensation |
|
|
187 |
|
|
|
168,945 |
|
| Legal |
|
|
50,415 |
|
|
|
118,280 |
|
| Debt transaction
expenses |
|
|
7,850 |
|
|
|
24,900 |
|
| Amortization of
patents |
|
|
51,028 |
|
|
|
51,028 |
|
| TOTAL
OPERATING EXPENSES |
|
|
258,739 |
|
|
|
546,236 |
|
| |
|
|
|
|
|
|
|
|
| OPERATING
LOSS |
|
|
(258,739 |
) |
|
|
(546,236 |
) |
| |
|
|
|
|
|
|
|
|
| OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
| Interest
expense |
|
|
(135,064 |
) |
|
|
(505,683 |
) |
| Gain (Loss) on
convertible notes |
|
|
(3,889 |
) |
|
|
(405,386 |
) |
| Gain (Loss) on
change in fair market value of derivative liabilities |
|
|
54,623 |
|
|
|
(368,164 |
) |
| Gain
(Loss) on forgiveness of debt |
|
|
67,227 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| TOTAL
OTHER EXPENSE |
|
|
(17,103 |
) |
|
|
(1,279,233 |
) |
| |
|
|
|
|
|
|
|
|
| NET LOSS |
|
|
(275,842 |
) |
|
|
(1,825,469 |
) |
| Net loss
attributable to non-controlling interests in variable interest
entity and subsidiary |
|
|
– |
|
|
|
– |
|
| Net loss
attributable to Company stockholders |
|
$ |
(275,842 |
) |
|
$ |
(1,825,469 |
) |
| LOSS PER SHARE |
|
|
|
|
|
|
|
|
| Basic
and Diluted |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
| WEIGHTED AVERAGE SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
| Basic
and Diluted |
|
|
2,323,180,245 |
|
|
|
487,850,346 |
|
See accompanying notes to consolidated financial statements.
DARKPULSE, INC.
Consolidated
Statements of Comprehensive Loss
| |
|
For
the Year Ended |
|
| |
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
| |
|
|
|
|
|
|
| NET LOSS |
|
$ |
(275,842 |
) |
|
$ |
(1,825,469 |
) |
| |
|
|
|
|
|
|
|
|
| OTHER COMPREHENSIVE LOSS |
|
|
|
|
|
|
|
|
|
Unrecognized Gain (Loss) on Foreign Exchange |
|
|
(20,943 |
) |
|
|
(52,905 |
) |
| COMPREHENSIVE
LOSS |
|
$ |
(296,785 |
) |
|
$ |
(1,878,374 |
) |
See accompanying notes to consolidated financial statements.
DARKPULSE, INC.
Consolidated
Statement of Stockholders' Deficit
For the Years Ended December 31, 2020 and 2019
| |
|
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, 2018 |
|
|
88,235 |
|
|
$ |
883 |
|
|
|
89,680,567 |
|
|
$ |
896,806 |
|
|
$ |
(1,000 |
) |
|
$ |
859,481 |
|
|
$ |
(12,439 |
) |
|
$ |
389,680 |
|
|
$ |
(4,348,859 |
) |
|
$ |
(2,215,448 |
) |
| Conversion of convertible notes |
|
|
– |
|
|
|
– |
|
|
|
1,302,361,545 |
|
|
|
13,023,615 |
|
|
|
– |
|
|
|
(12,737,345 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
286,270 |
|
| Foreign currency adjustment |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(52,905 |
) |
|
|
– |
|
|
|
(52,905 |
) |
| Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(1,825,469 |
) |
|
|
(1,825,469 |
) |
| 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 |
|
|
|
– |
|
|
|
(26,795,068 |
) |
|
|
– |
|
|
|
–</ |