UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-Q~~10-Q/A

(Mark One)

☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended ~~September 30, 2022~~March 31, 2023

☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from _______________________to___________________________

Commission File Number: 000-18730

DarkPulse, Inc.

(Exact name of registrant as specified in its charter)

Delaware	87-0472109
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

815 Walker Street, Suite 1155,Houston, TX	77002
(Address of principal executive offices)	(Zip Code)

(800) 436-1436

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

Title of Each Class		Trading Symbol(s)		Name of each exchange on which registered
Not applicable		Not applicable		Not applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports).

~~Yes~~ ~~☒ No~~ ☐

~~Indicate by check mark whether the registrant~~, and (2) has been subject to such filing requirements for the past 90 days.

Yes ☐ No☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☐ ~~Yes~~No ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, $0.0001 par value per share, outstanding as ofon ~~November 4, 2022,~~August 31, 2023 was ~~6,176,390,489~~7,539,945,289.

EXPLANATORY NOTE

As was previously stated on the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, as originally filed with the Securities and Exchange Commission on July 18, 2023 (the “Original Form 10-Q”), the Original Form 10-Q was incomplete because the review by the Company’s independent accountant of the unaudited interim financial information as of and for the three-months ended March 31, 2023 set forth in the Original Form 10-Q required by AS4105 of the Public Company Accounting Oversight Board (“PCAOB”) standards had not been completed.

We are filing this Amendment No. 1 on Form 10-Q (the “10-Q Amendment”) to amend and restate in their entirety the following items of the Original Form 10-Q: (i) Item 1 of Part I “Financial Information,” and (ii) Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The subsequent events footnote to the financial statements has been updated to reflect events that occurred after the filing date of the Original Form 10-Q. The 10-Q Amendment also includes Exhibits 31.1 and 32.1, new certifications by the Company’s principal executive officer and principal financial officer as required by Rule 12b-15.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2627
Item 3. Quantitative and Qualitative Disclosures About Market Risk	3335
Item 4. Controls and Procedures	3335
PART II—OTHER INFORMATION	3436
Item 1. Legal Proceedings	34
~~Item 1A. Risk Factors~~	3536
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3637
Item 6. Exhibits	3638
SIGNATURES	3739

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

~~DARKPULSE, INC.~~DarkPulse, Inc.

~~Consolidated Balance Sheets~~CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

September 30,

2022
(unaudited)

December 31,
2021

ASSETS

CURRENT ASSETS:
Cash $ 5,967,984 $ 3,658,846
Accounts receivable, net 3,531,244 4,223,990
Inventory 260,613 865,019
Unbilled revenue 319,025 497,773
Other current assets 868,597 181,000
TOTAL CURRENT ASSETS 10,947,463 9,426,628

NON-CURRENT ASSETS:
Property and equipment, net 1,712,950 1,787,824
Operating lease right-of-use assets 2,654,676 2,620,993
Patents, net 304,691 342,962
Intangible assets 3,098,379 3,886,588
Goodwill 15,286,010 17,088,501
Other assets, net 347,864 282,884
TOTAL NON-CURRENT ASSETS 23,404,570 26,009,752

TOTAL ASSETS $ 34,352,033 $ 35,436,380

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 4,048,227 $ 7,844,271
Convertible notes, net 378,263 378,263
Notes payable 2,000,000 2,000,000
Customer deposits 1,907,404 2,802,809
Derivative liability 296,308 533,753
Contract liabilities 4,050,438 3,216,562
Operating lease liabilities - current 1,779,238 364,105
Other current liabilities 2,802,374 2,407,750

TOTAL CURRENT LIABILITIES 17,262,252 19,547,513

NON-CURRENT LIABILITIES:
Secured debenture 1,090,827 1,172,364
Operating lease liabilities – non-current 1,145,908 2,474,530
Other liabilities – non-current 582,240 676,331
TOTAL NON-CURRENT LIABILITIES 2,818,975 4,323,225

TOTAL LIABILITIES 20,081,227 23,870,738

Commitments and contingencies – –

STOCKHOLDERS’ EQUITY:
Preferred stock - Series A (par value $0.01; 100 shares authorized; 100 and 0 issued and outstanding at September 30, 2022 and December 31, 2021, respectively) 1 –
Convertible preferred stock - Series D (par value $0.01; 100,000 shares authorized; 88,235 issued and outstanding at September 30, 2022 and December 31, 2021, respectively) 883 883
Common stock (par value $0.0001), 20,000,000,000 shares authorized, 6,145,852,186 and 5,197,821,885 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively 614,586 519,782
Treasury stock, 100,000 shares at September 30, 2022 and December 31, 2021 (1,000 ) (1,000 )
Paid-in capital in excess of par value 44,148,174 20,248,703
Non-controlling interest in variable interest entity and subsidiary 2,358,227 2,358,227
Accumulated other comprehensive income (3,198,065 ) (284,463 )
Accumulated deficit (29,652,000 ) (11,276,490 )

TOTAL STOCKHOLDERS’ EQUITY 14,270,806 11,565,642

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 34,352,033 $ 35,436,380


	March 31,			December 31,
	2023			2022

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	545,970		$	2,060,332
Accounts receivable, net		482,847			2,952,293
Inventory		21,919			23,825
Contract assets		1,567,212			1,439,844
Due from related party		767,135			318,025
Prepaid expenses and other current assets		204,462			180,530
TOTAL CURRENT ASSETS		3,589,545			6,974,849

NON-CURRENT ASSETS:
Property and equipment, net		1,910,858			1,933,871
Operating lease right-of-use assets		2,676,026			2,724,226
Patents, net		255,118			267,875
Notes receivable, related party		1,217,142			1,049,248
Investment in related party		1,500,000			1,500,000
Joint venture		79,793			46,724
Intangible assets, net		–			390,330
Goodwill		–			6,462,153
Other assets, net		806,018			689,869
TOTAL NON-CURRENT ASSETS		8,444,955			15,064,296
TOTAL ASSETS	$	12,034,500		$	22,039,145

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	11,508,784		$	10,736,373
Contract liabilities		2,672,244			2,215,212
Loss provision for contracts in progress		989,999			945,928
Convertible notes, net		378,263			378,263
Notes payable, current		2,000,000			2,000,000
Derivative liability		306,467			306,467
Loan payable, current		469,074			472,700
Loan payable, related party		361,747			361,747
Secured debenture, current		138,656			136,353
Operating lease liabilities - current		284,563			512,373
Other current liabilities		435,172			472,217
TOTAL CURRENT LIABILITIES		19,544,968			18,537,633

NON-CURRENT LIABILITIES:
Secured debenture		970,594			954,474
Loan payable		306,098			328,508
Operating lease liabilities - non-current		2,725,741			2,547,524
TOTAL NON-CURRENT LIABILITIES		4,002,433			3,830,506
TOTAL LIABILITIES		23,547,401			22,368,139

Commitments and contingencies		-			-

STOCKHOLDERS' DEFICIT:
Series A Super Voting preferred stock - par value $0.01; 100 shares designated, 100 shares issued and outstanding at both March 31, 2023 and December 31, 2022		1			1
Convertible preferred stock - Series D, par value $0.01, 100,000 shares designated, 88,235 shares issued and outstanding as of both March 31, 2023 and December 31, 2022		883			883
Common stock, par value $0.0001, 20,000,000,000 shares authorized, 7,256,166,860 and 6,427,495,360 shares issued as of March 31, 2023 and December 31, 2022, respectively, 7,256,066,860 and 6,427,395,360 shares outstanding as of March 31, 2023 and December 31, 2022, respectively		725,608			642,740
Treasury stock at cost, 100,000 shares at March 31, 2023 and December 31, 2022		(1,000	)		(1,000	)
Additional paid-in capital		48,596,886			44,602,052
Non-controlling interests		1,339,870			2,119,566
Accumulated other comprehensive loss		(1,600,247	)		(1,137,902	)
Accumulated deficit		(60,574,902	)		(46,555,334	)
TOTAL STOCKHOLDERS’ DEFICIT		(11,512,901	)		(328,994	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	12,034,500		$	22,039,145

See the accompanying notes to the unaudited condensed consolidated financial ~~statements.~~statements

~~DARKPULSE, INC.~~

~~Consolidated Statements of Operations~~

~~(unaudited)~~

For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2022 2021 2022 2021

REVENUE $ 1,431,104 $ 3,500,970 $ 7,884,480 $ 3,500,970
COST OF GOODS SOLD 5,804,875 2,767,239 12,119,352 2,767,239
GROSS PROFIT (4,373,771 ) 733,731 (4,234,872 ) 733,731

OPERATING EXPENSES:
Selling, general and administrative 1,498,717 406,940 3,579,326 531,793
Salaries, wages and payroll taxes 1,760,531 1,007,453 5,108,775 1,007,453
Professional fees 1,471,264 1,680,600 4,489,966 1,901,572
Depreciation and amortization 597,970 91,222 833,989 116,736
Debt transaction expenses – 33,000 – 184,950
TOTAL OPERATING EXPENSES 5,328,482 3,219,215 14,012,056 3,742,504

NET OPERATING LOSS (9,702,253 ) (2,485,484 ) (18,246,928 ) (3,008,773 )

OTHER INCOME (EXPENSE):
Interest income (expense) 168,846 (320,706 ) (349,758 ) (671,290 )
Gain on the forgiveness of debt 231,377 785,240 267,127 785,240
Restructuring costs – – (501,431 ) –
Change in fair market of derivative liabilities 70,289 (251,133 ) 237,445 76,363
Gain/(Loss) on convertible notes – 432,893 – 741,789
Foreign currency exchange rate variance 426,073 152,361 218,039 152,360
TOTAL INCOME (EXPENSE) 896,585 798,655 (128,578 ) 1,084,462

NET LOSS (8,805,668 ) (1,686,829 ) (18,375,506 ) (1,924,311 )
Net loss attributable to noncontrolling interests in variable interest entity and subsidiary 92,571 15,838 (255,835 ) 15,838
Net loss attributable to Company stockholders $ (8,898,239 ) $ (1,702,667 ) $ (18,119,671 ) $ (1,940,149 )

LOSS PER SHARE:
Basic $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.00 )
Diluted $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.00 )

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 5,840,449,453 4,835,935,495 5,539,124,247 4,679,197,410
Diluted 5,840,449,453 4,835,935,495 5,539,124,247 4,679,197,410

~~See accompanying notes to consolidated financial statements.~~

DarkPulse, Inc.

~~DARKPULSE, INC.~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~Consolidated Statements of Operations~~

~~(unaudited)~~UNAUDITED

For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2022 2021 2022 2021

NET LOSS $ (8,805,668 ) $ (1,686,829 ) $ (18,375,506 ) $ (1,924,311 )

OTHER COMPREHENSIVE GAIN (LOSS)
Unrealized Gain (Loss) on Foreign Exchange (1,956,159 ) 26,539 (2,913,602 ) (7,524 )
COMPREHENSIVE LOSS $ (10,761,827 ) $ (1,660,290 ) $ (21,289,108 ) $ (1,931,835 )


	Three Months Ended March 31,
	2023			2022
REVENUES	$	1,537,833		$	2,018,333
COST OF REVENUES		1,226,792			2,348,567
GROSS PROFIT (LOSS)		311,041			(330,234	)

OPERATING EXPENSES:
Selling, general and administrative		1,013,833			978,208
Salaries, wages and payroll taxes		1,547,208			1,972,067
Bad debt expense		2,364,977			–
Professional fees		2,950,698			1,538,103
Depreciation and amortization		231,234			228,614
Impairment expense		6,809,166			–
Gain on forgiveness of payables		–			(35,750	)
TOTAL OPERATING EXPENSES		14,917,116			4,681,242

OPERATING LOSS		(14,606,074	)		(5,011,476	)

OTHER INCOME (EXPENSE):
Interest expense		(117,415	)		(517,754	)
Loss on equity investment		(65,056	)		–
Change in fair market of derivative liabilities		–			125,107
Foreign currency exchange rate variance		(10,719	)		19,853
TOTAL OTHER (EXPENSE) INCOME		(193,189	)		(372,794	)

NET LOSS		(14,799,264	)		(5,384,270	)
Net loss attributable to non-controlling interests		779,696			113,681
Net loss attributable to DarkPulse, Inc.	$	(14,019,568	)	$	(5,270,589	)

Net loss per share - basic and diluted	$	0.00		$	0.00

Weighted average common shares outstanding - basic and diluted		6,958,719,650			5,290,107,585

~~See accompanying notes to consolidated financial statements.~~

See the accompanying notes to the unaudited condensed consolidated financial statements

DarkPulse, Inc.

~~DARKPULSE, INC.~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

~~Consolidated Statement of Stockholders' Equity~~UNAUDITED

~~For the Three Months Ended September 30, 2022 and 2021~~

~~(unaudited)~~

Preferred Stock, Series A Preferred Stock, Series D Common Stock Treasury
Shares Amount Shares Amount Shares Amount Stock

Balance, December 31, 2021 – $ – 88,235 $ 883 – – 5,197,821,885 $ 519,782 $ (1,000 )
Common stock issued for cash – – – – 200,121,061 20,012 –
Foreign currency adjustment – – – – – – –
Net loss – – – – – – – –
Balance, March 31, 2022 – $ – 88,235 $ 883 – – 5,397,942,946 $ 539,794 $ (1,000 )
Common stock issued for cash – – – – 192,488,404 19,250 –
Common stock issued for TerraData acquisition – – – – 3,725,386 373 –
Stock based compensation 100 1 – – – – –
Foreign currency adjustment – – – – – – –
Net loss – – – – – – – –
Balance, June 30, 2022 100 $ 1 88,235 $ 883 – – 5,594,156,736 $ 559,417 $ (1,000 )
Common stock issued for cash – – – – 551,695,450 55,169 –
Foreign currency adjustment – – – – – – –
Net loss – – – – – – – –
Balance, September 30, 2022 100 $ 1 88,235 $ 883 – – 6,145,852,186 $ 614,586 $ (1,000 )


	Three Months Ended March 31,
	2023			2022
NET LOSS	$	(14,799,264	)	$	(5,384,270	)

OTHER COMPREHENSIVE LOSS
Foreign currency translation		(462,345	)		(219,569	)
COMPREHENSIVE LOSS	$	(15,261,609	)	$	(5,603,839	)

Paid in
Capital in
Excess
of Par Non-
Controlling Interest in Accumulated Other Comprehensive Accumulated Total Stockholders’
Value Subsidiary Income Deficit Equity

Balance, December 31, 2021 $ 20,248,703 – $ 2,358,227 $ (284,463 ) $ (11,276,490 ) $ 11,565,642
Common stock issued for cash 7,679,988 – – 7,700,000
Foreign currency adjustment – – – (219,569 ) – (219,569 )
Net loss – – – (5,384,270 ) (5,384,270 )
Balance, March 31, 2022 $ 27,928,691 – $ 2,358,227 $ (504,032 ) $ (16,660,760 ) $ 13,661,803
Common stock issued for cash 4,696,625 – – 4,715,875
Common stock issued for TerraData acquisition 199,627 – – – – 200,000
Stock based compensation (1 ) – – – –
Foreign currency adjustment – – (737,874 ) – (737,874 )
Net loss – – – (4,185,572 ) (4,185,572 )
Balance, June 30, 2022 $ 32,824,943 – $ 2,358,227 $ (1,241,906 ) $ (20,846,332 ) $ 13,654,232
Common stock issued for cash 11,323,231 – – 11,378,400
Foreign currency adjustment – – – (1,956,159 ) – (1,956,159 )
Net loss – – – (8,805,668 ) (8,805,668 )
Balance, September 30, 2022 $ 44,148,174 – $ 2,358,227 $ (3,198,065 ) $ (29,652,000 ) $ 14,270,806

See the accompanying notes to the unaudited condensed consolidated financial statements

DarkPulse, Inc.

~~DARKPULSE, INC.~~CONDSENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

~~Consolidated Statement of Stockholders' Equity~~FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

~~For the Three Months Ended September 30, 2022 and 2021~~UNAUDITED

~~(unaudited)~~

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

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

Preferred stock

Series A

Series D

Common stock

Amount

Balance at December 31, 2021

–

88,235

883

5,197,821,885

519,782

Conversion of convertible notes

–

Common stock issued for cash

–

200,121,061

20,012

Foreign currency adjustment

–

Net loss

–

Balance at March 31, 2022 (unaudited)

–

88,235

883

5,397,942,951

539,794

Balance at December 31, 2022

100

88,235

883

6,427,395,360

642,740

Common stock issued for cash, net of fees

–

531,671,500

53,167

Issuance of common stock for legal settlement

–

297,000,000

29,700

Foreign currency adjustment

–

Net loss

–

Balance at March 31, 2023 (unaudited)

100

88,235

883

7,256,066,860

725,608


	Treasury stock					Additional paid-in		Non- controlling			Accumulated other com- prehensive			Accumulated			Total stockholders’ deficit
	Shares		Amount			capital		interests			loss			deficit			(equity)
Balance at December 31, 2021		100,000	$	(1,000	)	$	20,248,703	$	2,358,227		$	(284,463	)	$	(11,276,490	)	$	11,565,642
Conversion of convertible notes		–		–			–		–			–			–			–
Common stock issued for cash		–		–			7,679,988		–			–			–			7,700,000
Foreign currency adjustment		–		–			–		–			(219,569	)		–			(219,569	)
Net loss		–		–			–		–			–			(5,384,270	)		(5,384,270	)
Balance at March 31, 2022 (unaudited)		100,000	$	(1,000	)	$	27,928,691	$	2,358,227		$	(504,032	)	$	(16,660,760	)	$	13,661,803

Balance at December 31, 2022		100,000	$	(1,000	)	$	44,602,052	$	2,119,566		$	(1,137,902	)	$	(46,555,334	)	$	(328,994	)
Common stock issued for cash, net of fees		–		–			2,034,634		–			–			–			2,087,801
Issuance of common stock for legal settlement		–		–			1,960,200		–			–			–			1,989,900
Foreign currency adjustment		–		–			–		–			(462,345	)		–			(462,345	)
Net loss		–		–			–		(779,696	)		–			(14,019,568	)		(14,799,264	)
Balance at March 31, 2023 (unaudited)		100,000	$	(1,000	)	$	48,596,886	$	1,339,870		$	(1,600,247	)	$	(60,574,902	)	$	(11,512,901	)

See the accompanying notes to the unaudited condensed consolidated financial ~~statements.~~ statements

~~DARKPULSE, INC.~~DarkPulse, Inc.

~~Consolidated Statements of Cash Flows~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(unaudited)~~UNAUDITED

For the Nine Months Ended
September 30,

2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (18,375,506 ) $ (1,924,311 )
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 833,990 116,736
Amortization of loan acquisition costs – (480,450 )
Stock based loan acquisition costs – 649,334
Gain on the extinguishment of debt (267,127 ) (785,240 )
Restructuring costs 501,431 –
Operating lease expense (33,683 ) (90,946 )
Amortization of debt discount – 404,087
Derivative liability (237,445 ) (741,789 )
Changes in operating assets and liabilities:
Accounts receivable 692,746 (893,366 )
Inventory 604,406 410,836
Unbilled revenue 178,748 (563,555 )
Contract liability 833,876 (1,439,504 )
Other current assets (730,370 ) –
Customer deposits (895,405 ) 1,634,397
Accounts payable and accrued expenses (2,949,406 ) (4,362,016 )
Operating lease liabilities 86,511 1,398,068
Other current liabilities 300,533 (778,874 )
Net cash used by operating activities (19,456,701 ) (7,446,593 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (529,330 ) (78,662 )
Business acquisitions, net of cash received – (152,683 )
Deposits (124,000 )
Investment in patents (64,980 ) (191,420 )
Net cash used by investing activities (594,310 ) (546,765 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock from offering 23,794,275 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 23,794,275 10,718,100
NET INCREASE (DECREASE) IN CASH 3,743,264 2,724,742
Effect of exchange rate on cash (1,434,126 ) (160,587 )
CASH, beginning of period 3,658,846 337
CASH, end of period $ 5,967,984 $ 2,564,492

Non-cash finance and investing activities for the nine months ended September 30:
Stock issued for acquisition of TerraData $ 200,000 $ –
Stock issued 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
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the nine months ended September 30:
Interest $ – $ –
Income taxes $ – $ –


	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(14,799,264	)	$	(5,384,270	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		231,234			228,615
Loss on equity investment		65,056			–
Issuance of common stock for legal settlement		1,989,900			–
Impairment of goodwill and intangible assets		6,809,166			–
Bad debt expense		2,364,977			–
Operating lease expense		31,087			(440,171	)
Gain on forgiveness of payables		–			(35,750	)
Derivative liability		–			(125,107	)
Changes in operating assets and liabilities:
Accounts receivable		137,783			(2,523,210	)
Inventory		1,906			–
Contract assets		(73,048	)		(761,556	)
Prepaid expenses and other assets		(140,081	)		–
Accounts payable and accrued expenses		785,475			978,303
Contract liabilities		323,471			1,451,343
Loss provision for contracts in progress		15,968			–
Operating lease liabilities, net		(30,372	)		679,675
Other liabilities		(37,043	)		(356,372	)
Net cash used in operating activities		(2,323,783	)		(6,288,501	)
Cash flows from investing activities:
Purchases of property and equipment		(102,350	)		–
Investment in joint venture		(98,125	)		–
Issuance of note receivable, related party		(167,894	)
Advances to related party		(449,110	)		–
Deposits		–			(64,980	)
Net cash used in investing activities		(817,479	)		(64,980	)
Cash flows from financing activities:
Proceeds from sale of common stock, net of fees		2,087,801			7,700,000
Net repayments of loan payable		(26,039	)		–
Net cash provided by financing activities		2,061,762			7,700,000
Net change in cash		(1,079,500	)		1,346,519
Effect of exchange rate on cash		(434,862	)		(219,569	)
Cash at beginning of period		2,060,332			3,658,846
Cash at end of period	$	545,970		$	4,785,796

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	–		$	–
Cash paid for interest	$	47,948		$	–

See the accompanying notes to the unaudited condensed consolidated financial ~~statements.~~statements

~~DARKPULSE, INC.~~DarkPulse, Inc.

~~Notes to the Consolidated Financial Statements~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~UNAUDITED

NOTE 1 –- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Description of Business

DarkPulse, Inc. (“DPI” or “Company”) is a technology-security company incorporated in 1989 as Klever Marketing, Inc. (“Klever”). Its’ wholly-owned subsidiary, DarkPulse Technologies Inc. (“DPTI”), originally started as a technology spinout from the University of New Brunswick, Fredericton, Canada. The Company’s security and monitoring systems will initially be delivered in applications for border security, pipelines, the oil and gas industry and mine safety. Current uses of fiber optic distributed sensor technology have been limited to quasi-static, long-term structural health monitoring due to the time required to obtain the data and its poor precision. The Company’s patented BOTDA dark-pulse sensor technology allows for the monitoring of highly dynamic environments due to its greater resolution and accuracy.

The Company’s subsidiaries consist of Optilan HoldCo 3 Limited, a company headquartered in Coventry, United Kingdom (“Optilan”) whose focus is in telecommunications, energy, rail, critical network infrastructure, pipeline integrity systems, renewables and security; Remote Intelligence, LLC, a company headquartered in Pennsylvania who provides unmanned aerial drone and unmanned ground crawler (UGC) services to a variety of clients from industrial mapping and ecosystem services, to search and rescue, to pipeline security; Wildlife Specialists, LLC, a company headquartered in Pennsylvania who provides clients with comprehensive wildlife and environmental assessment, planning, and monitoring services; TerraData Unmanned, PLLC, a company headquartered in Florida who custom manufactures NDAA compliant drones and unmanned ground crawlers to meet the needs of its customers; and TJM Electronics West, Inc., a company headquartered in Arizona who is a U.S. manufacturer and tester of advanced electronics, cables and sub-assemblies specializing in advanced package and complex CCA and hardware.

Liquidation/winding up of Optilan (UK) Limited

On May 3, 2023, Eversheds Sutherland (International) LLP, a creditor of Optilan (UK) Limited, filed a petition to wind up (“Winding up Petition”) Optilan (UK) Limited, a wholly owned subsidiary of the Company’s Subsidiary, Optilan HoldCo 3 Limited, and the matter was due to be heard in the Portsmouth Combined Court Centre on June 28, 2023.

On June 28, 2023, the High Court of Justice in the United Kingdom issued a winding-up order for the liquidation and winding up of the affairs of Optilan (UK) Limited (“Optilan Liquidation”). In conjunction with the order, the court appointed the Offical Receiver’s Office (“OR”) to take the appointment as liquidator of Optilan (UK) Limited and take control of Optilan (UK) Limited’s assets.

On July 3, 2023, Optilan (UK) Limited received a letter from The Insolvency Service, an executive agency sponsored by the Department for Business and Trade located in the U.K. Pursuant to the letter of The Insolvency Services, the Company was required to provide information relating to Optilan (UK) Limited to the Official Receiver’s Office (a government body of Plymouth, the United Kingdom) and attend an interview with staff of the Official Receiver’s Office to review the prospect of recovering the assets of Optilan (UK) Limited for the benefit of creditors. The interview is scheduled for July 18, 2023.

No order confirming a plan of reorganization, arrangement or liquidation has been entered as of this filing. The Company is an Unsecured creditor of Optilan (UK) Limited and is at risk of losing any repayment of obligations due from Optilan (UK) Limited because there are several intercompany relationships between the Company and Optilan (UK) Limited, the financial impact of any future claims and liabilities may not be known for several months. The Company has approximately $19.4 million intercompany payables due from Optilan (UK), which will increase the Company liabilities for any obligations not repaid. The Company expects the remaining assets held by Optilan (UK) Limited to be fully impaired and reported as discontinued operations during the second quarter of 2023 as a result of the winding-up order for liquidation. At the time of this filing the Company is still evaluating the full effects of the winding-up order for liquidation and the material adverse effects it will have on the Company’s continued operations and ability to meet future obligations.

The Company evaluated the events and circumstances of Optilan (UK) Limited liquidation and determined that conditions existed as of March 31, 2023, to indicate that the carrying value of the Company’s goodwill and intangible assets may not be recoverable. Refer to Notes 2 and 7 for further detail on the impairment analysis. The Company expects the remaining assets held by Optilan (UK) Limited to be fully impaired during the second or third quarter of 2023 as a result of the winding-up order for liquidation.

Lasty, the Company performed an analysis of the trade receivables related to Optilan (UK) Limited and determined that an additional $2,364,977 may not be collectible pursuant to the Optilan Liquidation. As of March 31, 2023, the Company recorded a bad debt provision for this amount.

Optilan (UK) Limited has the following assets as of March 31, 2023, including in 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 whichbalance sheet are ~~in the opinion of management, necessary in order to make the financial statements not misleading. The consolidated financial statements~~ as ~~of December 31, 2021 have been audited by an independent registered public accounting firm. The accounting policies and procedures employed in the preparation of these~~follows:

Unaudited condensed consolidated ~~financial statements have been derived from the audited financial statements of the Company~~information for the year ended December 31, 2021, which are contained in Form 10-K as filed with the Securities and Exchange Commission on April 15, 2022. The consolidated balance sheet as of December 31, 2021 was derived from those financial statements. Optilan UK

	March 31,
	2023
Contract assets	$	1,224,047
Property and equipment, net	$	991,480
Operating lease right-of-use assets	$	1,528,544

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

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, 2022,~~March 31, 2023, and the results of operations for three ~~and nine~~ months and cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 have been included.

The ~~results~~Company evaluates its relationships with other entities to identify whether they are variable interest entities (“VIE”) as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC 810”), and to assess whether it is the primary beneficiary of such entities. If the determination is made that the Company is the primary beneficiary, then that entity is consolidated.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated balance sheet as of March 31, 2023, the unaudited condensed consolidated statements of operations for the three and ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 and of cash flows for the three months ended March 31, 2023 and 2022 have been prepared by the Company, pursuant to the rules and regulations of the SEC for the interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The unaudited interim consolidated financial statements have been prepared on a basis consistent with the audited consolidated financial statements and in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the consolidated results for the interim periods presented and of the consolidated financial condition as of the date of the interim consolidated balance sheet. The results of operations 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 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 infrastructure monitoring systems have been installed into the Honcut Bridge in Marysville, California creating the first intelligent bridge. Additional applications of this technology will include border security, pipelines, the oil and gas industry, aviation & aerospace 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.

The Company’s operating units consist of, Optilan HoldCo 3 Limited, a company headquartered in Coventry, United Kingdom (“Optilan”) whose focus is in telecommunications, energy, rail, critical network infrastructure, pipeline integrity systems, renewables and security; Remote Intelligence, Limited Liability Company, a company headquartered in Pennsylvania who provides unmanned aerial drone and unmanned ground crawler (UGC) services to a variety of clients from industrial mapping and ecosystem services, to search and rescue, to pipeline security; Wildlife Specialists, Limited Liability Company, a company headquartered in Pennsylvania who provides clients with comprehensive wildlife and environmental assessment, planning, and monitoring services; TerraData Unmanned, PLLC, a company headquartered in Florida who custom manufactures NDAA compliant drones and unmanned ground crawlers to meet the needs of its customers; and TJM Electronics West, Inc., a company headquartered in Arizona who is a U.S. manufacturer and tester of advanced electronics, cables and sub-assemblies specializing in advanced package and complex CCA and hardware.year ending December 31, 2023.

910

~~On April 27, 2018, Klever entered into an Agreement and Plan of Merger (the “Merger Agreement” or~~The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with 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,Company’s audited consolidated financial statements and the ~~name of~~notes thereto for the ~~Company was subsequently changed to DarkPulse, Inc. With the change of control of the Company, the Merger is being be accounted for as a recapitalization in a manner similar to a reverse acquisition.~~

On July 20, 2018, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the State of Delaware, changing the name of the Company to DarkPulse, Inc. The Company filed a corporate action notification with the Financial Industry Regulatory Authority (FINRA), and the Company's ticker symbol was changed to DPLS.

~~Reclassifications~~

~~Certain amounts~~year ended December 31, 2022 included in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods.Annual Form 10-K filed with SEC on June 23, 2023.

~~Going Concern Uncertainty~~

~~As shown in the accompanying financial statements, during the nine months ended September 30, 2022, the Company reported a net loss of $18,375,506. As of September 30, 2022, the Company’s current liabilities exceeded its current assets by $6,314,789. As of September 30, 2022, the Company had $5,967,984~~ ~~of cash.~~

The Company will require additional funding during the next twelve months to finance the growth of its current operations and achieve its strategic objectives. These factors, as well as the uncertain conditions that the Company faces relative to capital raising activities, create substantial doubt as to the Company’s ability to continue as a going concern. The Company is seeking to raise additional capital principally through private placement offerings and is targeting strategic partners in an effort to finalize the development of its products and generate revenues. The ability of the Company to continue as a going concern is dependent upon the success of future capital offerings or alternative financing arrangements or expansion of its operations. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Management is actively pursuing additional sources of financing sufficient to generate enough cash flow to fund its operations through calendar year 2022. However, management cannot make any assurances that such financing will be secured.

Use of Estimates

~~In preparing~~The preparation of the ~~consolidated~~Company’s financial statements in conformity with GAAP requires management ~~is required~~ to make estimates and assumptions that affect the reported amounts of assets and liabilities, asthe disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of ~~financial condition, and~~ revenues and expenses ~~for~~during the ~~years then ended. Actual results may differ significantly from those estimates.~~reporting period. Significant estimates ~~made by management~~and assumptions reflected in these financial statements include, but are not limited to, ~~the~~ assumptions used to calculate ~~stock-based compensation,~~ derivative liabilities, ~~preferred deemed dividend~~revenue recognition and ~~common stock issued for services.~~impairment of long-lived assets. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

Cash

~~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 a financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits. As of March 31, 2023, there was $64,065 of cash held at the U.S. entities in excess of federally insured limits.

Accounts Receivable

Accounts receivable and contract assets include amounts billed to customers under the terms and provisions of the contracts. Most billings are determined based on contractual terms. As is common practice in the industry, the Company classifies all accounts receivable and contract assets, including retainage, as current assets. The contracting cycle for certain long-term contracts may extend beyond one year, and accordingly, collection of retainage on those contracts may extend beyond one year. Contract assets include amounts billed to customers under retention provisions in construction contracts. Such provisions are standard in the Company’s industry and usually allow for a portion of progress billings on the contract price, typically 5-10%, to be withheld by the customer until after the Company has completed work on the project. Billings for such retention balances at each balance sheet date are finalized and collected after project completion. Generally, unbilled amounts will be billed and collected within one year. The Company determined that there are no material amounts due past one year and no material amounts billed but not expected to be collected within one year.

Each month, the Company reviews its receivables on a customer-by-customer basis and evaluates whether an allowance for doubtful accounts is necessary based on any known or perceived collection issues. Any balances that are eventually deemed uncollectible are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of both March 31, 2023 and December 31, 2022, the Company determined that the allowance for doubtful accounts was $5,685,960 and $3,320,983, respectively.

Accounts receivable includes retainage amounts for the portion of the contract price earned by us for work performed but held for payment by the customer as a form of security until we reach certain construction milestones or complete the project. As of March 31, 2023 and December 31, 2022, retainage receivable was $1,256,364 and $824,777, respectively.

1011

Foreign Currency Translation

The Company’s reporting currency is USU.S. Dollars. The accounts of one of the Company’s subsidiaries is maintained using the appropriate local currency, British Pound (“GBP”) as the functional ~~currency.~~currency, as well as the Turkish lira, Emiraes Dirham, Azerbajani Manat and Indian Rupee. The accounts of one of the Company’s subsidiaries isare maintained using the appropriate local currency, Canadian Dollar (“CAD”) as the functional currency. All assets and liabilities are translated into U.S. Dollars at balance sheet date, shareholders' equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are reported as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of ~~operations.~~operations as foreign currency exchange variance.

The relevant translation rates are as follows: for the three months ended March 31, 2023 closing rate at 1.23682 S$:GBP, average rate at 1.2033 US$:GBP, and closing rate at 1.3751 US$:CAD.

The relevant translation rates are as follows: for the ~~periods~~three months ended ~~September 30,~~March 31, 2022 closing rate at ~~1.113030~~1.31524 ~~USD:~~S$:GBP, average rate at ~~1.259161~~1.342089 ~~USD:~~US$:GBP, and ~~for the year ended December 31, 2021~~ closing rate at ~~1.353583~~1.2484 ~~USD: GBP, average rate at~~ ~~1.375671~~ ~~USD:GBP.~~US$:CAD.

~~The relevant translation rates are as follows: for the periods ended September 30, 2022 closing rate at~~ ~~1.3751~~ ~~CAD:USD, average rate at~~ ~~1.3213~~ ~~CAD:USD and for the year ended December 31, 2021 closing rate at~~ ~~1.2794~~ ~~CAD:USD, average rate at~~ ~~1.2534~~ ~~CAD:USD.~~

Long-Lived Assets and Goodwill

InThe Company accounts for long-lived assets in accordance with the provisions of ASC ~~350-30-65, “Intangibles - Goodwill~~360-10-35, Property, Plant and ~~Others”, the Company assesses the~~Equipment, Impairment or Disposal of Long-lived Assets. This accounting standard requires that long-lived assets be reviewed for impairment ~~of identifiable intangibles~~ whenever events or changes in circumstances indicate that the carrying ~~value~~amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

~~Factors~~Indefinite-lived intangible assets established in connection with business combinations consist of the ~~Company considers to be important which could trigger~~tradename. The impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value exceeds its fair value, an impairment ~~review include the following:~~loss is recognized in an amount equal to that excess.

~~Significant underperformance relative to expected historical or projected future operating results;~~

The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other. Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. This guidance simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. The quantitative impairment test calculates any goodwill impairment as the difference between the carrying amount of a reporting unit and its fair value, but not to exceed the carrying amount of goodwill. It is our practice, at a minimum, to perform a qualitative or quantitative goodwill impairment test in the fourth quarter every year. The Company has one reporting unit it evaluates during its impairment test.

~~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~~

As a result of the ~~Company determines~~Optilan Liquidation as described in Note 1, management determined that certain events and circumstances occurred that indicated that the carrying ~~value~~amount of ~~intangibles~~the Company’s reporting unit may not be recoverable ~~based upon~~as of March 31, 2023. The qualitative assessment was primarily due to the ~~existence of one or more~~customer contracts held by Optilan (UK) Limited at March 31, 2023 and the associated revenue projections by the UK subsidiary that is subject to the potential winding up. As such, the Company compared the fair value of the ~~above indicators~~reporting unit to the carrying amounts and recorded an impairment loss of $6,809,166 pertaining to impairment and goodwill in the consolidated statements of operations. The Company recorded impairment of the indefinite-lived intangible asset of $356,260, and impairment of goodwill of $6,452,906. The Company has one reporting unit which was evaluated in the impairment test noted above. As a result of the impairment, the Company had a 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$0 pertaining to ~~be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator~~goodwill and intangible assets as of ~~impairment exists and in projecting cash flows.~~March 31, 2023.

Property and Equipment

Property and equipment are carried at historical cost less accumulated depreciation. Depreciation is based on the estimated service lives of the depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized. Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they are removed from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance are expensed as incurred.

1112

The estimated useful lives of property and equipment are generally as follows:

Schedule of estimated useful lives
		Years
Office furniture and fixtures			4
Plant and equipment			4-8
Leasehold Improvements			10
Motor ~~Vehicles~~	vehicles		3

Revenue Recognition

The Company’s revenues are generated primarily from the sale of our ~~products,~~services, which consist primarily of advanced technology solutions for integrated communications and security ~~systems.~~systems, as well as habitat management. The Company’s sales of products are primarily generated from our TJM subsidiaries. Sales of products and services are separate from one another. 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 recognize service revenues as the performance obligations are met, which is generally as milestones are satisfied over time. 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~~The Company considers each individual sale of service contract to be its own performance obligation. Services in the contract are highly interdependent and ~~Practical Expedient, which~~interrelated, and the successful completion of each milestone is ~~to (1) clarify~~necessary for the ~~objective~~overall success of the ~~collectability criterion for applying paragraph 606-10-25-7; (2) permit~~contract. Therefore, each milestone is not separately identifiable from other promises in the contract, and not distinct and ultimately not individual performance obligations.

The Company records revenue over time using the input measure as it is the most faithful depiction of an ~~entity to exclude amounts collected from customers for all sales (and other similar) taxes from~~entity’s performance because it directly measures 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 beginningvalue of the ~~earliest period presented when identifying the satisfied~~goods and ~~unsatisfied performance obligations, determining the transaction price, and allocating the transaction price~~services transferred to the ~~satisfied and unsatisfied performance obligations; (5) clarify~~customer. The Company utilizes the Right to Invoice for these contracts, as the pricing structure is based on various milestones that ~~a completed contract for purposes of transition is a contract for which all (or substantially all)~~are specified in the contract. These milestones include Construction Phase Plan, Start of the ~~revenue was recognized under legacy GAAP before~~construction phase, installation phase, site surveys, fiber splicing, recoveries, and closeouts. There are specified payments associated with these milestones in the ~~date of initial application,~~contract, and ~~(6) clarify~~the value allocated is commensurate with work done. In the event that ~~an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is~~there are advances such as upfront retainers and 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 ASUbased 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~~value, those are recorded 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~~contract liabilities. ~~At September 30, 2022 and December 31, 2021, we had contract liabilities of $4,050,438~~ ~~and $3,216,562, respectively.~~

Cost of ~~Product Sales and Services~~Revenues

Cost of ~~sales~~revenues 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~~Cost of revenues also includes direct labor attributable to revenue ~~recognition above as to what constitutes deferred revenue.~~service arrangements.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company has ~~no significant concentrations of~~not experienced any losses related to its cash and does not believe that it is subject to unusual credit ~~risk.~~risk beyond the normal credit risk associated with commercial banking relationships.

As of both March 31, 2023 and December 31, 2022, one customer accounted for ~~Related Parties~~38

~~The Company~~% of gross accounts for related party transactions in accordance with ASC 850 (“Related Party Disclosures”). A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.receivable.

Leases

~~Effective January 1, 2019, the~~The Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred.

In calculating the right of use asset and lease liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term.

~~Derivative Financial Instruments~~

The Company evaluates the embedded conversion feature within its convertible debt instruments under ASC 815-15 and ASC 815-40 to determine if the conversion feature meets the definition of a liability and, if so, whether to bifurcate the conversion feature and account for it as a separate derivative liability. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a lattice model, in accordance with ASC 815-15 “Derivative and Hedging” to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument could be required within 12 months after the balance sheet date.

~~Restructuring Costs~~

The Company accounts for settlement of employment contracts and one-time salary expenses, such as severance, as restructuring costs when incurred due to specific restructuring event. For the quarter ended September 30, 2022, the Company recognized $~~501,431~~ ~~related to the settlement of employment contracts and severance due to employment changes in our subsidiary, Optilan.~~

~~Beneficial Conversion Features~~

The Company evaluates the conversion feature for whether it was beneficial as described in ASC 470-30. The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the shares of common stock at the commitment date to be received upon conversion.

Fair Value of Financial Instruments

The ~~carrying amounts of the Company's~~Company measures its financial assets and liabilities in accordance with the requirements of FASB ASC 820, Fair Value Measurements and Disclosures. As defined in FASB ASC 820, the fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 established a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement) as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as ~~cash, prepaid expenses,~~exchange-traded derivatives, marketable securities and ~~accruals approximate their fair values because~~listed equities.

Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the ~~short maturity~~reported date and includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these ~~instruments.~~ assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The ~~Company believes~~Company’s derivative liability is a Level 3 liability measured at fair value on a recurring basis. See Note 10.

Non-controlling Interests

Non-controlling interests are classified as a separate component of equity in the Company's consolidated balance sheets and statements of changes in stockholders’ equity. Net income (loss) and comprehensive income (loss) attributable to non-controlling interests are reflected separately from consolidated net income (loss) and comprehensive income (loss) in the consolidated statements of comprehensive income (loss) and statements of changes in stockholders’ equity. Any change in ownership of a subsidiary while the controlling financial interest is retained is accounted for as an equity transaction between the controlling and non-controlling interests. In addition, when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary will be initially measured at fair value and the difference between the carrying value ~~of its secured debenture payable approximates~~and fair value ~~because~~of the ~~terms were negotiated at arm’s length.~~retained interest will be recorded as a gain or loss. The Company has non-controlling interests via its subsidiaries TerraData, Remote Intelligence and Wildlife Specialists.

During the three months ended March 31, 2023 and 2022, the Company recorded a loss of $779,696 and $113,681, respectively, attributable to non-controlling interests.

~~Stock-based Compensation~~Comprehensive Loss

~~Stock-based compensation is accounted for based on~~Comprehensive loss includes net loss well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. During the ~~requirements~~three months ended March 31, 2023 and 2022, the Company’s only element of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

~~Pursuant to ASC Topic 718, for share-based payments to consultants and~~ other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date. Further, ASC Topic 718, provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718, such as the repricing of share options, which would revalue those options and the accounting for the cancellation of an equity award whether a replacement award or other valuable consideration is issued in conjunction with the cancellation. If not, the cancellation is viewed as a replacement and not a modification, with a repurchase price of $0.comprehensive loss was foreign currency translation.

~~Income (Loss)~~Loss Per Common Share

The Company accounts for earnings per share pursuant to ASC 260, Earnings per Share, which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year. In periods where the Company has a net loss, all dilutive securities are excluded. Potentially dilutive items outstanding as of March 31, 2023 and 2022 are as follows:

Schedule of antidilutive shares
	March 31,
	2023		2022
Convertible notes		65,827,695		87,775,272
Series D preferred stock		176,470		176,470
		66,004,165		87,951,742

For the nine months ended September 30, 2022, there were no stock options outstanding. For the nine months ended September 30, 2022, 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 ~~28,316,441~~ ~~common shares reserved for the potential conversion of the Company's convertible debt.~~

Recent Accounting Pronouncements

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging

, and Topic 825, Financial Instruments,

which amends and clarifies several provisions of Topic 326. In May 2019, the FASB issued ASU 2019-05, ~~Recently Issued Accounting Pronouncements~~Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief

, which amends Topic 326 to allow the fair value option to be elected for certain financial instruments upon adoption. ASU 2019-10 extended the effective date of ASU 2016-13 until December 15, 2022. The Company ~~has reviewed~~adopted this new guidance, including the ~~accounting pronouncements issued during~~subsequent updates to Topic 326, on January 1, 2023 and the ~~nine months ended September 30, 2022 and concluded they were either~~adoption did not ~~applicable or not expected to~~ have a material impact on the Company’s condensed consolidated financial ~~statements.~~statements and related disclosures.

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. The Company adopted this new guidance on January 1, 2023 and the adoption did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable.

NOTE 23 – LIQUIDITY AND GOING CONCERN

The Company generated net losses of $14,799,264and $5,384,270 during the three months ended March 31, 2023 and 2022, respectively, and net cash used in operating activities of $2,323,783 and $6,288,501, respectively. As of March 31, 2023, the Company’s current liabilities exceeded its current assets by $15,955,423 and has an accumulated deficit of $60,574,902. As of March 31, 2023, the Company had $545,970 of cash. Lastly, the Optilan Liquidation raises serious concerns about the viability of the Optilan (UK) Limited entity and related operations of the Optilan subsidiaries.

The Company will require additional funding during the next twelve months to finance the growth of its current operations and achieve its strategic objectives. These factors, as well as the uncertain conditions that the Company faces relative to capital raising activities, create substantial doubt as to the Company’s ability to continue as a going concern. The Company is seeking to raise additional capital principally through private placement offerings and is targeting strategic partners in an effort to finalize the development of its products and begin generating revenues. The ability of the Company to continue as a going concern is dependent upon the success of future capital offerings or alternative financing arrangements or expansion of its operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Management is actively pursuing additional sources of financing sufficient to generate enough cash flow to fund its operations for twelve months from the issuance date of these consolidated financial statements. However, management cannot make any assurances that such financing will be secured.

NOTE 4 – REVENUE

The following table is a summary of the Company’s timing of revenue recognition for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Schedule of timing of revenue recognition
	Three Months Ended				Nine Months Ended				Three Months Ended March 31,
	September 30,				September 30,				2023		2022
	2022		2021		2022		2021
Timing of revenue recognition:
Services and products transferred at a point in time	$	1,431,104	$	3,500,970	$	7,884,480	$	3,500,970	$	688,428	$	638,832
Services and products transferred over time		–		–		–		–		849,405		1,334,501
Total revenue	$	1,431,104	$	3,500,970	$	7,884,480	$	3,500,970	$	1,537,833	$	2,018,333

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, 2022~~March 31, 2023 and ~~2021:~~2022:

Schedule of revenue by source consisted
Schedule of revenue by source
	Three Months Ended				Nine Months Ended				Three Months Ended March 31,
	September 30,				September 30,				2023		2022
	2022		2021		2022		2021
Revenue by products and services:
Products	$	154,534	$	1,533,377	$	1,246,610	$	1,533,377	$	120,172	$	174,266
Services		1,276,570		1,967,593		6,619,870		1,967,593		1,417,661		1,844,067
Total revenue	$	1,431,104	$	3,500,970	$	7,884,480	$	3,500,970	$	1,537,833	$	2,018,333

Revenue by geographic destination consisted of the following for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Schedule of revenue by geographic destination
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Revenue by geography:
North America $ 590,028 $ 1,533,377 $ 1,124,462 $ 1,533,377
International 841,076 1,967,593 6,760,018 1,967,593
Total revenue $ 1,431,104 $ 3,500,970 $ 7,884,480 $ 3,500,970

Schedule of revenue by geographic destination
	Three Months Ended March 31,
	2023		2022
North America	$	219,266	$	161,372
United Kingdom		1,182,263		1,836,112
Rest of world		136,304		20,849
Total revenue	$	1,537,833	$	2,018,333

1516

Contracts

Contract revenue is recognized over time using the cost-to-cost measure of progress for fixed price contracts. The cost-to-cost measure of progress best depicts the continuous transfer of control of goods or services to the customer. The contractual terms provide that the customer compensates the Company for services rendered.

Contract costs include all direct materials, labor and subcontracted costs, as well as indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and the costs of capital equipment. The cost estimation and review process for recognizing revenue over time under the cost-to-cost method is based on the professional knowledge and experience of the Company’s project managers, engineers and financial professionals. Management reviews estimates of total contract transaction price and total project costs on an ongoing basis. Changes in job performance, job conditions and management’s assessment of expected variable consideration are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and profit recognition. Changes in these factors could result in revisions to revenue and costs of revenue in the period in which the revisions are determined on a prospective basis, which could materially affect the Company’s consolidated results of operations for that period. Provisions for losses on uncompleted contracts are recorded in the period in which such losses are determined.

Performance Obligations

A performance obligation is a contractual promise to transfer a distinct good or service to the customer and is the unit of account under Accounting Standards Codification (“ASC”) Topic 606. The transaction price of a contract is allocated to distinct performance obligations and recognized as revenue when or as the performance obligations are satisfied. The Company’s contracts often require significant integrated services and, even when delivering multiple distinct services, are generally accounted for as a single performance obligation. Contract amendments and change orders are generally not distinct from the existing contract due to the significant integrated service provided in the context of the contract and are accounted for as a modification of the existing contract and performance obligation. The majority of the Company’s performance obligations are completed within one year.

When more than one contract is entered into with a customer on or close to the same date, the Company evaluates whether those contracts should be combined and accounted for as a single contract as well as whether those contracts should be accounted for as more than one performance obligation. This evaluation requires significant judgment and is based on the facts and circumstances of the various contracts, which could change the amount of revenue and profit recognition in a given period depending upon the outcome of the evaluation.

Contract ~~Balances~~Assets and Liabilities

The Company ~~records~~bill its customers based on contractual terms, including, milestone billings based on the completion of certain phases of the work. Sometimes, billing occurs after revenue recognition, resulting in unbilled revenue, which is accounted for as a contract asset. Sometimes the Company receives advances payments from our customers before revenue is recognized, resulting in deferred revenue, which is accounted for as a contract liability.

Contract assets in the consolidated balance sheets represents costs and estimated earnings in excess of billings, which arise when itrevenue has ~~a right to consideration and records accounts receivable when it~~been recorded but the amount has ~~an unconditional right to consideration.~~ not been billed.

Contract assets consist of the following:

Schedule of excess of billings
	March 31,		December 31,
	2023		2022
Costs and estimated earnings in excess of billings on uncompleted contracts	$	1,567,212	$	1,439,844

Contract liabilities consist of ~~cash payments received (or unconditional rights to receive cash) in advance of fulfilling performance obligations. As of September 30, 2022,~~ the ~~Company did not have a contract assets balance.~~following:

	March 31,		December 31,
	2023		2022
Billings in excess of costs and estimated earnings on uncompleted contracts	$	2,672,244	$	2,215,212

The following table is a summary of the Company’s ~~opening and closing balances~~activity of contract liabilities related to contracts with ~~customers.~~customers:

Schedule of contract liabilities related to contracts with customers
	Total			Total
Balance at December 31, 2021	$	3,216,562
Balance at December 31, 2022				$	2,215,212
Additions through advance billings to or payments from vendors		4,192,899			1,775,599
Revenue recognized from current period advance billings to or payments from vendors		(3,359,023	)		(1,318,567	)
Balance at September 30, 2022	$	4,050,438
Balance at March 31, 2023				$	2,672,244

Variable Consideration

Transaction pricing for the Company’s contracts may include variable consideration, such as unapproved change orders, claims, incentives and liquidated damages. Management estimates variable consideration for a performance obligation utilizing estimation methods that best predict the amount of consideration to which the Company will be entitled. Variable consideration is included in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Management’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based on past practices with the customer, specific discussions, correspondence or preliminary negotiations with the customer, legal evaluations and all other relevant information that is reasonably available. The effect of a change in variable consideration on the transaction price of a performance obligation is typically recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders, claims and liquidated damages reflected in transaction price are not resolved in the Company’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.

NOTE 35 – ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:

Schedule of accounts receivable
	September 30,		December 31,		March 31,			December 31,
	2022		2021		2023			2022
Accounts receivable	$	3,531,244	$	4,223,990	$	6,168,807		$	6,273,276
Less: Allowance for doubtful accounts		–		–		(5,685,960	)		(3,320,983	)
Total accounts receivable	$	3,531,244	$	4,223,990
Accounts receivable, net					$	482,847		$	2,952,293

~~NOTE 4 –~~ ~~INVENTORY~~

~~Inventory consisted~~The Company performed an analysis of the ~~following as~~trade receivables related to Optilan (UK) Limited and determined that an additional $2,364,977 may not be collectible pursuant to the Optilan Liquidation. As of ~~September 30, 2022 and December~~March 31, ~~2021:~~ 2023, the Company recorded a bad debt provision for this amount.

Schedule of inventory
September 30, December 31,
2022 2021
Raw materials $ 162,835 $ 416,180
Work in progress 54,182 436,891
Finished goods 43,596 11,948
Total inventory 260,613 865,019
Reserve – –
Total inventory, net $ 260,613 $ 865,019

NOTE 56 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:

Schedule of property, plant and equipment
	September 30,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
Property and equipment	$	2,041,701		$	1,867,794		$	4,044,771		$	3,942,421
Leasehold improvements		46,934			42,396			46,934			46,934
		2,088,635			1,910,190
Property and equipment at cost								4,091,705			3,989,355
Less - accumulated depreciation		(375,685	)		(122,366	)		(2,180,847	)		(2,055,484	)
	$	1,712,950		$	1,787,824
Property and equipment, net							$	1,910,858		$	1,933,871

~~NOTE 6 –~~ ~~ACCOUNTS PAYABLE AND ACCRUED EXPENSES~~

~~Accounts payable and accrued expenses consisted of the following as of September 30, 2022 and December 31, 2021:~~

Schedule of accounts payable and accrued liabilities
September 30, December 31,
2022 2021
Accounts payable $ 3,288,094 $ 7,209,945
Accrued liabilities 760,133 634,326
Total accounts payable and accrued expenses $ 4,048,227 $ 7,844,271

NOTE 7 – ~~LEASES~~GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

~~We adopted~~The following is a summary of activity of goodwill for the three months ended March 31, 2023:

Schedule of changes in carrying amount of goodwill
	Goodwill
Balances at December 31, 2022	$	6,462,153
Impairment of goodwill pertaining to Optilan		(6,452,906	)
Foreign exchange translation		(9,247	)
Balances at March 31, 2023	$	–

Intangible Assets, Net

On January 1, 2023, the Company revised the estimated useful life of the trade name intangible asset from 25 years to 10 years. Amortization expense for the three months ended March 31, 2023 and 2022 was $33,255 and $0, respectively.

During the three months ended March 31, 2023, the Company recorded impairment of the trade name of $356,260. At March 31, 2023 and December 31, 2022, the carrying value of the intangible assets was $0 and $390,330, respectively.

Patents - Intrusion Detection Intellectual Property

The following is a summary of the DPTI patents:

Schedule of patents
	March 31,			December 31,
	2023			2022
Patents	$	904,269		$	904,269
Less: accumulated amortization		(649,151	)		(636,394	)
Patents, net	$	255,118		$	267,875

For the three months ended March 31, 2023 and 2022, the Company amortized $12,757 and $12,757, respectively.

NOTE 8 – JOINT VENTURE

On September 9, 2022, the Company entered into a Joint Venture Agreement with Neural Signals Inc, (“NSI”), for the purpose of developing, marketing and selling products and services based on the patents issued to NSI. The parties established the Joint Venture, Neural Logistics Inc., under a separate entity to conduct business. The Company has 50% ownership in NSI. The Company determined that the investment was accounted for as an equity investment under ASC ~~842 “Leases” using~~323-10-30-2.

During the ~~modified retrospective approach, electing~~three months ended March 31, 2023, the ~~practical expedient that allows us not to restate our comparative periods prior~~Company contributed $98,125 to the ~~adoption~~joint venture and recorded a loss on the equity investment 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, 2022:~~

Schedule of operating leases
Operating leases
September 30,
2022

Assets
ROU operating lease assets $ 2,654,676

Liabilities
Current portion of operating lease $ 1,779,238
Operating lease, net of current portion $ 1,145,908
Total operating lease liabilities $ 2,925,146

$65,056.

1719

~~The weighted average remaining lease term and weighted average discount rate at September 30, 2022 were as follows:~~

~~Schedule of weighted average remaining lease term and weighted average discount rate~~
~~Weighted average remaining lease term (years)~~	~~September 30,~~ ~~2022~~
~~Operating leases~~		~~7.53~~
~~Weighted average discount rate~~
~~Operating leases~~		~~6.00~~%

~~Operating Leases~~

~~On March 9, 2022, the Company entered into an operating lease agreement to rent office space in Houston, Texas. This ten-year agreement commenced March 9. 2022 with an annual rent of approximately $81,000~~ ~~with the first twelve months rent free.~~

~~The following table reconciles future minimum operating lease payments to the discounted lease liability as of September 30, 2022:~~

Schedule of future minimum operating lease payments
2022 122,777
2023 512,373
2024 497,411
2025 506,716
2026 and later 2,039,800
Total lease payments 3,679,077
Less imputed interest (753,931 )
Total lease obligations 2,925,146
Less current obligations (1,779,238 )
Long-term lease obligations $ 1,145,908

NOTE 89 – ~~GOODWILL~~ACCOUNTS PAYABLE AND ~~OTHER INTANGIBLE ASSETS~~ACCRUED EXPENSES

~~Goodwill~~Accounts payable and accrued expenses consisted of the following as of March 31, 2023 and December 31, 2022:

Schedule of accounts payable and accrued expenses
	March 31,		December 31,
	2023		2022
Accounts payable	$	8,192,413	$	8,677,648
Accrued liabilities		3,316,370		2,058,725
Total accounts payable and accrued expenses	$	11,508,784	$	10,736,373

NOTE 10 – DEBT

Convertible Notes

As of both March 31, 2023 and December 31, 2022, there was $378,263of convertible debt outstanding and a derivative liability of $306,467.

As of March 31, 2023, all outstanding convertible debt is default.

Notes Payable

On July 14, 2021, the Company entered a Securities Purchase Agreement (the “GS SPA”) with GS Capital Partners, LLC pursuant to which the Company issued to the Lender a 6% Redeemable Note in the principal amount of $2,000,000 (the “GS Note”). The purchase price of the GS Note is $1,980,000. The GS Note matures on July 14, 2022 upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the GS Note at 6% per annum until the GS Note becomes due and payable. The GS Note is subject to various “Events of Default,” which are disclosed in the GS Note. Upon the occurrence of an “Event of Default,” the interest rate on the GS Note will be 18%. The GS Note is not convertible into shares of the Company’s Common Stock and is not dilutive to existing or future shareholders and the Company used a portion of the proceeds of the GS Note to retire convertible debt. As of March 31, 2023 and December 31, 2022, $2,000,000 remains outstanding. As of March 31, 2023, the GS note is in default.

Loans Payable

The Company’s RI and WS subsidiaries have various loans including Small Business Association (“SBA”) Economic Injury Disaster Loan (“EIDL’) loans, lines of credit and other advances. The loans bear interest with varying rates up to 9.25% per annum. The following ~~table sets forth~~is a summary of the ~~changes in the carrying amount of goodwill for the nine months ended September 30,~~loans payable at March 31, 2023 and December 31, 2022:

Schedule of changes in carrying amount of goodwill
Total
Balance at December 31, 2021 $ 17,088,501
Exchange rate variation (1,802,491 )
Balance at September 30, 2022 $ 15,286,010

Schedule of loans payable
	March 31,		December 31,
	2023		2022
RI - line of credit	$	99,971	$	99,971
RI - Short-term loans		41,279		43,899
WS - line of credit		200,000		200,000
WS- Short-term loans		127,824		128,830
Loan payable, current	$	469,074	$	472,700

RI - SBA EIDL	$	102,597	$	102,597
RI - long-term loans		84,748		86,041
WS - SBA EIDL		26,307		26,307
WS - long-term loans		92,446		113,564
Loan payable, non-current	$	306,098	$	328,508

1820

~~Intangible Assets - Intrusion Detection Intellectual Property~~NOTE 11 – SECURED DEBENTURE

The Company relies on patent laws and restrictions on disclosure to protect its intellectual property rights. As of September 30, 2022, the Company held three U.S. and foreign patents on its intrusion detection technology, which expire in calendar years 2025 through 2034 (depending on the payment of maintenance fees).

The DPTI issued patents cover a System and Method for Brillouin Analysis, a System and Method for Resolution Enhancement of a Distributed Sensor, and a Flexible Fiber Optic Deformation System Sensor and Method. Maintenance of intellectual property rights and the protection thereof is important to our business. Any patents that may be issued may not sufficiently protect the Company's intellectual property and third parties may challenge any issued patents. Other parties may independently develop similar or competing technology or design around any patents that may be issued to the Company. The Company cannot be certain that the steps it has taken will prevent the misappropriation of its intellectual property, particularly in foreign countries where the laws may not protect proprietary rights as fully as in the United States. Further, the Company may be required to enforce its intellectual property or other proprietary rights through litigation, which, regardless of success, could result in substantial costs and diversion of management's attention. Additionally, there may be existing patents of which the Company is unaware that could be pertinent to its business, and it is not possible to know whether there are patent applications pending that the Company's products might infringe upon, since these applications are often not publicly available until a patent is issued or published.

~~For the nine months ended September 30, 2022 and 2021, the Company amortized $38,271~~ ~~and $38,271, respectively. Future amortization of intangible assets is as follows:~~

Schedule of future amortization of intangible assets
2022 $ 12,757
2023 51,028
2024 51,028
2025 51,028
2026 51,028
Thereafter 87,822
Total $ 304,691

~~NOTE 9 –~~ ~~DEBT AGREEMENTS~~

~~Secured Debenture~~

DPTI issued a convertible Debenture to the University (see Note 1) in exchange for the Patents assigned to the Company, in the amount of Canadian $1,500,000, or ~~US $1,491,923~~US$1,491,923 on December 16, 2010, the date of the Debenture. On April 24, 2017 DPTI issued a replacement secured term Debenture in the same C$CAD 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~~CAD 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,~~for 2020, 2019 and 2018. Beginning in 2023, The principal repayment amounts will be due ~~yearly~~quarterly over a ~~six-year~~six year period in the amount of Canadian Dollars ~~$62,500.~~62,500. Based on the exchange rate between the Canadian Dollar and the U.S. Dollar on ~~September 30, 2022,~~December 31, 2018, the quarterly principal repayment amounts will be US$~~49,750.~~48,447. The Debenture is secured by the Patents assigned by the University to DPTI by an Assignment Agreement on December 16, 2010. DPTI has pledged the Patents, and granted a lien on them pursuant to an Escrow Agreement dated April 24, 2017, between DPTI and the University.

The Debenture was initially recorded at the $1,491,923 equivalent USU.S. Dollar amount of Canadian ~~$1,500,000~~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 USU.S. 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, 2022 and 2021, were $74,538~~ ~~and $26,539~~ respectively. These amounts are included in Accumulated Other Comprehensive Loss in the Equity section of the consolidated balance sheet, and as Unrealized Loss on Foreign Exchange on the consolidated statement of comprehensive loss. The Debenture also includes a provision requiring DPTI to pay the University a 2% royalty on sales of any and all products or services which incorporate the Patents for a period of five years from April 24, 2018. To date, no royalties have been paid.

For the ~~nine~~three months ended ~~September 30,~~March 31, 2023, and 2022, ~~and 2021,~~ the Company recorded interest expense of $~~36,307~~28,275 and $~~39,001~~12,617, respectively.

As of ~~September 30,~~March 31, 2023 and December 31, 2022, the debenture liability totaled $1,109,250 and $1,090,827, ~~all of which was long term.~~respectively.

~~Future minimum required payments over the next 5 years and thereafter are as follows:~~

Schedule of future minimum debt payments
Period ending September 30,
2023 $ –
2024 –
2025 –
2026 –
2027 and after 1,090,827
Total $ 1,090,827

~~Convertible Debt Securities~~NOTE 12 – LEASES

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 securityfollowing was included in our balance sheet as of September 30, 2022. Management determined the expected volatility of 124.08%, a risk-free rate of interest of 4.05%, and contractual lives of the debt of three months. The table below details the Company's four outstanding convertible notes, with totals for the face amount, amortization of discount, initial loss, change in the fair market value, and the derivative liability.

Schedule of debt
Face Debt Initial Change Derivative
Balance
Amount Discount Loss in FMV 9/30/2022
$ 90,228 $ – $ 58,959 $ (16,827 ) $ 68,965
162,150 – 74,429 (30,240 ) 123,938
72,488 – 11,381 (13,519 ) 55,405
53,397 – 7,850 (9,706 ) 48,000
Subtotal 378,263 – 152,619 (70,292 ) 296,308
Transaction expense – – – – –
$ 378,263 $ – $ 152,619 $ (70,292 ) $ 296,308

~~As of September 30, 2022~~March 31, 2023 and December 31, ~~2021 respectively, there was $378,263~~2022:

Schedule of operating leases
	March 31,		December 31,
Operating leases	2023		2022

Assets
ROU operating lease assets	$	2,676,026	$	2,724,226

Liabilities
Current portion of operating lease		284,563		512,373
Operating lease, net of current portion		2,725,741		2,547,524
Total operating lease liabilities	$	3,010,304	$	3,059,897

The weighted average remaining lease term and ~~of convertible debt outstanding, net of debt~~weighted average discount ~~of $~~0~~. As of September 30, 2022~~rate at March 31, 2023 and December 31, ~~2021 respectively, there was a derivative liability of $296,308~~ ~~and $533,753~~ ~~related to convertible debt securities.~~2022 were as follows:

Schedule of weighted average remaining lease term and weighted average discount rate
	March 31,		December 31,
Operating leases	2023		2022
Weighted average remaining lease term (years)		8.00		8.25
Weighted average discount rate		6.00%		6.00%

2021

Operating Leases

On January 12, 2021, the Company’s newly acquired subsidiary entered into an operating lease agreement to rent office space in Mumbai, India. This three-year agreement commenced January 12, 2021 with an annual rent of approximately $50,000.

On May 27, 2021, the Company’s newly acquired subsidiary entered into an operating lease agreement to rent office space in Warwick, United Kingdom. This ten-year agreement commenced May 27, 2021 with an annual rent of approximately $85,000 with the first six months rent free.

On August 31, 2021, the Company’s newly acquired subsidiary entered into an operating lease agreement to rent office space in Tempe, Arizona. This five-year agreement commenced August 31, 2021 with an annual rent of approximately $192,000.

On October 20, 2021, the Company’s newly acquired subsidiary entered into an operating lease agreement to rent office space in Warwick, United Kingdom. This ten-year agreement commenced October 20, 2021 with an annual rent of approximately $200,000 with the first six months rent free.

On March 9, 2022, the Company entered into an operating lease agreement to rent office space in Houston, Texas. This ten-year agreement commenced March 9. 2022 with an annual rent of approximately $81,000 with the first twelve months rent free.

NOTE 1013 - STOCKHOLDERS' EQUITY (DEFICIT)

~~As of September 30, 2022, there were~~ ~~6,145,852,186~~Preferred Stock ~~shares of common stock and 88,335 shares of preferred stock issued and outstanding.~~

~~Preferred Stock~~

In accordance with the Company’s ~~Certificate of Incorporation,~~bylaws, the Company has authorized a total of 2,000,000 shares of preferred stock, par value $0.01 per share, for all classes. As of ~~September 30, 2022,~~March 31, 2023 and December 31, ~~2021,~~2022, there were 88,335 and ~~88,235~~88,335~~, respectively~~ total preferred shares issued and outstanding for all ~~classes.~~classes, respectively.

On June 22, 2022, the Board of Directors of the Company approved the filing of an amendment to the Company’s Certificate of Incorporation (the “Certificate of Incorporation”), in the form of a Certificate of Designation that authorized for issuance of up to 100 shares of a new series of Preferred Stock, par value $~~0.01~~ per share, of the Company designated “Series A Super Voting Preferred Stock” and established the rights, preferences and limitations thereof. The Board authorized the Series A Preferred Stock pursuant to the authority given to the Board under the Certificate of Incorporation, which authorizes the issuance of up to ~~2,000,000~~ ~~shares of Preferred Stock, par value $0.01~~ per share, and authorizes the Board, by resolution, to establish any or all of the unissued shares of Preferred Stock, not then allocated to any series into one or more series and to fix and determine the designation of each such shares, the number of shares which shall constitute such series and certain preferences, limitations and relative rights of the shares of each series so established.

~~The holders of the Series A Preferred Stock shall be entitled to vote, on a pro-rata basis, on all matters subject to a vote or written consent of the holders of the Company’s~~ Common Stock and on all such matters, the shares of Series A Preferred Stock shall be entitled to that number of votes equal to the number of votes that all issued and outstanding shares of Common Stock and all other securities of the Company are entitled to, as of any such date of determination, on a fully diluted basis, ~~plus~~ ~~one million (1,000,000) votes, it being the intention that the holders of the Series A Preferred Stock shall have effective voting control of the Company, on a fully diluted basis.~~

~~Unless approved by a majority vote of the holders of Common Stock, the Series A Super Voting Preferred Stock will terminate five years after the issuance date, which is June 24, 2027.~~

~~During the three months ended September 30, 2022, the Company issued 100 shares of Series A 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 $0.0001per share. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there were ~~6,145,852,186~~7,256,166,860 and ~~5,197,821,885~~6,427,495,360 common shares issued, respectively. As of March 31, 2023 and ~~outstanding.~~

~~During the three months ended September 30,~~December 31, 2022, ~~the Company issued the following~~there were 7,256,066,860 and 6,427,395,360 common shares ~~of common stock:~~

~~On July 1, 2022, the Company issued~~ ~~33,525,465~~ ~~shares of common stock for $556,750~~.

~~On July 11, 2022, the Company issued~~ ~~32,756,532~~ ~~shares of common stock for $556,750~~.

~~On July 20, 2022, the Company issued~~ ~~29,386,519~~ ~~shares of common stock for $556,750~~.

~~On July 28, 2022, the Company issued~~ ~~35,884,040~~ ~~shares of common stock for $556,750~~.

~~On August 10, 2022, the Company issued~~ ~~44,505,857~~ ~~shares of common stock for $680,110~~.

~~On August 18, 2022, the Company issued~~ ~~54,574,909~~ ~~shares of common stock for $948,863~~.

~~On August 25, 2022, the Company issued~~ ~~105,255,759~~ ~~shares of common stock for $2,264,961~~.

~~On August 30, 2022, the Company received~~ ~~33,898,377~~ ~~shares of common stock for cancellation from a previous note holder.~~

~~On September 2, 2022, the Company issued~~ ~~140,073,757~~ ~~shares of common stock for $3,000,000~~.

~~On September 14, 2022, the Company issued~~ ~~79,092,686~~ ~~shares of common stock for $1,757,466~~.

~~On September 30, 2022, the Company issued~~ ~~30,538,303~~ ~~shares of common stock for $500,000~~.

~~Stock Options~~

~~During the three months ended September 30, 2022, the Company did not issue any stock options and had~~ no ~~stock options~~ outstanding, ~~at September 30, 2022.~~

~~Public Offerings~~respectively.

~~Financings~~2023 Transactions

On ~~November 9, 2021,~~May 27, 2022 we entered an Equity Financing Agreement (the “~~Equity Financing Agreement~~~~”) and Registration Rights Agreement (the “~~~~GHS Registration Rights Agreement~~~~”) with GHS, pursuant to which GHS agreed to purchase up to $30,000,000~~ ~~in shares of our Common Stock, from time to time over the course of 24 months (the “~~~~Contract Period~~~~”) after effectiveness of a registration statement on Form S-1 (the “~~~~Registration Statement~~~~”) of the underlying shares of Common Stock.~~

The GHS Registration Rights Agreement provides that we shall (i) use our best efforts to file with the SEC a Registration Statement within 45 days of the date of the GHS Registration Rights Agreement; and (ii) have the Registration Statement declared effective by the SEC within 30 days after the date the GHS Registration Statement is filed with the SEC, but in no event more than 90 days after the GHS Registration Statement is filed.

~~Below is a table of all puts made by the Company under the Equity Financing Agreement during 2022:~~

Schedule of equity financing agreement
Date of Put Number of Shares Sold Total Proceeds, Net of Discounts Effective Price per Share Net Proceeds
1/12/22 23,372,430 $1,150,000 $0.054124 $1,033,975
1/21/22 33,454,988 $1,150,000 $0.037812 $1,033,975
2/7/22 16,040,411 $500,000 $0.0342884 $448,975
3/23/22 29,257,395 $1,500,000 $0.056396 $1,348,975
4/11/22 23,746,816 $1,000,000 $0.04211091 $898,975
5/3/22 29,522,276 $1,000,000 $0.03387273 $898,975
5/13/22 26,100,979 $556,750 $0.0213306 $500,050
5/23/22 25,025,540 $556,750 $0.0222473 $500,050
6/1/22 25,901,921 $556,750 $0.02149454 $500,050
6/16/22 23,799,766 $402,086 $0.018584 $360,852
22
~~On February 21,~~ 2022 ~~we sold~~ ~~75,798,921~~ ~~shares of our Common Stock at $0.032982~~ ~~per share for total consideration of $2,500,000~~.
~~On March 3, 2022, we sold~~ ~~16,579,569~~ ~~shares of our Common Stock at $0.0301576~~ ~~per share for total consideration of $500,000~~.
~~On March 14, 2022, we sold~~ ~~5,617,347~~ ~~shares of our Common Stock at $0.071208~~ ~~per share for total consideration of $400,000~~.
~~On May 27, we entered an Equity Financing Agreement (the “~~EFA”) and Registration Rights Agreement (the “RRA”) with GHS, pursuant to which GHS agreed to purchase up to $70,000,000 in shares of our Common Stock, from time to time over the course of 24 months after effectiveness of a registration statement on Form S-1 (the “Registration Statement”) of the underlying shares of Common Stock.

The RRA provides that we shall (i) use our best efforts to file with the SEC a Registration Statement within 45 days of the date of the GHS Registration Rights Agreement; and (ii) have the Registration Statement declared effective by the SEC within 30 days after the date the GHS Registration Statement is filed with the SEC, but in no event more than 90 days after the GHS Registration Statement is filed.

Below is a table of all puts made by the Company under the 2022 EFA during ~~2022:~~2023:
Schedule of equity financing agreement
Date of Put Number of Common Shares Issued Total Proceeds, Net of Discounts Effective Price per Share Net Proceeds
1/12/2023 64,130,435 $ 400,000 $0.006237 $ 370,975
1/17/2023* 11,441,647 100,000 $0.008740 100,000
1/24/2023 77,733,861 400,000 $0.005146 370,975
2/3/2023 61,173,706 300,000 $0.004904 277,975
2/17/2023 75,447,571 300,000 $0.003976 277,975
3/1/2023 83,113,044 324,000 $0.003898 300,295
3/16/2023 93,165,852 254,232 $0.002729 235,410
3/30/2023 65,465,384 166,903 $0.002549 154,195
531,671,500 $ 2,245,135 $ 2,087,801
* Issued shares pursuant to an individual stock purchase agreement with an unrelated investor (not under 2022 EFA)
In January 2023, the Company entered into a settlement of a dispute between certain stockholders in which the Company decided, during the period ended March 31, 2023, to issue shares to settle the dispute. In January 2023, the Company issued 297,000,000 shares of common stock to the individuals. The fair value of $1,989,900, or $0.0067 per share, was included in professional fees in the consolidated statements of operations in the three months ended March 31, 2023.

Date of Put Number of Shares Sold Total Proceeds, Net of Discounts Effective Price per Share Net Proceeds
6/24/22 38,391,106 $643,539 $0.01978 $578,160
7/1/22 33,525,465 $556,750 $0.019596 $500,050
7/11/22 32,756,532 $556,750 $0.01699661 $550,050
7/20/22 29,386,519 $556,750 $0.01894558 $550,050
7/28/22 35,884,040 $556,750 $0.018308 $500,050
8/10/22 44,505,857 $680,109 $0.015281 $611,073
8/18/22 54,574,909 $948,863 $0.017386441 $852,952
8/25/22 105,255,759 $2,264,961 $0.021518644 $2,128,038
9/2/22 140,073,757 $3,000,000 $0.021417288 $2,788,975
9/14/22 79,092,686 $1,757,466 $0.022220339 $1,757,466
9/30/22 30,538,303 $500,000 $0.0163729 $463,975
22
NOTE 14 - 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.
Bonded Contracts
As of March 31, 2023 and December 31, 2022, the Company’s Optilan subsidiary had five bonded contracts for a total guaranteed value of approximately $967,000 and $984,000, respectively.
Legal Matters
DarkPulse, Inc. v. Twitter, Inc.
As disclosed in greater detail in the Company’s Form 10-Q, filed October 24, 2022, the Company is actively investigating potential claims against the @MIKEWOOD and @BullMeechum3 Twitter accounts. There are no material updates to this matter.
Carebourn Capital, L.P. v. DarkPulse, Inc.
As disclosed in greater detail in the Company’s Form 10-Q, filed October 24, 2022, the Company remains in active litigation with Carebourn Capital, L.P. (“Carebourn”) in Minnesota state court. The following discloses the material updates for this matter.
On April 21, 2023, the Minnesota state court granted the Company’s motion for partial summary judgment on its affirmative defenses. Specifically, the Court found that Carebourn is an unregistered dealer, acting in violation of Section 15(a) of the Securities Exchange Act of 1934 and, thus, the contracts between the Company and Carebourn are now void pursuant to Section 29(b) of the Exchange Act.
On July 24, 2023, the Company moved for summary judgment against Carebourn on its counterclaims for damages under the Minnesota Uniform Securities Act. Oral arguments were held on the Company’s motion on August 22, 2023. The Company is currently awaiting a decision from the Minnesota state court.
More Capital, LLC v. DarkPulse, Inc. et al
On July 24, 2023, the Company moved for summary judgment against More on its affirmative defenses asserted under the Securities Exchange Act of 1934 (“Exchange Act”) and counterclaims for damages under the Minnesota Uniform Securities Act. Oral arguments on the Company’s motion are scheduled for September 14, 2023.
The Company remains committed to actively litigating its affirmative defenses and claims for relief under the Securities Exchange Act of 1934 and Minnesota Uniform Securities Act.
Carebourn Capital et al v. Standard Registrar and Transfer et al
On May 20, 2022, Carebourn Capital, L.P. (“Carebourn”) and More Capital, LLC (“More,” and together with Carebourn, the “Noteholder Plaintiffs”) commenced an action against (i) Standard Registrar and Transfer Co., Inc. (“Standard”), (ii) Amy Merrill (“Merrill”) (Standard and Merrill, together, the “TA Defendants”), (iii) DarkPulse, Inc., (iv) Dennis O’Leary (“O’Leary”), (v) Thomas Seifert (“Seifert”), (vi) Carl Eckel (“Eckel”), (vii) Anthony Brown (“Brown”), and (viii) Faisal Farooqui (“Farooqui”) (DarkPulse, O’Leary, Seifert, Eckel, Brown, and Farooqui, collectively, the “DPLS Defendants ”) in the United States District Court for the District of Utah.
23
The Noteholder Plaintiffs’ complaint alleges the DPLS Defendants violated the Racketeer Influenced and Corrupt Organizations (RICO) Act, are liable for attorneys’ fees pursuant to the Company’s breach of securities contracts between the Company and, separately, Carebourn and More, and engaged in civil conspiracy, fraudulent concealment, tortious interference with economic relations and conversion against the Noteholder Plaintiffs.
Thereafter, the TA Defendants and DPLS Defendants separately moved to dismiss the Noteholder Plaintiffs’ complaint. On February 10, 2023, the Court denied both motions without prejudice and stayed the action pending the conclusion of enforcement action commenced by the U.S. Securities and Exchange Commission against Carebourn and its principal, Chip Rice, in the U.S. District Court for the District of Minnesota.
The Company contends that the Noteholder Plaintiffs’ lawsuit is duplicative of the first-filed lawsuits commenced by the Noteholder Plaintiffs’ in Minnesota state court. The Company intends to vigorously defend itself against the Noteholder Plaintiffs’ lawsuit.
The Company remains in active litigation with Carebourn Capital, L.P. (“Carebourn”) and More Capital, LLC (“More,” and together with Carebourn, the “Noteholder Plaintiffs”) in the United States District Court for the District of Utah. There are no material updates to this litigation.
The Company intends to vigorously defend itself against the Noteholder Plaintiffs’ lawsuit.
Goodman et al. v. DarkPulse, Inc.
As disclosed in greater detail in the Company’s Form 10-Q, filed October 24, 2022, on September 10, 2021, Stephen Goodman, Mark Banash, and David Singer (“Former Officers”) commenced suit against the Company in Arizona Superior Court, Maricopa County.
As of the date hereof, the Company and Former Officers have entered into a mutual settlement. Thus, the Former Officers’ lawsuit against the Company has been dismissed with prejudice.
DarkPulse, Inc. v. FirstFire Global Opportunities Fund, LLC, and Eli Fireman
As disclosed in greater detail in the Company’s Form 10-Q, filed October 24, 2022, the Company remains in active litigation with FirstFire Global Opportunities Fund, LLC (“FirstFire”), and Eli Fireman (“Fireman”) (FirstFire and Fireman together, the “FirstFire Parties”). The following discloses the material updates for this matter.
On January 17, 2023, the Court granted the FirstFire Parties’ motion to dismiss the Company’s complaint. Also on January 17, 2023, the Company appealed the trial court’s decision to the United States Court of Appeals for the Second Circuit. Briefing is currently taking place on the Company’s appeal.
The Company’s opening memorandum in support of its appeal was filed on May 1, 2023. On July 31, 2023, the FirstFire Parties filed their memorandum in opposition. On August 21, 2023, the Company filed its reply memorandum. As of the date hereof, oral arguments are not scheduled for the appeal.
The Company remains committed to actively litigating its claims for relief under the Securities Exchange Act of 1934 and Racketeer Influenced and Corrupt Organizations (RICO) Act.
DarkPulse, Inc. v. EMA Financial, LLC et al
As disclosed in greater detail in the Company’s Form 10-Q, filed October 24, 2022, the Company remains in active litigation with EMA Financial, LLC (“EMA”), EMA Group, Inc. (“EMA Group”), and Felicia Preston (“Preston”) (EMA, EMA Group, and Preston together, the “EMA Parties”). The following discloses the material updates for this matter.
On March 1, 2023, the Court granted the EMA Parties’ motion to dismiss the Company’s claims asserted under the Securities Exchange Act of 1934, but denied dismissal of the Company’s claim asserted under the Racketeer Influenced and Corrupt Organizations (RICO) Act.
On or about May 15, 2023, the Company and the EMA Parties reached an understanding of settlement, which was subsequently memorialized. The action was subsequently dismissed on or about June 14, 2023. The Company views this matter as closed.
24
DarkPulse, Inc. v. Brunson Chandler & Jones, PLLC et al
On July 8, 2022, the Company commenced litigation against Brunson Chandler & Jones, PLLC (“Brunson Firm”), and Lance B. Brunson (“Brunson,” and together with the Brunson Firm, the “Brunson Parties”) through the filing of a complaint in the United States District Court for the District of Utah. The Company is alleging that the Brunson Parties have committed professional negligence and breach of contract.
On March 2, 2023, the Brunson Parties filed an answer, affirmative defenses, and counterclaims to the Company’s complaint, wherein the Brunson Firm alleged claims for (i) breach of contract against the Company, (ii) breach of contract against the Company’s subsidiary, DarkPulse Technologies, Inc., and (iii) quantum meruit.
On June 5, 2023, the Company filed its answer and affirmative defenses to the Brunson Firm’s counterclaims. The Company remains committed to litigating its claims and affirmative defenses against the Brunson Parties.
The parties are currently engaged in discovery in this matter.
The Company remains committed to vigorously litigating its claims for relief and defenses against the Brunson Parties.
DarkPulse, Inc., et al v. Crown Bridge Partners, LLC, et al
On September 23, 2022, the Company commenced an action along with two other plaintiffs (“Crown Bridge Plaintiffs”) against Crown Bridge Partners, LLC, Soheil Ahdoot, and Sepas Ahdoot (“Crown Bridge Defendants”) in the United States District Court for the Southern District of New York alleging violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act.
On January 13, 2023, the Crown Bridge Defendants filed a motion to dismiss. As of May 16, 2023, the Crown Bridge Defendants’ motion to dismiss was fully submitted to the court. As of the date hereof, no decision has been made on the motion.
As of the date hereof, the court has not yet rendered its decision on the Crown Bridge Defendants’ motion to dismiss.
The Company remains committed to actively litigating its RICO claims against the Crown Bridge Defendants.
Benner et al v. DarkPulse, Inc. et al
On March 29, 2023, J. Merlin Benner, Phillip J. Benner, Benjamin P. Benner, Jonas M. Benner, and Angelica M. Benner (collectively, the “Benner Parties”) commenced an action in the United States District Court for the Southern District of Texas against the Company and its Chief Executive Officer, Dennis O’Leary, individually, alleging (i) the Company is in breach of contracts between the Company and the Benner Parties as it concerns Remote Intelligence, LLC and Wildlife Specialists, LLC, (ii) violation of Texas Uniform Fraudulent Transfer Act by the Company, and (iii) defamation by Mr. O’Leary.
On June 30, 2023, the Company and Mr. O'Leary filed their Answer to the Benner Parties' Complaint. The Company intends to vigorously defend itself against the Benner Parties’ lawsuit.
The Company remains in active litigation with J. Merlin Benner, Phillip J. Benner, Benjamin P. Benner, Jonas M. Benner, and Angelica M. Benner (collectively, the “Benner Parties”) in the United States District Court for the Southern District of Texas. The following discloses the material updates for this matter.
The parties are currently engaged in discovery in this matter.
GS Capital Partners, LLC v. DarkPulse, Inc.
On June 2, 2023, GS Capital Partners, LLC (“GS Capital”) commenced an action in the Supreme Court for New York County against the Company through the filing of motion for summary judgment in lieu of a complaint. The motion claims that the Company is in breach of a convertible promissory note, dated July 14, 2021, and accompanying securities purchase agreement, dated the same.
The motion claims that GS Capital is entitled to an award of $2,407,671, plus prejudgment interest and attorney’s fees, costs and disbursements.
On July 27, 2023, the Company moved to set aside the default judgment entered in favor of GS Capital and against the Company on July 25, 2023. GS Capital’s opposition thereto is due on or before August 31, 2023. Thereafter, DarkPulse’s reply is due on or before September 6, 2023. Oral arguments are currently not scheduled on the Company’s motion.
The Company is currently looking to retain legal counsel to represent it in this matter, and intends to vigorously defend itself against GS Capital.
The Company intends to vigorously defendant against the lawsuit.
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.
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NOTE 1115 – 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 ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ certain executives of the Company received $~~270,000~~ 120,000 and $0, respectively, in Directors fees from Optilan for being members of Optilan’s Board of ~~Directors~~Directors.
Remote Intelligence and Wildlife Specialists Loan Payables
RI has a loan payable with the former majority shareholder, who is a shareholder in the Company after the acquisition of 60% of RI’s membership interests. The loan is unsecured, non-interest bearing and due on demand. As of both March 31, 2023 and December 31, 2022, the outstanding balance was $226,247.
WS has a loan payable with the former majority shareholder, who is a shareholder in the Company after the acquisition of 60% of WS’s membership interests. The loan is unsecured, non-interest bearing and due on demand. As of both March 31, 2023 and December 31, 2022, the outstanding balance was $135,500.
SPAC Transaction
On October 12, 2022, the Company entered into and closed the Purchase Agreement (the “Agreement”) pursuant to which the Company purchased 2,623,120 shares of Class B Common Stock (the “Class B Common Stock”) and 4,298,496 Private Placement Warrants, each of which is exercisable to purchase one share of Class A Common Stock (the “Warrants,” together, with the Class B Common Stock, the “Securities”) of Gladstone Acquisition Corp., a Delaware corporation (NASDAQ: GLEE) (the “SPAC”), from Gladstone Sponsor, LLC (“Original Sponsor”) for $1,500,000 (the “Purchase Price”). The SPAC subsequently changed its name to Global Systems Dynamics, Inc. (“GSD”).
As of March 31, 2023 and December 31, 2022, the Company’s $1,500,000 investment in GSD was accounted for as cost.
In addition to the payment of the Purchase Price, the Company also assumed the following obligations: (i) responsibility for all of SPAC’s public company reporting obligations, (ii) the right to provide an extension payment and extend the deadline of the SPAC to complete an initial business combination from 15 months from August 9, 2021 to 18 months for an additional ~~$90,000 accrued but unpaid.~~$1,150,000, and (iii) all other obligations and liabilities of the Original Sponsor related to the SPAC. The principal balance of this note shall be payable by GSD on the earlier to occur of: (i) the date on which GSD consummates its initial business combination (the “Business Combination”) and (ii) the date that the winding up of GSD is effective. The note does not bear interest. On February 7, 2023 and March 9, 2023, GSD issued a non-convertible promissory note in the aggregate principal amount of $167,894 ($83,947 per month) to the Company in connection with the extension of the termination date for the GSD’s initial business combination. As of March 31, 2023 and December 31, 2022, the outstanding note receivable was $1,217,142 and $1,049,248, respectively.

As of March 31, 2023 and December 31, 2022, the Company has $917,775 and $318,025, respectively, owed from GSD and included as due from related party on the consolidated balance sheet. These advances were made to pay for certain expenses on behalf of the SPAC, as well as $80,000 in accrued management fees. The advances are unsecured, non-interest bearing and due on demand.

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~~NOTE 12 -~~ ~~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~~
~~DarkPulse, Inc. v. Twitter, Inc.~~
~~As disclosed in greater detail in the Company’s Form 10-K, filed April 15, 2022, the Company’s investigation of the Investor News matter remains ongoing.~~
On October 21, 2022, the Company filed a petition against Twitter, Inc. in the Supreme Court of the State of New York County of New York to compel disclosure of the owner(s) and operator(s) of two certain Twitter accounts: “Mike Wood” (@MIKEWOOD) and “Bull Meechum” (@BullMeechum3). The petition seeks disclosure of the owner(s) and operator(s) of the aforementioned accounts so the Company can commence an action against such individuals for damages arising from false, misleading, and untrue statements made by the same.
On October 25, 2022, the court signed an order to show cause directing Twitter to show cause on or before November 4, 2022 as to why an order compelling disclosure of the identities of the owner(s) / operator(s) of the @MIKEWOOD and @BullMeechum3 Twitter accounts should not be made.
~~Carebourn Capital, L.P. v. DarkPulse, Inc.~~
As disclosed in greater detail in the Company’s Form 10-Q, filed August 10, 2022, the Company remains in active litigation with Carebourn Capital, L.P. (“Carebourn”) in Minnesota State Court. There are no material updates to this litigation.
~~The Company remains committed to actively litigating its affirmative defenses and claims for relief under the Securities Exchange Act of 1934.~~
~~More Capital, LLC v. DarkPulse, Inc. et al~~
As disclosed in greater detail in the Company’s Form 10-Q, filed August 10, 2022, the Company remains in active litigation with More Capital, LLC (“More”) in Minnesota State Court. There are no material updates to this litigation.
~~The Company remains committed to actively litigating its affirmative defenses and claims for relief under the Securities Exchange Act of 1934.~~
~~Goodman et al. v. DarkPulse, Inc.~~
As disclosed in greater detail in the Company’s Form 10-Q, filed November 15, 2021, on September 10, 2021, Stephen Goodman, Mark Banash, and David Singer (“Former Officers”) commenced suit against the Company in Arizona Superior Court, Maricopa County.
~~As of the date hereof, the Company is engaged in settlement negotiations with the Former Officers.~~
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~~DarkPulse, Inc. v. FirstFire Global Opportunities Fund, LLC, and Eli Fireman~~
As disclosed in greater detail in the Company’s Form 10-Q, filed August 10, 2022, the Company remains in active litigation with FirstFire Global Opportunities Fund, LLC (“FirstFire”), and Eli Fireman (“Fireman”) (FirstFire and Fireman together, the “FirstFire Parties”).
As previously disclosed therein, the FirstFire Parties’ motion to dismiss the Company’s first amended complaint has been fully submitted to the Court. On May 26, 2022, the FirstFire Parties requested oral arguments on their motion to dismiss. As of the date hereof, oral arguments have not been scheduled and, further, no decision has been rendered on the FirstFire Parties’ motion to dismiss.
~~The Company remains committed to actively litigating its claims for relief under the Securities Exchange Act of 1934.~~
~~DarkPulse, Inc. v. EMA Financial, LLC et al~~
As disclosed in greater detail in the Company’s Form 10-Q, filed August 10, 2022, the Company remains in active litigation with EMA Financial, LLC (“EMA”), EMA Group, Inc. (“EMA Group”), and Felicia Preston (“Preston”) (EMA, EMA Group, and Preston together, the “EMA Parties”).
As of July 22, 2022, the EMA Parties’ motion to dismiss the Company’s first amended complaint is fully submitted. As of the date hereof, no decision has been rendered on the EMA Parties’ motion to dismiss.
~~The Company remains committed to actively litigating its claims for relief under the Securities Exchange Act of 1934 and Racketeer Influenced and Corrupt Organizations Act.~~
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 1316 – SUBSEQUENT EVENTS

From April 1, 2023 through August 31, 2023, the Company has issued 283,878,429 shares of common stock for net proceeds of $879,964.
From April 1, 2023 through August 31, 2023, GSD issued non-convertible promissory notes aggregating in the principal amount of $365,601 ($83,947 per month through July then 29,813 for August) to the Company in connection with the extension of the termination date for the GSD’s initial business combination. The termination was extended through February 9, 2023.
Pursuant to the promissory note, the Company has agreed to loan to GSD $251,841 to deposit into GSDs trust account. The promissory note bears no interest and is repayable in full upon the earlier of (i) the date on which GSD consummates its Initial Business Combination, and (ii) the date that the winding up of GSD is effective.
From April 1, 2023 through July 18, 2023, the Company has provided non-interest-bearing advances to GSD aggregating $- 126,760.
On ~~October 12, 2022~~May 16, 2023, the Company entered into ~~and closed~~a 50/50 Partner Agreement with Jupiter Metal Pvt. Ltd. (“Jupiter,” together, with the ~~Purchase Agreement~~Company, the “Partners”) pursuant to which the Company ~~purchased 2,623,120 shares~~and Jupiter formed a partnership pursuant to the provisions of Class B Common Stock and 4,298,496 Private Placement Warrants, each of which is exercisable to purchase one share of Class A Common Stock of Gladstone Acquisition Corp., a Delaware corporation (NASDAQ: GLEE) (the "~~SPAC~~~~"), from Gladstone Sponsor, LLC ("~~~~Original Sponsor~~~~") for $1,500,000~~The Indian Partnership Act 1932 (the “~~Purchase Price~~~~”).~~
In addition to the payment of the Purchase Price, the Company also assumed the following obligations: (i) responsibility for all of SPAC’s public company reporting obligations, (ii) the right to provide an extension payment and extend the deadline of the SPAC to complete an initial business combination from 15 months from August 9, 2021 to 18 months for an additional $1,150,000, and (iii) all other obligations and liabilities of the Original Sponsor related to the SPAC.
On October 14, 2022, the Company and GHS agreed that the Company would issue and sell to GHS, and GHS would purchase from the Company, 30,538,303 shares of Common Stock for total proceeds to the Company, net of discounts, of $500,000, at an effective price of $0.0140339 per share (the “~~Closing~~Act”). The name of the partnership is “OM DarkPulse Infratech” (the “Partnership”) and its purpose is to jointly work on infrastructure projects in India. The Partnership will commence on the effective date and will continue for 12 months, unless earlier dissolved and terminated pursuant to the Act or any other provisions in the agreement. The Partnership will also be automatically extended for additional 12-month terms unless terminated upon written notice by either of the Partners upon 90 days prior written notice prior to termination of the Partnership pursuant to the terms in the agreement. No contributions have been made to date.
On August 7, 2023, the Company ~~received approximately $463,975 in net proceeds~~entered into a convertible note for a principal of $57,750. The note bears interest at a rate of 10% per annum and matures after one year. Following 180 days from the ~~Closing after deducting~~note, the ~~fees and other estimated offering expenses payable by the Company. The Company used the net proceeds from the Closing for working capital and for general corporate purposes.~~noteholder may convert at a discount of 39%.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. 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 consolidated financial statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the United States.

Use of Estimates
The preparation of ~~these~~the Company’s financial statements in conformity with GAAP requires management to make estimates ~~judgments~~ and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and ~~related disclosures of contingencies. We continually evaluate the accounting policies and estimates~~assumptions reflected in these financial statements include, but are not limited to, assumptions used to ~~prepare the financial statements. We base our~~calculate derivative liabilities, revenue recognition and impairment of long-lived assets. The Company bases its estimates on historical ~~experiences~~experience, known trends and ~~assumptions believed~~other market-specific or other relevant factors that it believes to be reasonable under ~~current~~the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and ~~circumstances.~~experience. Changes in estimates are recorded in the period in which they become known. Actual ~~amounts and~~ results could differ from those estimates.
Long-Lived Assets and Goodwill
The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35, Property, Plant and Equipment, Impairment or Disposal of Long-lived Assets. This accounting standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.
Indefinite-lived intangible assets established in connection with business combinations consist of the tradename. The impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other. Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. This guidance simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. The quantitative impairment test calculates any goodwill impairment as the difference between the carrying amount of a reporting unit and its fair value, but not to exceed the carrying amount of goodwill. It is our practice, at a minimum, to perform a qualitative or quantitative goodwill impairment test in the fourth quarter every year. The Company has one reporting unit it evaluates during its impairment test.
In determining the fair value of the reporting unit, management estimated the price that would be received to sell the reporting unit as a whole in an orderly transaction between market participants at the measurement date. This includes reviewing market comparables such as revenue multipliers and assigning certain assets and liabilities to the reporting units, such as the respective working capital deficits of each entity and debt obligations that would need to be assumed by a market participant buyer in an orderly transaction. The Company calculated the carrying amounts of the reporting unit by utilizing the entities’ assets and liabilities at December 31, 2022, including the carrying value of the identifiable intangible assets and goodwill assigned to the respective reporting unit.
The Company recorded impairment expense of intangibles and goodwill of $12,222,598 upon its annual impairment test during the year ended December 31, 2022. In the three months ended March 31, 2023, the Company evaluated changes in circumstances as a result of the Optilan Liquidation which indicated that the carrying amount of Optilan’s long-lived assets may not be recoverable. As such, the Company recorded impairment expense of intangibles of $356,260 and goodwill of $6,452,906.
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Revenue Recognition
The Company’s revenues are generated primarily from the sale of our services, which consist primarily of advanced technology solutions for integrated communications and security systems, as well as habitat management. The Company’s sales of products are primarily generated from our TJM subsidiaries. Sales of products and services are separate from one another. 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 recognize service revenues as the performance obligations are met, which is generally as milestones are satisfied over time. 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.
The Company considers each individual sale of service contract to be its own performance obligation. Services in the contract are highly interdependent and interrelated, and the successful completion of each milestone is necessary for the overall success of the contract. Therefore, each milestone is not separately identifiable from other promises in the contract, and not distinct and ultimately not individual performance obligations.
The Company records revenue over time using the output measure as it is the most faithful depiction of an entity’s performance because it directly measures the value of the goods and services transferred to the customer. The Company utilizes the Right to Invoice for these ~~estimates made by management.~~contracts, as the pricing structure is based on various milestones that are specified in the contract. These milestones include Construction Phase Plan, Start of the construction phase, installation phase, site surveys, fiber splicing, recoveries, and closeouts. There are specified payments associated with these milestones in the contract, and the value allocated is commensurate with work done. In the event that there are advances such as upfront retainers and not based on the value, those are recorded as contract liabilities.
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.
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Business Overview

DarkPulse, Inc., a Delaware corporation (the “Company” or “DarkPulse”), is a technology and research and development 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 Houston, DarkPulse is a globally-based technology company with presence through its subsidiaries in the United Kingdom, India, Dubai, Abu Dhabi, Turkey, Azerbaijan, ~~Iraq, Libya, Egypt, Brazil,~~ 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, oil and gas pipeline leak detection, physical security services, telecommunications and satellite communications services, artificial intelligence-based camera systems, railway monitoring services, drone and rover systems, and Big Data as a Service (“~~BDaaS”~~BDaaS”). The Company is focused on expanding services through acquisitions and partnerships to address global infrastructure and critical environmental resource challenges.
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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 eight 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 and movement of personnel and 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~~Subsidiaries

~~The Company’s operating units~~Our subsidiaries consist of, Optilan, a company headquartered in Coventry, United Kingdom whose focus is in telecommunications, energy, rail, critical network infrastructure, pipeline integrity systems, renewables and security; Remote Intelligence, Limited Liability Company, a company headquartered in Pennsylvania who provides unmanned aerial drone and unmanned ground crawler (UGC) services to a variety of clients from industrial mapping and ecosystem services, to search and rescue, to pipeline security; Wildlife Specialists, Limited Liability Company, a company headquartered in Pennsylvania who provides clients with comprehensive wildlife and environmental assessment, planning, and monitoring services; TerraData Unmanned, PLLC, a company headquartered in Florida who custom manufactures NDAA compliant drones and unmanned ground crawlers to meet the needs of its customers; and TJM Electronics West, Inc., a company headquartered in Arizona who is a U.S. manufacturer and tester of advanced electronics, cables and sub-assemblies specializing in advanced package and complex CCA and hardware.

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Recent Events

Liquidation/winding up of Optilan (UK) Limited
On May 3, 2023, Eversheds Sutherland (International) LLP, a creditor of Optilan (UK) Limited, filed a petition to wind up (“Winding up Petition”) Optilan (UK) Limited, a wholly owned subsidiary of the Company’s Subsidiary, Optilan HoldCo 3 Limited, and the matter was due to be heard in the Portsmouth Combined Court Centre on June 28, 2023.
On June 28, 2023, the High Court of Justice in the United Kingdom issued a winding-up order for the liquidation and winding up of the affairs of Optilan (UK) Limited (“Optilan Liquidation”). In conjunction with the order, the court appointed the Offical Receiver’s Office (“OR”) to take the appointment as liquidator of Optilan (UK) Limited and take control of Optilan (UK) Limited’s assets.
On July 3, 2023, Optilan (UK) Limited received a letter from The Insolvency Service, an executive agency sponsored by the Department for Business and Trade located in the U.K. Pursuant to the letter of The Insolvency Services, the Company was required to provide information relating to Optilan (UK) Limited to the Official Receiver’s Office (a government body of Plymouth, the United Kingdom) and attend an interview with staff of the Official Receiver’s Office to review the prospect of recovering the assets of Optilan (UK) Limited for the benefit of creditors. The interview is scheduled for July 18, 2023.
No order confirming a plan of reorganization, arrangement or liquidation has been entered as of this filing. The Company is an Unsecured creditor of Optilan (UK) Limited and is at risk of losing any repayment of obligations due from Optilan (UK) Limited because there are several intercompany relationships between the Company and Optilan (UK) Limited, the financial impact of any future claims and liabilities may not be known for several months. The Company has approximately $19.4 million intercompany payables due from Optilan (UK), which will increase the Company liabilities for any obligations not repaid. The Company expects the remaining assets held by Optilan (UK) Limited to be fully impaired and reported as discontinued operations during the second quarter of 2023 as a result of the winding-up order for liquidation. At the time of this filing the Company is still evaluating the full effects of the winding-up order for liquidation and the material adverse effects it will have on the Company’s continued operations and ability to meet future obligations.
The Company evaluated the events and circumstances of Optilan (UK) Limited liquidation and determined that conditions existed as of March 31, 2023 to indicate that the carrying value of the Company’s goodwill and intangible assets may not be recoverable. Refer to Notes 2 and 7 for further detail on the impairment analysis. The Company expects the remaining assets held by Optilan (UK) Limited to be fully impaired during the second or third quarter of 2023 as a result of the winding-up order for liquidation.
Lasty, the Company performed an analysis of the trade receivables related to Optilan (UK) Limited and determined that an additional $2,364,977 may not be collectible pursuant to the Optilan Liquidation. As of March 31, 2023, the Company recorded a bad debt provision for this amount.
Optilan (UK) Limited has the following assets as of March 31, 2023, including in the accompanying unaudited condensed consolidated balance sheet are as follows:
March 31,
2023
Contract assets $ 1,224,047
Property and equipment, net $ 991,480
Operating lease right-of-use assets $ 1,528,544
Financings

On ~~November 9, 2021,~~May 27, 2022 we entered an Equity Financing Agreement (the “~~Equity Financing Agreement~~~~”) and Registration Rights Agreement (the “~~~~GHS Registration Rights Agreement~~~~”) with GHS, pursuant to which GHS agreed to purchase up to $30,000,000 in shares of our Common Stock, from time to time over the course of 24 months (the “~~~~Contract Period~~~~”) after effectiveness of a registration statement on Form S-1 (the “~~~~Registration Statement~~~~”) of the underlying shares of Common Stock.~~
The GHS Registration Rights Agreement provides that we shall (i) use our best efforts to file with the SEC a Registration Statement within 45 days of the date of the GHS Registration Rights Agreement; and (ii) have the Registration Statement declared effective by the SEC within 30 days after the date the GHS Registration Statement is filed with the SEC, but in no event more than 90 days after the GHS Registration Statement is filed.
~~Below is a table of all puts made by the Company under the Equity Financing Agreement during 2022:~~
Date of Put Number of Shares Sold Total Proceeds, Net of Discounts Effective Price per Share Net Proceeds
1/12/22 23,372,430 $1,150,000 $0.054124 $1,033,975
1/21/22 33,454,988 $1,150,000 $0.037812 $1,033,975
2/7/22 16,040,411 $500,000 $0.0342884 $448,975
3/23/22 29,257,395 $1,500,000 $0.056396 $1,348,975
4/11/22 23,746,816 $1,000,000 $0.04211091 $898,975
5/3/22 29,522,276 $1,000,000 $0.03387273 $898,975
5/13/22 26,100,979 $556,750 $0.0213306 $500,050
5/23/22 25,025,540 $556,750 $0.0222473 $500,050
6/1/22 25,901,921 $556,750 $0.02149454 $500,050
6/16/22 23,799,766 $402,086 $0.018584 $360,852
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~~On February 21,~~ 2022 ~~we sold 75,798,921 shares of our Common Stock at $0.032982 per share for total consideration of $2,500,000.~~
~~On March 3, 2022, we sold 16,579,569 shares of our Common Stock at $0.0301576 per share for total consideration of $500,000.~~
~~On March 14, 2022, we sold 5,617,347 shares of our Common Stock at $0.071208 per share for total consideration of $400,000.~~
~~On May 27, we entered an Equity Financing Agreement (the “~~EFA”) and Registration Rights Agreement (the “RRA”) with GHS, pursuant to which GHS agreed to purchase up to $70,000,000 in shares of our Common Stock, from time to time over the course of 24 months after effectiveness of a registration statement on Form S-1 ~~(the “~~~~Registration Statement~~”) of the underlying shares of Common Stock.

The RRA provides that we shall (i) use our best efforts to file with the SEC a ~~Registration Statement~~registration statement within 45 days of the date of the GHS Registration Rights Agreement; and (ii) have the ~~Registration Statement~~registration statement declared effective by the SEC within 30 days after the date the GHS ~~Registration Statement~~registration statement is filed with the SEC, but in no event more than 90 days after the ~~GHS Registration Statement~~registration statement is filed.

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Below is a table of all puts made by the Company under the 2022 EFA during ~~2022:~~2023:
Date of Put Number of Common Shares Issued Total Proceeds, Net of Discounts Effective Price per Share Net Proceeds
1/12/2023 64,130,435 $ 400,000 $0.006237 $ 370,975
1/24/2023 77,733,861 400,000 $0.005146 370,975
2/3/2023 61,173,706 300,000 $0.004904 277,975
2/17/2023 75,447,571 300,000 $0.003976 277,975
3/1/2023 83,113,044 324,000 $0.003898 300,295
3/16/2023 93,165,852 254,232 $0.002729 235,410
3/30/2023 65,465,384 166,903 $0.002549 154,195
520,229,853 $ 2,145,135 $ 1,987,801

Date of Put Number of Shares Sold Total Proceeds, Net of Discounts Effective Price per Share Net Proceeds
6/24/22 38,391,106 $643,539 $0.01978 $578,160
7/1/22 33,525,465 $556,750 $0.019596 $500,050
7/11/22 32,756,532 $556,750 $0.01699661 $550,050
7/20/22 29,386,519 $556,750 $0.01894558 $550,050
7/28/22 35,884,040 $556,750 $0.018308 $500,050
8/10/22 44,505,857 $680,109 $0.015281 $611,073
8/18/22 54,574,909 $948,863 $0.017386441 $852,952
8/25/22 105,255,759 $2,264,961 $0.021518644 $2,128,038
9/2/22 140,073,757 $3,000,000 $0.021417288 $2,788,975
9/14/22 79,092,686 $1,757,466 $0.022220339 $1,757,466
9/30/22 30,538,303 $500,000 $0.0163729 $463,975
On January 17, 2023, we entered into a Stock Purchase Agreement with an investor for the purchase of 11,441,647 shares of Common Stock in exchange for $100,000.

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.
Going Concern Uncertainty

As shown in the accompanying financial statements, we generated net losses of $14,799,264 and $5,384,270 during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~the Company reported a~~respectively, and net ~~loss~~cash used in operating activities of ~~$18,375,506.~~$2,323,783 and $6,288,501, respectively. As of ~~September 30, 2022, the Company’s~~March 31, 2023, our current liabilities exceeded its current assets by ~~$6,314,789.~~$ 15,955,423 and has an accumulated deficit of $60,574,902. As of ~~September 30, 2022,~~March 31, 2023, we had $545,970 of cash. Lastly, the ~~Company had $5,967,984~~Optilan Liquidation raises serious concerns about the viability of ~~cash.~~the Optilan (UK) Limited entity and related operations of the Optilan subsidiaries.

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 substantial 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.
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Foreign Currency Risk

In general, the Company is a net receiver of currencies other than the U.S. dollar. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, will negatively affect the Company’s net sales and gross margins as expressed in U.S. dollars. There is a risk that the Company will have to adjust local currency product pricing due to competitive pressures when there has been significant volatility in foreign currency exchange rates.

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Results of Operations

~~Revenues~~The Company’s revenues are generated primarily from the sale of our services, which consist primarily of advanced technology solutions for integrated communications and security systems, as well as habitat management. The Company’s sales of products are primarily generated from our TJM subsidiaries.

~~During previous years, the Company experienced no revenue as it developed its technology. More recently, we have experienced revenue derived from the acquisitions of our subsidiaries from the 3~~^rd ~~quarter of 2021 to the present.~~ The Company’s ~~new~~future revenues ~~are~~will be derived from the following, among other ~~things:~~things.

· promote adoption if our patented technology through agency and distribution agreements;
· cross-selling existing customer with products from other subsidiaries;
· provide a wide array of diverse services, including enhanced or additional services that may become available in the future due to, among other things, advances in technology or improvements in our infrastructure;
· ~~provide our premium services to a higher percentage of our customers;~~
· pursue acquisitions of additional assets, in each case if available at attractive prices; and
· market our products and services to new customers.

While 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, the Company also maintains multiple contracts for future material revenues, including part of framework contracts that will be recognized during future reporting periods.

For the three months ended ~~September 30, 2022,~~March 31, 2023, total revenues were ~~$1,431,104~~$1,537,833 compared to ~~$3,500,970~~$2,018,333 for the ~~same period in 2021,~~three months ended March 31, 2022, a decrease of ~~$2,069,866. This~~$480,500. The decrease was primarily ~~consisted~~due to lower revenues achieved by Wildlife and Optilan due to decreased operations given capital and resources restraints. The breakdown of revenues ~~of $841,876 from Optilan, $385,529 from Wildlife Specialists~~by entity for the three months ended March 31, 2023 and ~~$139,225 from TJM Electronics~~2022 is as ~~well as $64,474 from the remaining subsidiaries.~~follows:

For the nine months ended September 30, 2022, total revenues were $7,884,480 compared to $3,500,970 for the same period in 2021, an increase of $4,383,510. This increase primarily consisted of revenues of $6,760,818 from Optilan, $589,986 from Wildlife Specialists and $434,459 from TJM Electronics as well as $99,217 from the remaining subsidiaries.
Three Months Ended
March 31,
2023 2022
Optilan $ 1,318,567 $ 1,467,203
Wildlife 40,155 306,548
TJM 120,172 174,266
Remote Intelligence – 24,816
TerraData 58,939 45,500
$ 1,537,833 $ 2,018,333

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Cost of ~~Goods Sold~~Revenues and Gross Margin

For the three months ended ~~September 30, 2022,~~March 31, 2023, cost of ~~goods sold were $5,804,875~~revenues was $1,226,792 compared to ~~$2,767,239~~$2,348,567 for the ~~same period~~three months ended March 31, 2022, a decrease of $1,121,775.
Gross profit (loss) for the three months ended March 31, 2023 was $311,041 with a gross margin of 20.2% compared to $(330,234) for the three months ended March 31, 2022 with a (16.4)% gross margin. During 2022, it was realized that certain fixed price quoted contracts, with design and execution issues, prolonged the completion of the projects. This resulted in ~~2021, an increase of $3,037,636. This increase primarily consisted of $2,500,000 of additional cost of goods sold~~significant excess costs related to ~~a contract with National Grid (which was entered into prior to~~labor, subcontractor, and material costs. The Company has adequately reserved for these costs through completion of the ~~Company’s acquisition of Optilan and valued at £25,411,720) that the Company’s subsidiary, Optilan, is~~projects in the ~~final stages~~third quarter of ~~completing after more than five years. The project took significantly longer to complete than originally quoted and unfortunately~~2023. Unfortunately, there was very little foresight tointo the magnitude of the loss. The Company believes that this is not a recurring issue with Optilan and/or its business model, but more specifically related to the factors surrounding this project which included but not limited to initial issues with the quote and the associated agreement, delays due to Covid-19 and current inflation rates.model. The Company has ~~taken~~undertaken internal procedures during its bid process to assure that such ~~practuces~~practices will not occur in the future.
~~For the nine months ended September 30, 2022, cost of goods sold were $12,119,352 compared~~ In 2023, gross profit increased due to ~~$2,767,239 for the same period in 2021, an increase of $9,352,113. This increase primarily consisted of $2,500,000 of additional cost of goods sold~~more normalized costs related to ~~a contract with National Grid (which~~revenue as Optilan performed new, profitable projects. Approximately $240,000 of the gross profit was ~~entered into prior~~due to the ~~Company’s acquisition of Optilan and valued at £25,411,720) that the Company’s subsidiary, Optilan, is in the final stages of completing after more~~fiber business which generates higher gross profits than five years. The project took significantly longer to complete than originally quoted and unfortunately there was very little foresight to the magnitude of the loss. The Company believes that this is not a recurring issue with Optilan and/or its business model, but more specifically related to the factors surrounding this project which included but not limited to initial issues with the quote and the associated agreement, delays due to Covid-19 and current inflation rates. The Company has taken internal procedures during its bid process to assure that such practuces will not occur in the future.other projects.
~~Gross margin for the three months ended September 30, 2022 was $(4,373,771) with a gross margin of (305.6)% compared to $733,731 for the same period in 2021 with a 21.0% gross margin.~~
~~Gross margin for the nine months ended September 30, 2022 was $(4,234,872) with a gross loss margin of (677.2)% compared to $733,731 for the same period in 2021 with a gross margin of 21.0%.~~

Operating Expenses

Selling, general and administrative expenses for three months ended ~~September 30, 2022~~March 31, 2023 increased by ~~$1,091,777, or 268,.3%,~~$35,625 to ~~$1,498,717~~$1,013,833 from ~~$406,940~~$978,208 for the three months ended ~~September 30, 2021.~~March 31, 2022. The increase primarily consisted of an increase ~~to the operations from our various acquisitions.~~in advertising costs, insurance and information technology expenses.

~~Selling, general~~Salaries, wages and administrative expenses for nine months ended September 30, 2022 increased by $3,047,533, or 573.1%, to $3,579,326 from $531,793 for the nine months ended September 30, 2021. The increase primarily consisted of an increase to the operations from our various acquisitions.
~~Payroll related expenses~~payroll taxes for three months ended ~~September 30, 2022, increased~~March 31, 2023 decreased to ~~$1,760,531~~$1,547,208 from ~~$1,007,453~~$1,972,067 for the three months ended ~~September 30, 2021.~~March 31, 2022. The ~~increase~~decrease primarily consisted of reduced headcount at each subsidiary.
The Company performed an ~~increase~~analysis of the trade receivables related to Optilan (UK) Limited and determined that an additional $2,364,977 may not be collectible pursuant to the ~~numbers~~Optilan Liquidation. As of ~~employees inherited from our various acquisitions.~~
~~Payroll related expenses~~March 31, 2023, the Company recorded a bad debt provision for nine months ended September 30, 2022, increased to $5,108,775 from $1,007,453 for the nine months ended September 30, 2021. The increase primarily consisted of an increase to the numbers of employees inherited from our various acquisitions.this amount.

Professional fees for the three months ended ~~September 30, 2022, decreased by $209,636~~March 31, 2023 increased to ~~$1,471,264~~$2,950,698 from ~~$1,680,600~~$1,538,103 for the three months ended ~~September 30, 2021. This decrease primarily consisted of decreased legal expenditures associated with the current decrease in litigation activity.~~
~~Professional fees for the nine months ended September 30, 2022, increased by $2,588,394 to $4,489,966 from $1,901,572 for the nine months ended September 30, 2021.~~March 31, 2022. This increase primarily consisted of ~~increased~~$1,989,900 in non-cash expenses due to the issuance of common stock per the settlement of an litigation matter, partially offset by lower legal ~~expenditures associated with the increase~~fees incurred in ~~litigation.~~2023.

During the three months ended March 31, 2022, the Company recorded a gain on forgiveness of payables of $35,750.

As a result of the Optilan Liquidation as described in Note 1, management determined that certain events and circumstances occurred that indicated that the carrying amount of the Company’s reporting unit may not be recoverable as of March 31, 2023. The qualitative assessment was primarily due to the customer contracts held by Optilan (UK) Limited at March 31, 2023 and the associated revenue projections by the UK subsidiary that is subject to the potential winding up. As such, the Company compared the fair value of the reporting unit to the carrying amounts and recorded an impairment loss of $6,809,166 pertaining to impairment and goodwill in the consolidated statements of operations. The Company recorded impairment of the indefinite-lived intangible asset of $356,260, and impairment of goodwill of $6,452,906.
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Depreciation and amortization for three months ended ~~September 30,~~March 31, 2023 and 2022 increased by $506,748 to $597,970 from $91,222 for the three months ended September 30, 2021. This increase is primarily due to the increase in the depreciable assets we acquired from new acquisitions in other countries.
~~Depreciation~~was $231,234 and amortization for nine months ended September 30, 2022, increased by $717,253 to $833,989 from $116,736 for the nine months ended September 30, 2021. This increase is primarily due to the increase in depreciable assets we acquired from new acquisitions.$228,614, respectively.

Other Income (Expense)

For the three months ended ~~September 30, 2022,~~March 31, 2023, we had other ~~expense~~expenses of ~~$896,585~~($193,189) compared to other ~~expense~~expenses of ~~$798,655~~($372,794) for the ~~same period in 2021, an increase in expense of $97,930. This increase~~three months ended March 31, 2022. The decrease in other ~~income~~expenses was primarily ~~consisted of a $70,289 decrease in the fair value of the Company’s derivative instruments, $426,073 of loss on foreign currency exchange rate variance, and a decrease in~~due to lower interest expense ~~of $489,552 due to changes~~ in ~~borrowings associated with acquisitions.~~
For the nine months ended September 30, 2022, we had other income of $128,578 compared to other expense of $1,084,462 for the same period in 2021, a decrease in expense of $1,213,040. This increase in other income primarily consisted of changes of $501,431 of restructuring costs, $237,445 increase in the fair value of the Company’s derivative instruments, $218,039 of loss on foreign currency exchange rate variance, an decrease in interest expense of $321,532 due to changes in borrowings associated with acquisitions.2023.

Net Loss

As a result of the above, we reported a net loss of ~~$8,805,668~~$14,799,264 and ~~$1,686,829~~$5,384,270 for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

~~As a result of the above, we reported a net loss of $18,375,506 and $1,924,311 for the nine months ended September 30, 2022 and 2021, respectively.~~
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Liquidity and Capital Resources

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, 2022,~~March 31, 2023, we had ~~$11,378,400~~$2,087,801 in ~~new~~ cash proceeds from our equity financings compared to ~~the three months ended September 30, 2021, when we had no new cash proceeds.~~$7,700,000 in 2022.

As of ~~September 30, 2022,~~March 31, 2023, we had cash of ~~$5,967,984,~~$545,970 compared to ~~$2,564,492~~$2,060,332 as of ~~September 30, 2021.~~December 31, 2022. We currently do not have sufficient cash to fund our operations for the next 12 months and we will require working capital to complete development, testing and marketing of our products and to pay for ongoing operating expenses. We anticipate adding consultants for technology development and the corresponding operations of the Company, but this will not occur prior to obtaining additional capital. Management is currently in the process of looking for additional investors. Currently, loans from banks or other lending sources for lines of credit or similar short-term borrowings are not available to us. We have been able to raise working capital to fund operations through the issuances of convertible notes or obtained through the issuance of our restricted common stock. As of ~~September 30, 2022,~~March 31, 2023, our current liabilities exceeded our current assets by ~~$6,314,789.~~$15,955,423. Lastly, the Optilan Liquidation raises serious concerns about the viability of the Optilan (UK) Limited entity and related operations of the Optilan subsidiaries.

Several of our significant operating subsidiaries have borrowed funds from DarkPulse. The terms of the instruments governing the indebtedness of these borrowers or borrowing groups may restrict our ability to access their accumulated cash. In addition, our ability to access the liquidity of these and other subsidiaries may be limited by tax, legal and other considerations.

31
Our executive officers and our Board of Directors review our sources and potential uses of cash in connection with our annual budgeting process and whenever circumstances warrant. Generally speaking, our principal funding source is cash from financing activities, and our principal cash requirements include loans to our operating subsidiaries, operating expenses, and capital expenditures,

For the remaining 12 month period ending September 30, 2023, we project that our subsidiaries will begin to operate with their own operating activities and reduce their dependency on the financing activities of DarkPulse.
~~For additional information, see "Risk Factors—Financial Risks" in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021.~~
Cash Flows From Operating Activities

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023, net cash used by operating activities was $2,323,783 resulting from our net loss of $14,799,264 partially offset by non-cash charges of $11,491,421 primarily driven by impairment charges, bad debt expense and the issuance of common stock for a legal settlement. In 2023, we had cash provided by our operating assets and liabilities of $984,059 primarily driven by increases in accounts payable and contract liabilities.
During the three months ended March 31, 2022, net cash used by operating activities was ~~$19,456,701,~~$6,288,501, resulting from our net loss of ~~$18,375,506~~$5,384,270, partially offset by non-cash gains of $372,413. In 2022, we had cash used in our operating assets and ~~an increase in expenses related to our inventory of $604,406 and operating lease~~ liabilities of ~~$86,511. These~~$531,817 primarily due to increases ~~were offset by a decrease in derivative liability of $237,445, increase in accounts payable and accrued expenses of $2,949,406 and an increase from restructuring costs of $501,431, decrease~~ in accounts receivable ~~of $692,746, decrease in unbilled revenue of $178,748~~ and ~~decrease in~~ contract ~~liability of $833,876.~~
~~By comparison, 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~~assets partially offset by ~~an increase in non-cash expenses of stock based loan acquisition costs of $649,334 and the amortization of debt discount of $404,087 offset by gain on the extinguishment of debt of $785,240 and~~ increases in accounts payable and ~~accrued liabilities of $4,362,016 and~~ contract ~~liability of $1,439,504~~liabilities.

Cash Flows From Investing Activities

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023, we had net cash used in investing activities of $817,749, including $167,894 in notes and $449,110 in advances to GSD, as well as our joint venture investment of $98,125 and purchase of property and equipment of $102,350.
During the three months ended March 31, 2022, we had net cash used in investing activities of ~~$594,310. During the nine months ended September 30, 2021, net cash used by investing activities was $546,765.~~$64,980 due to deposits.

Cash Flows From Financing Activities

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023, net cash provided by financing activities was $2,061,762 which was primarily comprised of proceeds from the sale of common stock of $2,087,801, less net repayments of loans of $26,039.
During the three months ended March 31, 2022, net cash provided by financing activities was ~~$23,794,275 which was~~$7,700,000, comprised of proceeds from the sale of common stock from offering of $23,794,275. During the nine months ended September 30, 2021, net cash used by financing activities was $10,718,100, which was comprised of proceeds from the sale of common stock from offering of $8,000,000, proceeds from issuance of convertible notes payable of $1,102,700 and proceeds from notes payable of $2,000,000 less repayment of notes payable of $384,600.$7,700,000.
34

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.

32
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

WeIn April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which amends and clarifies several provisions of Topic 326. In May 2019, the FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which amends Topic 326 to allow the fair value option to be elected for certain financial instruments upon adoption. ASU 2019-10 extended the effective date of ASU 2016-13 until December 15, 2022. The Company adopted this new guidance, including the subsequent updates to Topic 326, on January 1, 2023 and the adoption did not have ~~provided~~ a ~~discussion of recent accounting pronouncements in Note 1 to~~material impact on the ~~Condensed Financial Statements.~~Company’s condensed consolidated financial statements and related disclosures.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, the Company has elected not to provide the disclosure required by this item.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We have established disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and, as such, is accumulated and communicated to our Chief Executive Officer, Dennis O’Leary, who serves as our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Mr. O’Leary, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of ~~September 30, 2022.~~March 31, 2023. Based on his evaluation, Mr. O’Leary concluded that the Company’s disclosure controls and procedures were not effective as of ~~September 30, 2022.~~March 31, 2023.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during our quarter ended ~~September 30, 2022,~~March 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

3335

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

~~DarkPulse, Inc. v. Twitter, Inc.~~
~~As disclosed in greater detail in~~See Note 14 to the ~~Company’s Form 10-K, filed April 15, 2022, the Company’s investigation of the Investor News matter remains ongoing.~~unaudited consolidated condensed financial statements.

On October 21, 2022, the Company filed a petition against Twitter, Inc. in the Supreme Court of the State of New York County of New York to compel disclosure of the owner(s) and operator(s) of two certain Twitter accounts: “Mike Wood” (@MIKEWOOD) and “Bull Meechum” (@BullMeechum3). The petition seeks disclosure of the owner(s) and operator(s) of the aforementioned accounts so the Company can commence an action against such individuals for damages arising from false, misleading, and untrue statements made by the same.
On October 25, 2022, the court signed an order to show cause directing Twitter to show cause on or before November 4, 2022 as to why an order compelling disclosure of the identities of the owner(s) / operator(s) of the @MIKEWOOD and @BullMeechum3 Twitter accounts should not be made.
~~Carebourn Capital, L.P. v. DarkPulse, Inc.~~
As disclosed in greater detail in the Company’s Form 10-Q, filed August 10, 2022, the Company remains in active litigation with Carebourn Capital, L.P. (“Carebourn”) in Minnesota State Court. There are no material updates to this litigation.
~~The Company remains committed to actively litigating its affirmative defenses and claims for relief under the Securities Exchange Act of 1934.~~
~~More Capital, LLC~~Benner et al v. DarkPulse, Inc. et al

~~As disclosed in greater detail~~On March 29, 2023, J. Merlin Benner, Phillip J. Benner, Benjamin P. Benner, Jonas M. Benner, and Angelica M. Benner (collectively, the “Benner Parties”) commenced an action in the ~~Company’s Form 10-Q, filed August 10, 2022,~~United States District Court for the Southern District of Texas against the Company ~~remains~~and its Chief Executive Officer, Dennis O’Leary, individually, alleging (i) the Company is in ~~active litigation~~breach of contracts between the Company and the Benner Parties as it concerns Remote Intelligence, LLC and Wildlife Specialists, LLC, (ii) violation of Texas Uniform Fraudulent Transfer Act by the Company, and (iii) defamation by Mr. O’Leary.
On June 30, 2023, the Company and Mr. O'Leary filed their Answer to the Benner Parties' Complaint. The Company intends to vigorously defend itself against the Benner Parties’ lawsuit.
Optilan (UK) Limited – Compulsory Liquidation
On June 28, 2023, an order was made by the English courts to place Optilan (UK) Limited (“Optilan UK”) into compulsory liquidation. Compulsory liquidation is a formal, legal insolvency procedure that results in a company being forcibly liquidated by the courts. The process was initiated by the presentation of a winding petition served on Optilan UK by an unpaid creditor. Optilan UK was unable to settle the creditor payment ahead of the wining up hearing in court and consequently, the court made an order for the company to be wound up/liquidated. At the point the order was made, Optilan UK ceased operating, and the directors’ powers ceased. All employment contracts terminated as did other contractual relationships with ~~More Capital, LLC (“More”~~clients and customers whose contracts allowed for termination following the company’s entry into liquidation. We understand the other companies in the Optilan group remain solvent and continue to operate.
At the same time, the court appointed the Official Receiver's Office (the “OR”) ~~in Minnesota State Court. There are no material updates~~ to ~~this litigation.~~take the appointment as liquidator of Optilan UK. An official receiver is a licensed insolvency practitioner who has been appointed by the courts to ensure the company is wound down as per the compulsory order. The OR has taken control of the Optilan UK’s assets.

The ~~Company remains committed~~primary objective of the OR, who is also an officer of the court, is to ~~actively litigating its affirmative defenses~~repay as much as possible to the creditors. The OR will undertake an initial interview with the directors to identify urgent matters, and ~~claims for relief under~~thereafter undertake a full interview with the ~~Securities Exchange Act of 1934.~~directors to further their investigation work. The OR will also conduct a separate interview as regards the directors’ conduct and report this back to the Insolvency Service.

~~Goodman et al. v.~~Creditors can also nominate their own choice of liquidator to replace the OR. The OR will consider nominations from creditors and ordinarily the largest unsecured creditor will be able to appoint their own choice of liquidator. The liquidator acts in the interests of all creditors. It is the intention for DarkPulse ~~Inc.~~(as largest unsecured creditor of Optilan UK) to try and replace the liquidator for one of its choice.

~~As disclosed~~The liquidator's fees are generally paid out of the company's assets. The liquidator must make payment to creditors in greater detail in the Company’s Form 10-Q, filed November 15, 2021, on September 10, 2021, Stephen Goodman, Mark Banash, and David Singer (“Former Officers”) commenced suit against the Company in Arizona Superior Court, Maricopa County.a particular order as set out below:

~~As of the date hereof, the Company is engaged in settlement negotiations with the Former Officers.~~
· Secured creditors with a fixed charge;
· Liquidator fees;
· Preferential creditors (employees);
· Secondary preferential creditors (HMRC);
· Secured creditors with a floating charge; and
· Unsecured creditors (which includes DarkPulse debts). Unsecured creditors rank equally.

3436

The main result of compulsory liquidation is the complete dissolution of the business of Optilan UK. However, assets of Optilan UK can be purchased at fair market value. DarkPulse ~~Inc. v. FirstFire Global Opportunities Fund, LLC, and Eli Fireman~~has expressed a desire to acquire certain assets of Optilan UK from the liquidator.

~~As disclosed~~If DarkPulse does not purchase the assets of Optilan UK, the liquidator will go out to competitors and may try to find a buyer. If they cannot find one, any contracts will be disclaimed (cannot be performed), and tangible assets will be disposed of at auction to get the best price.
Most liquidations take around 6 to 12 months to conclude. This period usually affords the liquidator sufficient time to dispose of the company’s assets, agree creditor claims and make a distribution to creditors (if there are any funds available), conclude the company’s tax affairs and fill the necessary closure paperwork.
During the process, the subsidiaries can continue to operate, and DarkPulse can support those operations as well as attempt to sign new contracts with the current customers of Optilan UK.
From time to time, we may become involved in ~~greater detail~~litigation relating to claims arising out of our operations in the ~~Company’s Form 10-Q, filed August 10, 2022, the Company remains~~normal course of business. We are not currently involved in ~~active~~any pending legal proceeding or litigation ~~with FirstFire Global Opportunities Fund, LLC (“FirstFire”),~~ and, ~~Eli Fireman (“Fireman”) (FirstFire and Fireman together, the “FirstFire Parties”).~~
~~As previously disclosed therein, the FirstFire Parties’ motion to dismiss the Company’s first amended complaint has been fully submitted~~ to the Court. On May 26, 2022, the FirstFire Parties requested oral arguments on their motion to dismiss. As of the date hereof, oral arguments have not been scheduled and, further, no decision has been rendered on the FirstFire Parties’ motion to dismiss.
~~The Company remains committed to actively litigating its claims for relief under the Securities Exchange Act of 1934.~~
~~DarkPulse, Inc. v. EMA Financial, LLC et al~~
As disclosed in greater detail in the Company’s Form 10-Q, filed August 10, 2022, the Company remains in active litigation with EMA Financial, LLC (“EMA”), EMA Group, Inc. (“EMA Group”), and Felicia Preston (“Preston”) (EMA, EMA Group, and Preston together, the “EMA Parties”).
As of July 22, 2022, the EMA Parties’ motion to dismiss the Company’s first amended complaint is fully submitted. As of the date hereof, no decision has been rendered on the EMA Parties’ motion to dismiss.
~~The Company remains committed to actively litigating its claims for relief under the Securities Exchange Act of 1934 and Racketeer Influenced and Corrupt Organizations Act.~~
~~Item 1A. Risk Factors~~
~~Foreign Currency Risk~~
~~Optilan, our wholly-owned subsidiary which is responsible for a large portion~~best of our ~~revenues~~knowledge, no governmental authority is ~~located in the United Kingdom. Foreign sales~~contemplating any proceeding to which we are a party or to which any of ~~products and services are primarily denominated in the British pound sterling, which~~our properties is subject, which would reasonably be likely to fluctuations due to changes in foreign currency exchange rates. Accordingly, we are subject to exposure from changes in the exchange rates of local currencies. Consequently, changes in the exchange rates of the currencies may impact the translation of the foreign subsidiaries’ statements of operations into U.S. dollars, which may in turn affecthave a material adverse effect on our ~~consolidated statement of operations.~~
~~We have not~~ ~~entered into any~~business, financial derivative instruments that expose us to material market risk, including any instruments designed to hedge the impact of foreign currency exposures. We may, however, hedge such exposure to foreign currency exchange rate ~~fluctuations in the future.~~condition and operating results.
35

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Below is a table of all puts made by the Company under the 2022 EFA during ~~the quarter ended September 30, 2022:~~2023:
Date of Put Number of Common Shares Issued Total Proceeds, Net of Discounts Effective Price per Share Net Proceeds
1/12/2023 64,130,435 $ 400,000 $0.006237 $ 370,975
1/17/2023* 11,441,647 100,000 $0.008740 100,000
1/24/2023 77,733,861 400,000 $0.005146 370,975
2/3/2023 61,173,706 300,000 $0.004904 277,975
2/17/2023 75,447,571 300,000 $0.003976 277,975
3/1/2023 83,113,044 324,000 $0.003898 300,295
3/16/2023 93,165,852 254,232 $0.002729 235,410
3/30/2023 65,465,384 166,903 $0.002549 154,195
531,671,500 $ 2,245,135 $ 2,087,801
* Issued shares pursuant to an individual stock purchase agreement (not under 2022 EFA)

Date of Put Number of Shares Sold Total Proceeds, Net of Discounts Effective Price per Share Net Proceeds
7/1/22 33,525,465 $556,750 $0.019596 $500,050
7/11/22 32,756,532 $556,750 $0.01699661 $550,050
7/20/22 29,386,519 $556,750 $0.01894558 $550,050
7/28/22 35,884,040 $556,750 $0.018308 $500,050
8/10/22 44,505,857 $680,109 $0.015281 $611,073
8/18/22 54,574,909 $948,863 $0.017386441 $852,952
8/25/22 105,255,759 $2,264,961 $0.021518644 $2,128,038
9/2/22 140,073,757 $3,000,000 $0.021417288 $2,788,975
9/14/22 79,092,686 $1,757,466 $0.022220339 $1,757,466
9/30/22 30,538,303 $500,000 $0.0163729 $463,975
37
Effective January 17, 2023, the Company entered into a Securities Purchase Agreement with George Thomas Rettas pursuant to which the Company sold 11,441,647 shares of Common Stock $0.0087 per share for gross proceeds of $100,000.

The shares above were issued in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) of Regulation D under the Securities Act, based in part on the representations of the investor. There were ~~$889,517~~$150,159 in sales commissions paid to J.H. Darbie & Co., Inc. (“J.H. Darbie”) pursuant to ~~these transactions.~~the 2022 EFA.
In January 2023, the Company entered into a settlement of a dispute between certain stockholders in which the Company decided, during the period ended March 31, 2023, to issue shares to settle the dispute. In January 2023, the Company issued 297,000,000 shares of common stock to the individuals. The fair value of $1,989,900, or $0.0067 per share, was included in professional fees in the consolidated statements of operations in the three months ended March 31, 2023.
The shares above were issued in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act.

Item 6. Exhibits

SEC Ref. No. Title of Document
10.1* ~~Exclusive Commercial Agency Agreement dated July 27, 2022 with Gulf Automation Services & Oilfield Supplies Company [Gasos] LLC~~
10.2* ~~Membership Purchase Agreement dated August 24, 2022 with Remote Intelligence, Limited Liability Company Wildlife Specialists, LLC~~
10.3* ~~Membership Purchase Agreement dated August 24, 2022 with Wildlife Specialists, LLC~~
31.1* Rule 13a-14(a) Certification by Principal Executive and Financial Officer
32.1** Section 1350 Certification of Principal Executive and Financial Officer
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
104* Cover Page Interactive Data File (formatted in Inline XBRL, and included in exhibit 101).

*Filed with this Report.
**Furnished with this Report.

3638

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DarkPulse, Inc.

Date: ~~November 4, 2022~~August 31, 2023 By /s/ Dennis O’Leary
Dennis O’Leary, Chairman, Chief Executive Officer, President, Chief Financial Officer
(Principal Executive Officer and Principal
Financial Officer)

3739


	September 30,
	2022 (unaudited)			December 31, 2021
ASSETS

CURRENT ASSETS:
Cash	$	5,967,984		$	3,658,846
Accounts receivable, net		3,531,244			4,223,990
Inventory		260,613			865,019
Unbilled revenue		319,025			497,773
Other current assets		868,597			181,000
TOTAL CURRENT ASSETS		10,947,463			9,426,628

NON-CURRENT ASSETS:
Property and equipment, net		1,712,950			1,787,824
Operating lease right-of-use assets		2,654,676			2,620,993
Patents, net		304,691			342,962
Intangible assets		3,098,379			3,886,588
Goodwill		15,286,010			17,088,501
Other assets, net		347,864			282,884
TOTAL NON-CURRENT ASSETS		23,404,570			26,009,752

TOTAL ASSETS	$	34,352,033		$	35,436,380

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	4,048,227		$	7,844,271
Convertible notes, net		378,263			378,263
Notes payable		2,000,000			2,000,000
Customer deposits		1,907,404			2,802,809
Derivative liability		296,308			533,753
Contract liabilities		4,050,438			3,216,562
Operating lease liabilities - current		1,779,238			364,105
Other current liabilities		2,802,374			2,407,750

TOTAL CURRENT LIABILITIES		17,262,252			19,547,513

NON-CURRENT LIABILITIES:
Secured debenture		1,090,827			1,172,364
Operating lease liabilities – non-current		1,145,908			2,474,530
Other liabilities – non-current		582,240			676,331
TOTAL NON-CURRENT LIABILITIES		2,818,975			4,323,225

TOTAL LIABILITIES		20,081,227			23,870,738

Commitments and contingencies		–			–

STOCKHOLDERS’ EQUITY:
Preferred stock - Series A (par value $0.01; 100 shares authorized; 100 and 0 issued and outstanding at September 30, 2022 and December 31, 2021, respectively)		1			–
Convertible preferred stock - Series D (par value $0.01; 100,000 shares authorized; 88,235 issued and outstanding at September 30, 2022 and December 31, 2021, respectively)		883			883
Common stock (par value $0.0001), 20,000,000,000 shares authorized, 6,145,852,186 and 5,197,821,885 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		614,586			519,782
Treasury stock, 100,000 shares at September 30, 2022 and December 31, 2021		(1,000	)		(1,000	)
Paid-in capital in excess of par value		44,148,174			20,248,703
Non-controlling interest in variable interest entity and subsidiary		2,358,227			2,358,227
Accumulated other comprehensive income		(3,198,065	)		(284,463	)
Accumulated deficit		(29,652,000	)		(11,276,490	)

TOTAL STOCKHOLDERS’ EQUITY		14,270,806			11,565,642

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	34,352,033		$	35,436,380


	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2022			2021			2022			2021

REVENUE	$	1,431,104		$	3,500,970		$	7,884,480		$	3,500,970
COST OF GOODS SOLD		5,804,875			2,767,239			12,119,352			2,767,239
GROSS PROFIT		(4,373,771	)		733,731			(4,234,872	)		733,731

OPERATING EXPENSES:
Selling, general and administrative		1,498,717			406,940			3,579,326			531,793
Salaries, wages and payroll taxes		1,760,531			1,007,453			5,108,775			1,007,453
Professional fees		1,471,264			1,680,600			4,489,966			1,901,572
Depreciation and amortization		597,970			91,222			833,989			116,736
Debt transaction expenses		–			33,000			–			184,950
TOTAL OPERATING EXPENSES		5,328,482			3,219,215			14,012,056			3,742,504

NET OPERATING LOSS		(9,702,253	)		(2,485,484	)		(18,246,928	)		(3,008,773	)

OTHER INCOME (EXPENSE):
Interest income (expense)		168,846			(320,706	)		(349,758	)		(671,290	)
Gain on the forgiveness of debt		231,377			785,240			267,127			785,240
Restructuring costs		–			–			(501,431	)		–
Change in fair market of derivative liabilities		70,289			(251,133	)		237,445			76,363
Gain/(Loss) on convertible notes		–			432,893			–			741,789
Foreign currency exchange rate variance		426,073			152,361			218,039			152,360
TOTAL INCOME (EXPENSE)		896,585			798,655			(128,578	)		1,084,462

NET LOSS		(8,805,668	)		(1,686,829	)		(18,375,506	)		(1,924,311	)
Net loss attributable to noncontrolling interests in variable interest entity and subsidiary		92,571			15,838			(255,835	)		15,838
Net loss attributable to Company stockholders	$	(8,898,239	)	$	(1,702,667	)	$	(18,119,671	)	$	(1,940,149	)

LOSS PER SHARE:
Basic	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		5,840,449,453			4,835,935,495			5,539,124,247			4,679,197,410
Diluted		5,840,449,453			4,835,935,495			5,539,124,247			4,679,197,410


	Paid in Capital in Excess of Par				Non- Controlling Interest in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Value				Subsidiary		Income			Deficit			Equity

Balance, December 31, 2021	$	20,248,703		–	$	2,358,227	$	(284,463	)	$	(11,276,490	)	$	11,565,642
Common stock issued for cash		7,679,988						–			–			7,700,000
Foreign currency adjustment		–		–		–		(219,569	)		–			(219,569	)
Net loss		–				–		–			(5,384,270	)		(5,384,270	)
Balance, March 31, 2022	$	27,928,691		–	$	2,358,227	$	(504,032	)	$	(16,660,760	)	$	13,661,803
Common stock issued for cash		4,696,625						–			–			4,715,875
Common stock issued for TerraData acquisition		199,627		–		–		–			–			200,000
Stock based compensation		(1	)			–		–			–			–
Foreign currency adjustment		–				–		(737,874	)		–			(737,874	)
Net loss		–				–		–			(4,185,572	)		(4,185,572	)
Balance, June 30, 2022	$	32,824,943		–	$	2,358,227	$	(1,241,906	)	$	(20,846,332	)	$	13,654,232
Common stock issued for cash		11,323,231						–			–			11,378,400
Foreign currency adjustment		–		–		–		(1,956,159	)		–			(1,956,159	)
Net loss		–				–		–			(8,805,668	)		(8,805,668	)
Balance, September 30, 2022	$	44,148,174		–	$	2,358,227	$	(3,198,065	)	$	(29,652,000	)	$	14,270,806


				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


	For the Nine Months Ended September 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(18,375,506	)	$	(1,924,311	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		833,990			116,736
Amortization of loan acquisition costs		–			(480,450	)
Stock based loan acquisition costs		–			649,334
Gain on the extinguishment of debt		(267,127	)		(785,240	)
Restructuring costs		501,431			–
Operating lease expense		(33,683	)		(90,946	)
Amortization of debt discount		–			404,087
Derivative liability		(237,445	)		(741,789	)
Changes in operating assets and liabilities:
Accounts receivable		692,746			(893,366	)
Inventory		604,406			410,836
Unbilled revenue		178,748			(563,555	)
Contract liability		833,876			(1,439,504	)
Other current assets		(730,370	)		–
Customer deposits		(895,405	)		1,634,397
Accounts payable and accrued expenses		(2,949,406	)		(4,362,016	)
Operating lease liabilities		86,511			1,398,068
Other current liabilities		300,533			(778,874	)
Net cash used by operating activities		(19,456,701	)		(7,446,593	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(529,330	)		(78,662	)
Business acquisitions, net of cash received		–			(152,683	)
Deposits					(124,000	)
Investment in patents		(64,980	)		(191,420	)
Net cash used by investing activities		(594,310	)		(546,765	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock from offering		23,794,275			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		23,794,275			10,718,100
NET INCREASE (DECREASE) IN CASH		3,743,264			2,724,742
Effect of exchange rate on cash		(1,434,126	)		(160,587	)
CASH, beginning of period		3,658,846			337
CASH, end of period	$	5,967,984		$	2,564,492

Non-cash finance and investing activities for the nine months ended September 30:
Stock issued for acquisition of TerraData	$	200,000		$	–
Stock issued 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
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the nine months ended September 30:
Interest	$	–		$	–
Income taxes	$	–		$	–

Schedule of inventory
	September 30,		December 31,
	2022		2021
Raw materials	$	162,835	$	416,180
Work in progress		54,182		436,891
Finished goods		43,596		11,948
Total inventory		260,613		865,019
Reserve		–		–
Total inventory, net	$	260,613	$	865,019

Schedule of operating leases
Operating leases	September 30, 2022

Assets
ROU operating lease assets	$	2,654,676

Liabilities
Current portion of operating lease	$	1,779,238
Operating lease, net of current portion	$	1,145,908
Total operating lease liabilities	$	2,925,146

Schedule of future minimum operating lease payments
2022		122,777
2023		512,373
2024		497,411
2025		506,716
2026 and later		2,039,800
Total lease payments		3,679,077
Less imputed interest		(753,931	)
Total lease obligations		2,925,146
Less current obligations		(1,779,238	)
Long-term lease obligations	$	1,145,908

Schedule of future amortization of intangible assets
2022	$	12,757
2023		51,028
2024		51,028
2025		51,028
2026		51,028
Thereafter		87,822
Total	$	304,691

Schedule of future minimum debt payments
Period ending September 30,
2023	$	–
2024		–
2025		–
2026		–
2027 and after		1,090,827
Total	$	1,090,827

Schedule of debt
	Face		Debt		Initial		Change			Derivative Balance
	Amount		Discount		Loss		in FMV			9/30/2022
	$	90,228	$	–	$	58,959	$	(16,827	)	$	68,965
		162,150		–		74,429		(30,240	)		123,938
		72,488		–		11,381		(13,519	)		55,405
		53,397		–		7,850		(9,706	)		48,000
Subtotal		378,263		–		152,619		(70,292	)		296,308
Transaction expense		–		–		–		–			–
	$	378,263	$	–	$	152,619	$	(70,292	)	$	296,308

Schedule of equity financing agreement
Date of Put	Number of Shares Sold	Total Proceeds, Net of Discounts	Effective Price per Share	Net Proceeds
1/12/22	23,372,430	$1,150,000	$0.054124	$1,033,975
1/21/22	33,454,988	$1,150,000	$0.037812	$1,033,975
2/7/22	16,040,411	$500,000	$0.0342884	$448,975
3/23/22	29,257,395	$1,500,000	$0.056396	$1,348,975
4/11/22	23,746,816	$1,000,000	$0.04211091	$898,975
5/3/22	29,522,276	$1,000,000	$0.03387273	$898,975
5/13/22	26,100,979	$556,750	$0.0213306	$500,050
5/23/22	25,025,540	$556,750	$0.0222473	$500,050
6/1/22	25,901,921	$556,750	$0.02149454	$500,050
6/16/22	23,799,766	$402,086	$0.018584	$360,852

Schedule of equity financing agreement
Date of Put	Number of Common Shares Issued		Total Proceeds, Net of Discounts		Effective Price per Share	Net Proceeds
1/12/2023		64,130,435	$	400,000	$0.006237	$	370,975
1/17/2023*		11,441,647		100,000	$0.008740		100,000
1/24/2023		77,733,861		400,000	$0.005146		370,975
2/3/2023		61,173,706		300,000	$0.004904		277,975
2/17/2023		75,447,571		300,000	$0.003976		277,975
3/1/2023		83,113,044		324,000	$0.003898		300,295
3/16/2023		93,165,852		254,232	$0.002729		235,410
3/30/2023		65,465,384		166,903	$0.002549		154,195
		531,671,500	$	2,245,135		$	2,087,801


	·	cross-selling existing customer with products from other subsidiaries;


	·	provide a wide array of diverse services, including enhanced or additional services that may become available in the future due to, among other things, advances in technology or improvements in our infrastructure;

SEC Ref. No.		Title of Document
10.1*	~~Exclusive Commercial Agency Agreement dated July 27, 2022 with Gulf Automation Services & Oilfield Supplies Company [Gasos] LLC~~
10.2*	~~Membership Purchase Agreement dated August 24, 2022 with Remote Intelligence, Limited Liability Company Wildlife Specialists, LLC~~
10.3*	~~Membership Purchase Agreement dated August 24, 2022 with Wildlife Specialists, LLC~~
31.1*		Rule 13a-14(a) Certification by Principal Executive and Financial Officer
32.1**		Section 1350 Certification of Principal Executive and Financial Officer
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (formatted in Inline XBRL, and included in exhibit 101).

	DarkPulse, Inc.


Date: ~~November 4, 2022~~August 31, 2023	By	/s/ Dennis O’Leary
		Dennis O’Leary, Chairman, Chief Executive Officer, President, Chief Financial Officer
		(Principal Executive Officer and Principal
		Financial Officer)