Item 1. Business
ITEM 1. BUSINESS
As used in this Annual Report, the terms “we,”
“us,” “our,” and the “Company” refer to DarkPulse, Inc., a Delaware corporation.
Corporate Overview
Organization
DarkPulse, Inc. ("DPI", “DarkPulse”
or the "Company") is a technology-security company incorporated in 1989 as Klever Marketing, Inc ("Klever"). Its principal
wholly-owned subsidiary, DarkPulse Technologies Inc. ("DPTI"), originally started as a technology spinout from the University
of New Brunswick, Fredericton, Canada. DPI is comprised of two security platforms: Fiber and Ultra-High Sensitivity Sensors ("UHSS").
On April 27, 2018, Klever entered into an Agreement
and Plan of Merger (the “Merger Agreement” or the “Merger”) involving Klever as the surviving parent corporation
and acquiring DPTI as its wholly-owned subsidiary. On July 18, 2018, the parties closed the Merger Agreement, as amended on July 7, 2018,
and the name of the Company was subsequently changed to DarkPulse, Inc. With the change of control of the Company, the Merger was accounted
for as a recapitalization in a manner similar to a reverse acquisition.
On July 20, 2018, the Company filed a Certificate
of Amendment to its Certificate of Incorporation with the State of Delaware, changing the name of the Company to “DarkPulse, Inc.”
The Company filed a corporate action notification with the Financial Industry Regulatory Authority (FINRA), and the Company's ticker symbol
was changed to “DPLS.”
The Company’s security and monitoring systems
will be delivered in applications for critical infrastructure/ key resources such as but not limited to border security, pipelines, the
oil and gas industry and mine safety. Current uses of fiber optic distributed sensor technology have been limited to quasi-static, long-term
structural health monitoring due to the time required to obtain the data and its poor precision. The Company’s patented BOTDA dark-pulse
sensor technology allows for the monitoring of highly dynamic environments due to its greater resolution and accuracy.
In December 2010 DPTI entered into an Assignment
Agreement with the University of New Brunswick, Canada (the “University”), pursuant to which the University sold, transferred,
and assigned to the Company certain patents related to the University’s BOTDA dark-pulse technology (the "Patents") in
exchange for the issuance of a debenture to the University in the amount of C$1,500,000 (Canadian dollars). In April 2017, DPTI
issued a replacement debenture to the University in the amount of US$1,491,923 (the “Debenture”). The Patents and the
Debenture were initially recorded in the Company’s accounts at $1,491,923, based upon the exchange rate between the US dollar and
the Canadian dollar on December 16, 2010, the date of the original debenture. In addition to the repayment of principal and interest,
the Debenture requires DPTI to pay the University a two percent royalty on sales of any and all products or services which incorporate
the Patents for a period of five years commencing on April 24, 2018, as well as to reimburse the University for its patent-related costs.
Our Business
The Company offers a full suite of engineering,
installation and security management solutions to industries and governments. Coupled with our patented BOTDA dark-pulse technology (the
“DarkPulse Technology”), DarkPulse provides its customers a comprehensive data stream of critical metrics for assessing the
health and security of their infrastructure. Our comprehensive system provides for rapid, precise analysis and responsive activities predetermined
by the end-user customer.
Historically, distributed sensor systems have
been too costly, slow and limited in their capabilities to attain widespread use. In addition, Brillouin-based sensors have been plagued
with temperature and strain cross-sensitivity, i.e. the inability to distinguish between temperature and strain change along the same
fiber. The loss of spatial resolution with an increase in fiber length has also limited the use of distributed sensor systems. Due to
these shortcomings, existing technologies are unable to succeed within today’s dynamic environments, and needs for more advanced
sensor technologies have remained unsatisfied.
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By contrast to existing technologies, the DarkPulse
Technology is a distributed-fiber sensing system, based on dark-pulse Brillouin scattering, which reports in real-time on conditions
such as temperature, stress, strain corrosion and structural health monitoring of Critical Infrastructure/Key Resources including Bridges,
Buildings, Roadways pipelines and mining installations.
DarkPulse Technology’s differentiators from
and advantages over existing technologies:
·
Real-time Reporting: Higher data acquisition speeds allowing for structural monitoring of dynamic systems
·
Cost to Customer: Significantly lower acquisition and operating costs
·
Precision: A greater magnitude of precision and spatial resolution than other systems currently available
·
Applications: Wider range of capabilities than other systems currently available
·
Power consumption: Lower power consumption than existing systems allowing for off-grid installations
·
Integration: Capable of integrating with existing systems
·
Central station monitoring/cloud based GUI
We believe that these key advantages should allow
the Company not only to enter existing markets, but more importantly, to open new market opportunities with new applications. The Company
intends to leverage new applications to target clients that have been unable to make use of distributed fiber optic technology to date.
Revenue Generation
We intend to generate revenue from the following
sources:
·
Hardware equipment sales, warranties, service contracts and licensing to large enterprises and governments.
·
Recurring subscription fees paid by enterprise/government users for access to our 24/7 monitoring services of their critical infrastructure;
·
Recurring subscription fees paid by enterprise/government users for access to our applications by enterprises/governments;
·
Recurring subscription fees paid by enterprise users for access to data stored in the cloud that may be integrated into large, third-party providers such as Oracle, Google Cloud; and Microsoft; among others;
·
Recurring subscription fees paid by enterprise/government users who subscribe to bundled service offerings.
Our Market
Current uses of fiber optic distributed sensor
technology have been limited to quasi-static, long-term structural health monitoring due to the time required to obtain the data and its
poor precision. Our DarkPulse Technology allows for the monitoring of highly dynamic environments due to its magnitude of increased resolution
and greater accuracy. The resulting high speed, real-time monitoring capabilities of our DarkPulse Technology should satisfy a broad range
of existing and emerging requirements. Use of the DarkPulse Technology by our customers should result in lower production costs with increased
sensing capabilities that can integrate with existing technology and be upgraded cost effectively.
Due to the characteristics of the fiber used in
fiber optic sensing, the uses of our DarkPulse Technology are wide ranging. Optical fiber is hard-wearing, which allows it to be used
in environments where other technologies fail (for example, at temperatures ranging from -40°C to 300°C and 1000psi). Additionally
DarkPulse Technology’s sensors allow for live sensing due to the speed at which the analysis takes place.
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The Company’s management team is continually
identifying markets in which our DarkPulse Technology may be readily applied. Once these markets (as described below) have been addressed,
our DarkPulse Technology may be adapted and applied to new markets.
Structural Monitoring
·
Buildings and Skyscrapers
·
Bridges, Tunnels and Dams
·
Roads and Railway tracks
Temperature Sensing
·
Fire Alarm and Environment control
·
Low cost and maintenance
·
Long life span
·
Ability to withstand harsh working environment
Security & Defense
·
National Border Protection
·
Protection of Military and other sensitive installations
Consulting Services:
·
Consulting (as stand-alone or presales)
·
Post sales deployment and Support
·
Managed services (monitoring, etc.)
Additional Potential Markets:
·
Monitoring of composite structures in aircraft
·
Dynamic stress monitoring of runways
·
Dynamic ship hull stress monitoring, especially with a view to double-hull oil tankers
·
Smart grid and power conservation applications based on cooling and/or heat proximity – for instance, computer rooms, cell towers for heat soak
·
Monitor low temperatures as part of control systems
·
Monitoring of temperatures in extreme refrigeration environments
·
Avalanche early warning systems
·
Sea defense monitoring
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Marketing
We utilize our DarkPulse Technology as the foundation
of our ongoing marketing initiatives. Most notably, the greater magnitude of increased capabilities DarkPulse Technology versus existing
bright-pulsing technologies. Existing bright-pulse Brillouin-based sensors have historically been plagued with temperature and strain
cross-sensitivity, i.e. the inability to distinguish between temperature and strain change along the same fiber. The loss of spatial resolution
with an increase in fiber length is also a limiting factor for the use of distributed sensor systems. Because of these shortcomings, existing
bright-pulse Brillouin-based technologies are unable to succeed within today’s dynamic environments, which coincides with our DarkPulse
Technology’s increased capabilities over bright-pulse systems. Our marketing initiatives include daily, broad-based social media
engagement; management of our website; email campaigns, and other ongoing initiatives designed to increase awareness of our products and
services and drive conversion and adoption rates.
Competition
The overall optical sensing market is projected
to reach USD $3.47 billion by 2023 from USD $1.13 billion in 2016, at a CAGR of 15.47% between 2017 and 2023. 1
The Company is active in the optical sensing market, including Oil & Gas pipeline health monitoring, National Border Security applications,
and the mining industry. We believe that fiber sensing applications which incorporate our DarkPulse Technology may provide significant
competitive advantages over structural health monitoring applications offered by the long-term leaders in the field, such as Schlumberger,
Hewlett-Packard, and Yokogawa, which collectively account for a significant portion of industry sales. These companies, as well as others,
have numerous differences in feature sets and functionality, but all share certain basic attributes: a bright-pulse technology as the
core of their systems architecture. An architecture designed using bright-pulsing technology has limited sensing capabilities and resolutions
of one meter allowing for mostly long-term quasi-static deployments.
However, the Company utilizes its DarkPulse Technology
allowing for multiple applications into those markets unavailable to companies using bright-pulse technology. While many of the companies
using bright-pulse technology have attempted to incorporate various sensing techniques into a legacy technology, none have been able to
offer the order of magnitude resolutions offered by our DarkPulse Technology. This magnitude in resolution coupled with the DarkPulse
Technology’s increased data collection speeds allows our DarkPulse Technology to be installed into areas of the market that our
competitors cannot. The Company’s future financial condition and operating results depend on its ability to provide a high-quality
solution as well as increased distribution of the solutions in each of the markets in which it competes or intends to compete within.
The markets
for the Company’s products and services are highly competitive and the Company is confronted by aggressive competition. These markets
are characterized by frequent product introductions and rapid technological advances. The Company’s financial condition and operating
results can be adversely affected by these and other industry-wide downward pressures on gross margins. Principal competitive factors
important to the Company include price, product features, relative price and performance, product quality and reliability, marketing and
distribution capability, service and support and corporate reputation.
Intellectual Property
Our policy is to protect our technology by, among
other things, patents, trade secret protection and copyrights. We have taken security measures to protect our trade secrets and proprietary
know-how, to the greatest extent possible. Our means of protecting our proprietary rights may not prove to be adequate and our competitors
may independently develop technology or products that are similar to ours or that compete with ours. Trade secret, patent and copyright
laws afford only certain protections for our technology and products. The laws of many countries do not protect our proprietary rights
to as great an extent as do the laws of the United States. Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to obtain and use information that we regard as proprietary. Third parties may also design around our proprietary rights,
which may render our protected technology and products less valuable, if the design around is favorably received in the marketplace.
In addition, any of our products or technology
covered by patents or other intellectual property rights, could cause us to be subject to various legal actions. Litigation may be necessary
to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights
of others, or to defend against claims of infringement, invalidity, misappropriation, or other claims.
Through DPTI’s April 2017 Intellectual Property
agreement with the University, DPTI was sold, transferred, and assigned U.S. Patent Nos. 7,245,790, 8,643,829, and 9,534,965, each of
which are related to our BOTDA dark-pulse technology. In addition, Canadian Patent No. 2,502,275 was also assigned.
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1 Optical
Sensing Market by Industry (Aerospace & Defense, Utilities, Oil & Gas, Medical, Construction, and Consumer Electronics), Application,
Method, and Geography - Global Forecast to 202\3 (https://www.marketsandmarkets.com/Market-Reports/optical-sensing-market-197592599.html?gclid=EAIaIQobChMIzrfanf7P4QIVA0GGCh3jlw7rEAAYASAAEgI9bvD_BwE)
4
Suppliers
We currently rely on a full-time, dedicated, external
team of experienced professionals for the coding and maintenance of our products. We believe we have mitigated the associated risks
of managing an external team of software and engineering development professionals by incorporating internal management and oversight,
as well as appropriate systems, protocols, controls, and procedures and ensuring that we have access to additional qualified professionals
to provide like or complementary services.
Government Regulation
Government regulation is not of significant concern
for our business nor is government regulation expected to become an impediment to the business in the near- or mid-term as management
is currently unaware of any planned or anticipated government regulation that would have a material impact on our business. Our management
believes it currently possesses all requisite authority to conduct our business as described in this Annual Report.
Employees
As of April 10, 2021, we had one full-time employee
and no part-time employees.