DarkPulse, Inc. 10-K

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the OTC Markets under the trading symbol “DPLS.” The Company has 20,000,000,000 authorized common shares. The following table sets forth the high and low bid of the Company’s Common Stock for each quarter within the past two completed fiscal years and the current year. The information below was provided from the OTC Markets and reflects the highest and lowest closing prices during each quarter. 2021: High Low First Quarter $ 0.0510 $ 0.0007 2020: High Low First Quarter $ 0.0002 $ 0.0001 Second Quarter $ 0.0002 $ 0.0001 Third Quarter $ 0.0006 $ 0.0001 Fourth Quarter $ 0.0011 $ 0.0001 2019: High Low First Quarter $ 0.0500 $ 0.0035 Second Quarter $ 0.0062 $ 0.0005 Third Quarter $ 0.0008 $ 0.0001 Fourth Quarter $ 0.0003 $ 0.0001 The number of shareholders of record of the Company's common stock as of April 10, 2021 was approximately 923. The Company has not paid any cash dividends to date and does not anticipate paying cash dividends in the foreseeable future. It is the present intention of management to utilize any available funds for the development of the Company's business. Recent Sales of Unregistered Securities. On September 2, 2020, the Company entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) issuing to Geneva a convertible promissory note in the aggregate principal amount of $47,850 with a $4,350 original issue discount and $3,500 in transactional expenses due to Geneva and its counsel. The note bears interest at 9% per annum and may be converted into common shares of the Company's common stock at a conversion price equal to 70% of the lowest trading price of the Company's common stock during the 20 prior trading days. The Company received $40,000 net cash. This note was issued without registration under the Securities Act of 1933, as amended, by reason of the exemption from registration afforded by the provisions of Section 4(a)(2) thereof, and Rule 506(b) promulgated thereunder, as a transaction by an issuer not involving any public offering. No selling commissions were paid in connection with the issuance of the note. Equity Compensation Plan Information As of December 31, 2020, there were no securities authorized for issuance under equity compensation plans. Issuer Purchases of Equity Securities None. 16 ITEM 6. SELECTED FINANCIAL DATA Not required for smaller reporting companies. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Background DarkPulse, Inc. (the “Company”) is a technology-security company created to develop, market and distribute a full suite of engineering, installation and security management solutions to industries and governments and has not commenced its planned principal operations. 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. The Company’s activities since inception have consisted principally of developing various solutions which the Company is currently testing, obtaining patents and trademarks related to its technology, and raising capital. The Company’s activities are subject to significant risks and uncertainties including failing to secure additional funding needed to finalize development of the Company’s technology and to commercialize its product in a profitable manner. Recent Events Financings On January 4, 2021, the Company entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) issuing to Geneva a convertible promissory note in the aggregate principal amount of $42,350 with a $3,850 original issue discount and $3,500 in transactional expenses due to Geneva and its counsel. The note bears interest at 8% per annum and may be converted into common shares of the Company's common stock at a conversion price equal to 70% of the lowest trading price of the Company's common stock during the 20 prior trading days. The Company received $35,000 net cash. On February 3, 2021, the Company entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) issuing to Geneva a convertible promissory note in the aggregate principal amount of $94,200 with a $15,700 original issue discount and $3,500 in transactional expenses due to Geneva and its counsel. The note bears interest at 4.5% per annum and may be converted into common shares of the Company's common stock at a conversion price equal to 81% of the lowest 2 trading prices of the Company's common stock during the 10 prior trading days. The Company received $75,000 net cash. On February 18, 2021, the Company entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) issuing to Geneva a convertible promissory note in the aggregate principal amount of $76,200 with a $12,700 original issue discount and $3,500 in transactional expenses due to Geneva and its counsel. The note bears interest at 4.5% per annum and may be converted into common shares of the Company's common stock at a conversion price equal to 81% of the lowest 2 trading prices of the Company's common stock during the 10 prior trading days. The Company received $60,000 net cash. 17 Going Concern The Company generated net losses of $275,841 and $1,825,469 during the years ended December 31, 2020 and 2019, respectively. The Company did not generate any revenue from product sales during the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, the Company’s current liabilities exceeded its current assets by $3,241,567. As of December 31, 2020, the Company had $337 of cash. The Company will require additional funding during the next twelve months to finance the growth of its current operations and achieve its strategic objectives. These factors, as well as the uncertain conditions that the Company faces relative to capital raising activities, create substantial doubt as to the Company’s ability to continue as a going concern. The Company is seeking to raise additional capital principally through private placement offerings and is targeting strategic partners in an effort to finalize the development of its products and begin generating revenues. The ability of the Company to continue as a going concern is dependent upon the success of future capital offerings or alternative financing arrangements and 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 2021. However, management cannot make any assurances that such financing will be secured. Results of Operations Revenues To date, the Company has not generated any operating revenues. Operating Expenses Operating expenses for the year ended December 31, 2020 decreased by $287,497 or 52.6% to $258,739 from $546,236 for the year ended December 31, 2019. The primary reason for the overall decrease in general and administrative expense in the current year is a decrease in payroll and compensation of $168,758. General and administrative expenses for the year ended December 31, 2020 decreased by $33,824 or 18.5% to $149,259 from $183,083 for the year ended December 31, 2019. The primary reason for the overall decrease in general and administrative expense in the current year is a decrease in professional fees. Payroll and compensation expenses for the year ended December 31, 2020 decreased to $187 from $168,945 or 99.9% for the year ended December 31, 2019. The primary reason for the overall decrease in payroll and compensation expense in the current year is a decrease in employees and a reduction in stock based compensation. Amortization expenses for the years ended December 31, 2020 and 2019 remained constant at $51,028. 18 Legal expenses for the year ended December 31, 2020 decreased $50,415 from $118,281 for the year ended December 31, 2019. The increase is related to ongoing litigation as described in more detail in Note 12 of the attached financial statements. Debt transaction expenses for the year ended December 31, 2020 decreased $17,050 or 68.5% from $24,900 to $7,850. The primary reason for the decrease is related to the decrease in convertible notes entered into during 2020. Other Income (Expense) Total other expenses totaled $17,102 and $1,279,233 for the years ended December 31, 2020 and 2019, respectively. The $1,262,131 decrease is primarily attributed to the decrease recognized due to changes in the fair value of derivative instruments of $422,787, loss on convertible notes of $401,497 and a decrease in interest expense of $370,619. Net Loss As a result, net loss for the year ended December 31, 2020 decreased by $1,549,627 to $275,842 from $1,825,469 for the year ended December 31, 2019. Comprehensive (Loss) Gain The Company recorded a loss for foreign currency translation adjustments for the year ended December 31, 2020 of $20,941 and a loss of $52,905 for the year ended December 31, 2019. The fluctuations of the increase/decrease is primarily attributed to the change in the value of the note recognized due to exchange rate variances. Comprehensive loss was $296,785 as compared to $1,878,374 for the years ended December 31, 2020 and 2019, respectively. Liquidity and Capital Resources Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. At December 31, 2020, we had a cash balance of $337. Our working capital deficit is approximately $3,241,567 at December 31, 2020. As of December 31, 2020, we had cash of $337, compared to $1,210 as of December 31, 2019. The Company currently does not have sufficient cash to fund its operations for the next 12 months and will require working capital to complete development, testing and marketing of its products and to pay for ongoing operating expenses. The Company anticipates adding consultants for technology development and the corresponding operations of the Company, but this will not occur prior to obtaining additional capital. Management is currently in the process of looking for additional investors. Currently, loans from banks or other lending sources for lines of credit or similar short-term borrowings are not available to the Company. The Company has been able to raise working capital to fund operations through the issuances of convertible notes or obtained through the issuance of the Company’s restricted common stock. As of December 31, 2020, our current liabilities of $3,241,904 exceeded our current assets of $337 by $3,241,567. 19 Operating Activities During the year ended December 31, 2020, net cash used by operating activities was $8,194, resulting from our net loss of $275,842 partially offset by non-cash expenses totaling $14,446 and increases in accounts payable of $195,951 and accrued liabilities of $72,892. By comparison, during the year ended December 31, 2019, net cash used by operating activities was $171,604, resulting from our net loss of $1,825,469, partially offset by non-cash expenses totaling $259,824 and increases in accounts payable of $264,788 and a decrease in accrued liabilities of $145,234. Investing Activities During the year ended December 31, 2020, net cash used by investing activities was $4,969, of capitalized patents costs of $4,969. During the year ended December 31, 2019, net cash used by investing activities was $54,930. Financing Activities During the year ended December 31, 2020, net cash used by financing activities was $4,096, comprised of proceeds from issuance of convertible notes payable of $40,000, offset by repayments of related party notes payable of $44,096. During the year ended December 31, 2019, net cash provided by financing activities was $155,450, comprised of proceeds from issuance of convertible notes payable of $180,100, partially offset by repayments of convertible notes payable of $24,650. Factors That May Affect Future Results - Management’s Discussion and Analysis contains information based on management’s beliefs and forward-looking statements that involve a number of risks, uncertainties, and assumptions. There can be no assurance that actual results will not differ materially from the forward-looking statements as a result of various factors, including but not limited to the following: · The Company may not obtain the equity funding or short-term borrowings necessary to market and launch its products. · The product development and launch may take longer to implement than planned or may not be successful. 0 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements of the Company are included beginning on page F-1 immediately following the signature page to this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.