What changed in this filing

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Item 1. Financial Statements

2021-11-15 compared with 2021-08-16 · 735 added, 333 removed, 344 unchanged (76% of the section changed)

1 unchanged sentence

DARKPULSE, INC.

Condensed Consolidated Balance Sheets

CONSOLIDATED BALANCE SHEETS

September 30,

CURRENT ASSETS:

Accounts receivable, net

Unbilled revenue

Other current assets

TOTAL CURRENT ASSETS

NON-CURRENT ASSETS:

Property and equipment, net

Operating lease right-of-use assets

Other assets, net

TOTAL NON-CURRENT ASSETS

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:

Accounts payable

Accounts payable and accrued expenses

Convertible notes, net of discount $ 111,888 and $ 39,414 respectively

Notes payable

Customer deposits

Derivative Liability

Accrued liabilities

Contract liabilities

Operating lease liabilities - current

Other current liabilities

TOTAL CURRENT LIABILITIES

NON-CURRENT LIABILITIES:

Secured debenture

Operating lease liabilities - non-current

TOTAL NON-CURRENT LIABILITIES

TOTAL LIABILITIES

Commitments and contingencies

STOCKHOLDERS' DEFICIT

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Treasury Stock, 100,000 shares

Convertible preferred stock, Series D (par value $ 0.01 ) 100,000 shares authorized, 88,235 shares issued and outstanding respectively

Convertible Preferred Stock, Series D, par value $ 0.01 , 100,000

shares authorized, 88,235

shares issued and outstanding

Paid in capital in excess of par value

Distributions

Non-controlling interest in a variable interest entity and subsidiary

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( 6,450,170 )

TOTAL STOCKHOLDERS' DEFICIT

( 3,577,557 )

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)

( 3,932,205 )

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DARKPULSE, INC.

Condensed Consolidated Statements of Operations

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS

FOR THE NINE MONTHS

ENDED SEPTEMBER 30,

COST OF GOODS SOLD

OPERATING EXPENSES:

General and administrative expenses

Payroll and compensation

Legal expenses

Amortization of patents

Selling, general and administrative

Salaries, wages and payroll taxes

Professional fees

Depreciation and amortization

Debt transaction expenses

TOTAL OPERATING EXPENSES

OPERATING LOSS

NET OPERATING LOSS

( 2,485,484 )

( 3,008,773 )

OTHER INCOME (EXPENSE):

Interest expense

Loss on convertible notes

Gain on the forgiveness of debt

Gain(loss) on change in fair market values of derivative liabilities

Gain on settlement of debt

Change in fair market of derivative liabilities

Gain/Loss on convertible notes

Foreign currency exchange rate variance

TOTAL OTHER INCOME (EXPENSE)

( 1,686,829 )

( 1,924,311 )

Net Loss attributable to noncontrolling interests in variable interest entity and subsidiary

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1,754,933,152

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DARKPULSE, INC.

Condensed Consolidated Statements of Comprehensive

THREE MONTHS ENDED

SIX MONTHS ENDED

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS

FOR THE NINE MONTHS

ENDED SEPTEMBER 30,

$ ( 1,670,991 )

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$ ( 388,561 )

OTHER COMPREHENSIVE LOSS

OTHER COMPREHENSIVE GAIN (LOSS)

Unrealized Gain (Loss) on Foreign Exchange

COMPREHENSIVE GAIN (LOSS)

COMPREHENSIVE LOSS

$ ( 1,644,452 )

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$ ( 374,905 )

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DARKPULSE, INC.

Consolidated Statement of Stockholders' Deficit

For the Periods Ended June 30, 2021 and 2020

Non-Controlling

Other Comprehensive

Stockholders’

Statement of Stockholders' Deficit

the Periods Ended September 30, 2021 and 2020

Preferred Stock

Paid in Capital in Excess of Par

Balance, December 31, 2020

4,088,762,156

Conversion of convertible notes

Foreign currency adjustment

Balance, March 31, 2021

4,689,762,151

Conversion of convertible notes

Stock based loan acquisition cost

Foreign currency adjustment

Balance, June 30, 2021

4,770,327,191

Conversion of convertible notes

Issuance of common stock for public offering

Issuance of common stock for Wildlife Specialist acquisition

Issuance of common stock for Remote Intelligence acquisition

Share-based compensation

Distributions

Foreign currency adjustment - NCI

Foreign currency adjustment

Balance, March 31, 2021

Balance, September 30, 2021

4,922,968,442

Balance, December 31, 2019

1,392,042,112

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Conversion of convertible notes

Stock based loan acquisition cost

Foreign currency adjustment

Balance, March 31, 2020

1,392,042,112

$ ( 11,877,864 )

Conversion of convertible notes

( 2,156,228 )

Foreign currency adjustment

Balance, June 30, 2020

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$ ( 14,034,092 )

Conversion of convertible notes

1,785,632,186

Balance, December 31, 2019

( 17,739,248 )

Foreign currency adjustment

Balance, September 30, 2020

3,394,817,156

$ ( 31,773,340 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DARKPULSE, INC.

Statement of Stockholders' Deficit

the Periods Ended September 30, 2021 and 2020 (continued)

Non-Controlling Interest in

Accumulated Other Comprehensive

Total Stockholders’

Distributions

Balance, December 31, 2020

$ ( 6,450,170 )

$ ( 3,932,205 )

Conversion of convertible notes

3 unchanged sentences

$ ( 3,752,049 )

Conversion of convertible notes

Stock based loan acquisition cost

Foreign currency adjustment

Balance, June 30, 2021

$ ( 6,687,651 )

1 unchanged sentence

Conversion of convertible notes

Issuance of common stock for public offering

Issuance of common stock for Wildlife Specialist acquisition

Issuance of common stock for Remote Intelligence acquisition

Share-based compensation

Distributions

Foreign currency adjustment - NCI

Foreign currency adjustment

( 1,686,829 )

Balance, September 30, 2021

$ ( 8,374,480 )

Balance, December 31, 2019

$ ( 6,174,328 )

$ ( 3,807,552 )

Conversion of convertible notes

Foreign currency adjustment

Balance, March 31, 2020

$ ( 6,248,626 )

$ ( 3,789,204 )

Conversion of convertible notes

Foreign currency adjustment

Balance, June 30, 2020

1 unchanged sentence

$ ( 3,953,290 )

Conversion of convertible notes

Foreign currency adjustment

Balance, September 30, 2020

$ ( 6,562,889 )

$ ( 4,050,184 )

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DARKPULSE, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

SIX MONTHS ENDED

FOR THE NINE MONTHS

ENDED SEPTEMBER 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Adjustments to reconcile net loss to net cash used by operating activities:

Depreciation and amortization

Gain on extinguishment of debt

Stock based compensation

Operating lease expense

Loan acquisition costs

Gain on reduction of loan default penalty

Stock based loan acquisition costs

Amortization of debt discount

Derivative liability

Amortization of debt discount

Depreciation and amortization

Changes in operating assets and liabilities:

Accounts payable

Accrued liabilities

Net cash (Used by) Provided by operating

Accounts receivable

Unbilled Revenue

Customer Deposits

Contract liability

( 1,439,504 )

Accounts payable and accrued expenses

( 4,362,016 )

Operating lease liabilities

Other current liabilities

Net Cash Used by Operating Activities

( 7,446,593 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in demo box

Purchases of property and equipment

Business acquisitions, net of cash received

Investment in patents

Net Cash Used by Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from sale of common stock from offering

Proceeds from convertible notes payable

Payments on notes payable

Payments on convertible notes

Proceeds from notes payable

Net Cash Provided by Financing Activities

NET INCREASE IN CASH

Net Cash Increase (Decrease)

Effect of exchange rate on cash

Cash, Beginning of Period

Cash, End of Period

Noncash investing and financing activities for the quarter ending June 30:

Stock issued for convertible notes payable and accrued interest

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Supplementary Cash Flow Information:

Interest paid in cash

Taxes paid in cash

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

Non-cash finance and investing activities for the quarter ending September 30:

Issuance of common stock for convertible notes payable and accrued interest

Issuance of common stock for Wildlife Specialists

Issuance of common stock for Remote Intelligence

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DARKPULSE, INC.

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All adjustments (consisting of normal recurring items) necessary to present fairly the Company’s financial

position as of June 30, 2021, and the results of operations for three and six months and cash flows for the six months ended June 30,

position as of September 30, 2021, and the results of operations for three and nine months and cash flows for the nine months ended September

30, 2021 have been included.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of

the results to be expected for the full year.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative

of the results to be expected for the full year.

Description of Business

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DarkPulse, Inc.

With the change of control of the Company, the Merger is being be accounted for as a recapitalization in a manner similar

With the change of control of the Company, the Merger is being accounted for as a recapitalization in a manner similar

to a reverse acquisition.

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filed a corporate action notification with the Financial Industry Regulatory Authority (FINRA), and the Company's ticker symbol was changed

Going Concern Uncertainty

The Company has recently completed several acquisitions.

See Note 2 – Business Acquisitions for more information.

Concern Uncertainty

As shown in the accompanying financial statements,

during the six months ended June 30, 2021, the Company did not generate any revenues and reported a net loss of $ 237,481 .

As of June 30,

2021, the Company’s current liabilities exceeded its current assets by $ 2,915,206 .

As of June 30, 2021, the Company had $ 148,562

during the nine months ended September 30, 2021, the Company reported a net loss of $ 1,924,311 .

As of September 30, 2021, the Company’s

current liabilities exceeded its current assets by $ 12,139,502 .

As of September 30, 2021, the Company had $ 2,564,492 of cash.

The Company will require additional funding to

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compensation, derivative liabilities, preferred deemed dividend and common stock issued for services.

On January 30, 2020, the World Health Organization

(WHO) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”)

and the risks to the international community as the virus spread globally beyond the point of origin.

On March 20, 2020 the WHO classified

the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

The full impact of the COVID-19 outbreak continues

to evolve as of the date of these condensed consolidated financial statements.

As such, it is uncertain as to the full magnitude that

the pandemic will have on the Company’s combined financial condition, liquidity and future results of operations.

Management is

actively monitoring the impact of the global situation on its consolidated financial condition, liquidity, operations, suppliers, industry

and workforce.

Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able

to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2021

beyond the results presented in these condensed consolidated financial statements and this quarterly report.

Due to the impacts of COVID-19 we have seen an

increase in recruiting and labor costs as well as delays in supply chain.

The Company’s revenues are generated primarily

from the sale of our products, which consist primarily of advanced technology solutions for integrated communications and security systems.

At contract inception, we assess the goods and services promised in the contract with customers and identify a performance obligation

To determine the performance obligation, we consider all products and services promised in the contract regardless of whether

they are explicitly stated or implied by customary business practices.

The timing of satisfaction of the performance obligation is not

subject to significant judgment.

We measure revenue as the amount of consideration expected to be received in exchange for transferring

goods and services.

We generally recognize product revenues at the time of shipment, provided that all other revenue recognition criteria

have been met.

The Company recognizes revenue when its customer

obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for

those goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606,

we perform the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize

revenue when (or as) we satisfy a performance obligation.

The five-step model is applied to contracts when it is probable that we will

collect the consideration we are entitled to in exchange for the goods or services transferred to the customer.

At contract inception,

once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine

those that are performance obligations and assess whether each promised good or service is distinct.

We then recognize revenue in the

amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is

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

(4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before

the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the

transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations;

(5) clarify that a completed

contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP

before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic 606 to each

prior reporting period is not required to disclose the effect of the accounting change for the period of adoption.

The amendments of this

ASU are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.

There was no impact

as a result of adopting this ASU on the financial statements and related disclosures.

Based on the terms and conditions of the product

arrangements, the Company believes that its products and services can be accounted for separately as its products and services have value

to the Company’s customers on a stand-alone basis.

When a transaction involves more than one product or service, revenue is allocated

to each deliverable based on its relative fair value;

otherwise, revenue is recognized as products are delivered or as services are provided

over the term of the customer contract.

Contract liabilities is shown separately in

the unaudited consolidated balance sheets as current liabilities.

At September 30, 2021 and December 31, 2020, we had contract

liabilities of $ 2,699,688 and $ 0 , respectively.

Cost of Product Sales and Services

Cost of sales consists primarily of materials,

airtime and overhead costs incurred internally and amounts incurred to contract manufacturers to produce our products, airtime and other

implementation costs incurred to install our products and train customer personnel, and customer service and third-party original equipment

manufacturer costs to provide continuing support to our customers.

There are certain costs which are deferred and recorded as prepaids,

until such revenue is recognized.

Refer to revenue recognition above as to what constitutes deferred revenue.

Cash and Cash Equivalents

The Company considers all highly liquid investments

with a maturity of three months or less when acquired to be cash equivalents.

The Company places its cash with a high credit quality financial

institutions.

The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”)

up to $ 250,000 .

To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually

the rating of the financial institution in which it holds deposits.

The Company considers all highly liquid

investments with a maturity of three months or less when acquired to be cash equivalents.

The Company places its cash with high

credit quality financial institutions.

The Company’s account at this institution is insured by the Federal Deposit Insurance

Corporation (“FDIC”) up to $ 250,000 .

To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of

the financial institution in which it holds deposits.

Intangible Assets

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carrying value of the asset exceeds the expected future cash flows.

Goodwill and other intangible assets

In accordance with ASC 350-30-65, “Intangibles

- Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances

indicate that the carrying value may not be recoverable.

Factors the Company considers to be important

which could trigger an impairment review include the following:

· Significant underperformance relative to expected historical or projected

future operating results;

· Significant changes in the manner of use of the acquired assets or the strategy

for the overall business;

· Significant negative industry or economic trends.

When the Company determines that the carrying

value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying

value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge.

The Company measures

any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with

the risk inherent in the current business model.

Significant management judgment is required in determining whether an indicator of impairment

exists and in projecting cash flows.

Foreign Currency Translation

The company translates monetary assets and liabilities

(any item paid for or settled in foreign currency) into the United States Dollar at exchange rates prevailing on the balance sheet date.

Non-monetary assets and liabilities are translated at the historical rate in effect when the transaction occurred.

Revenues and expenses

are translated at the spot rate on the date the transaction occurred.

Exchange gains and losses from the translation of monetary items

are included in unrealized gain/loss on Foreign Exchange as Other Comprehensive Loss.

The following table discloses the dates and exchange rates used for

converting Canadian Dollar amounts to U.S.

Dollar amounts disclosed in the balance sheet and the statement of operations.

The spot exchange rate between the Canadian Dollar

Dollar on, December 31, 2020 closing rate at 1.2754 US$:

CAD, average rate at 1.3388 US$:

CAD and for the three months ended

June 30, 2021 closing rate at 1.2395 US$:

CAD, average rate at 1.2249 US$.

The Company’s reporting

currency is U.S.

The accounts of one of the Company’s subsidiaries, Optilan, is maintained using the appropriate local

currency, Great British Pound, as the functional currency.

All assets and liabilities are translated into U.S.

Dollars at balance sheet

date, shareholders’ equity is translated at historical rates and revenue and expense accounts are translated at the average exchange

rate for the year or the reporting period.

The translation adjustments are reported as a separate component of stockholders’ equity,

captioned as accumulated other comprehensive (loss) gain.

Transaction gains and losses arising from exchange rate fluctuations on transactions

denominated in a currency other than the functional currency are included in the statements of operations.

The relevant translation rates are as follows:

for the three and nine months ended September 30, 2021, closing rate at 1.3468

GBP, quarterly average rate at 1.3787

The Company accounts for income taxes in accordance

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the relevant tax authority.

Effective January 1, 2019, the Company accounts

for its leases under ASC 842, Leases .

Under this guidance, arrangements meeting the definition of a lease are classified as operating

or financing leases, and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by

discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.

Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease

For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent

expense over the lease term.

For finance leases, interest on the lease liability and the amortization of the right of use asset results

in front-loaded expense over the lease term.

Variable lease expenses are recorded when incurred.

In calculating the right of use asset and lease

liability, the Company has elected to combine lease and non-lease components.

The Company excludes short-term leases having initial terms

of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over

the lease term.

Accounting for Derivatives

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including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.

instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the

derivative instrument could be required within 12 months of the balance sheet date.

Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement

of the derivative instrument could be required within 12 months of the balance sheet date.

Fair Value of Financial Instruments

5 unchanged sentences

There were no new accounting pronouncements issued

or proposed by the Financial Accounting Standards Board during the three months ended June 30, 2021, and through the date of filing of

this report that the Company believes has had or will have a material impact on its financial position or results of operations, including

or proposed by the Financial Accounting Standards Board during the three months ended September 30, 2021, and through the date of filing

of this report that the Company believes has had or will have a material impact on its financial position or results of operations, including

the recognition of revenue, cash flow, the merger that was consummated on July 18, 2018.

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issuable upon exercise of outstanding convertible preferred stock and stock options.

For the three and six months ended June 30, 2021,

For the three and nine months ended September

30, 2021, there were no stock options outstanding.

For the three and six months ended June 30, 2021, common stock equivalents related to convertible

preferred stock and convertible debt have not been included in the calculation of diluted loss per common share because they are anti-dilutive.

For the three and nine months ended September 30, 2021, common stock equivalents related

to convertible preferred stock and convertible debt have not been included in the calculation of diluted loss per common share because

they are anti-dilutive.

Therefore, basic loss per common share is the same as diluted loss per common share.

There are 1,970,029,676 common shares reserved for

the potential conversion of the Company's convertible debt.

NOTE 2 - DEBENTURE

There are 1,970,029,676

common shares reserved for the potential conversion of the Company's convertible debt.

NOTE 2 – BUSINESS ACQUISITIONS

Optilan Holdco 3 Limited

On August 9, 2021, the Company entered into a

Share Purchase Agreement with Optilan Guernsey Limited and Optilan Holdco 2 Limited (the “Sellers”), pursuant to which the

Company purchased from the Sellers all of the issued and outstanding equity interests of Optilan HoldCo 3 Limited, a private company incorporated

in England and Wales (“Optilan”) for £1.00 and also a commitment to enter into the Subscription (as defined below).

As of August 9, 2021, the Company owns all of the equity interests of Optilan.

The Company has accounted for the purchase using

the acquisition method of accounting for business combinations under ASC 805.

Accordingly, the purchase price has been allocated to the

underlying assets and liabilities in proportion to their respective fair values.

The excess of the consideration transferred over the

estimated fair values of the net assets acquired was recorded as goodwill.

The following table summarizes the acquired assets and assumed

liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated

Balance Sheet at September 30, 2021:

Schedule of fair value of assets and liabilities

in acquisition

Accounts receivable

Unbilled revenue

Property & equipment

Accounts payable

Contract deposits

Contract liabilities, current

Lease liabilities, current

Other current liabilities

Lease liabilities, noncurrent

Total purchase consideration

This purchase price allocation is preliminary

and is pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed

valuation analyses as of the filing date of this Form 10-Q.

Wildlife Specialists, LLC and Remote Intelligence,

On August 30, 2021, we closed two separate Membership

Interest Purchase Agreements (the “ MPAs ”) with Remote Intelligence, Limited Liability Company, a Pennsylvania limited

liability company (“ RI ”) and Wildlife Specialists, LLC, a Pennsylvania limited liability company (“ WS ”)

pursuant to which we agreed to pay to the majority shareholder of each of RI and WS an aggregate of 15,000,000 shares of our Common Stock,

$ 500,000 to be paid on the closing date, and an additional $500,000 to be paid 12 weeks from closing date in exchange for 60 % ownership

of each of RI and WS.

RI and WS are now subsidiaries of the Company.

The Company has accounted for the purchase using

the acquisition method of accounting for business combinations under ASC 805.

Accordingly, the purchase price has been allocated to the

underlying assets and liabilities in proportion to their respective fair values.

The excess of the consideration transferred over the

estimated fair values of the net assets acquired was recorded as goodwill.

The following table summarizes the acquired assets and assumed

liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated

Balance Sheet at September 30, 2021:

Schedule of fair value of assets and liabilities

in acquisition

WILDLIFE SPECIALISTS

Accounts receivable

Other current assets

Property & equipment

Accounts payable

Other current liabilities

Total purchase consideration

Schedule of fair value of assets and liabilities

in acquisition

REMOTE INTELLIGENCE

Accounts receivable

Property & equipment

Accounts payable

Other long term liabilities

Total purchase consideration

These purchase price allocations are preliminary

and are pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed

valuation analyses as of the filing date of this Form 10-Q.

TJM Electronics West, Inc.

On September 8, 2021,

we entered into and closed the Stock Purchase Agreement (the “ TJM SPA ”) with TJM Electronics West, Inc., an Arizona

corporation (“ TJM ”), and TJM’s shareholders, pursuant to which we agreed to purchase all of the equity interests

in TJM in exchange for $ 450,000 , subject to adjustments as defined in the TJM SPA.

TJM is now a wholly-owned subsidiary of the Company.

The Company has accounted for the purchase using

the acquisition method of accounting for business combinations under ASC 805.

Accordingly, the purchase price has been allocated to the

underlying assets and liabilities in proportion to their respective fair values.

The excess of the consideration transferred over the

estimated fair values of the net assets acquired was recorded as goodwill.

The following table summarizes the acquired assets and assumed

liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated

Balance Sheet at September 30, 2021:

Schedule of fair value of assets and liabilities

in acquisition

Accounts receivable

Property & equipment

Total purchase consideration

This purchase price allocation is preliminary

and is pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed

valuation analyses as of the filing date of this Form 10-Q.

NOTE 3 – REVENUE

following table is a summary of the Company’s timing of revenue recognition for the three and nine months ended September 30, 2021

Schedule of timing of revenue recognition

Three Months Ended

Nine Months Ended

September 30,

Timing of revenue recognition:

Services and products transferred at a point in time

Services and products transferred over time

Total revenue

The Company disaggregates revenue by source and

geographic destination to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Revenue by source consisted of the following

for the three and nine months ended September 30, 2021 and 2020:

Schedule of revenue by source consisted

Three Months Ended

Nine Months Ended

September 30,

Revenue by products and services:

Total revenue

Revenue by geographic destination consisted of

the following for the for the three and nine months ended September 30, 2021 and 2020:

Schedule of revenue by geographic destination

Three Months Ended

Nine Months Ended

September 30,

Revenue by geography:

North America

International

Total revenue

Contract Balances

The Company records contract assets when it has

a right to consideration and records accounts receivable when it has an unconditional right to consideration.

Contract liabilities consist

of cash payments received (or unconditional rights to receive cash) in advance of fulfilling performance obligations.

As of September

30, 2021, the Company did not have a contract assets balance.

The following table is a summary of the Company’s

opening and closing balances of contract liabilities related to contracts with customers.

Schedule of contract liabilities related to contracts with customers

Balance at December 31, 2020

Additions through advance billings to or payments from vendors

Additions through business acquisition

Revenue recognized from current period advance billings to or payments from vendors

Revenue recognized from amounts acquired through business acquisition

Balance at September 30, 2021

NOTE 4 – ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following

as of September 30, 2021 and December 31, 2020:

Schedule of accounts receivable

September 30,

Accounts receivable

Allowance for doubtful accounts

Total accounts receivable

NOTE 5 – INVENTORY

Inventory consisted of the following as of September

30, 2021 and December 31, 2020:

Schedule of inventory

September 30,

Raw materials

Work in progress

Finished goods

Total inventory

Total inventory, net

NOTE 6 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following

as of September 30, 2021 and December 31, 2020:

Schedule of property, plant and

September 30,

Property and equipment

Leasehold improvements

Less - accumulated depreciation

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED

Accounts payable and accrued expenses consisted

of the following as of September 30, 2021 and December 31, 2020:

Schedule of accounts payable and accrued liabilities

September 30,

Accounts payable

Accrued liabilities

Total accounts payable and accrued expenses

NOTE 8 – LEASES

We adopted ASC 842 “Leases” using

the modified retrospective approach, electing the practical expedient that allows us not to restate our comparative periods prior to

the adoption of the standard on January 1, 2019.

As such, the disclosures required under ASC 842 are not presented for periods before

the date of adoption.

The following was included in our balance sheet

as of September 30, 2021:

Schedule of operating leases

Operating leases

ROU operating lease assets

Current portion of operating lease

Operating lease, net of current portion

Total operating lease liabilities

The weighted average remaining lease term and

weighted average discount rate at September 30, 2021 were as follows:

Schedule of weighted average remaining lease term and

weighted average discount rate

Weighted average remaining lease term (years)

September 30,

Operating leases

Weighted average discount rate

Operating leases

Operating Leases

On January 12, 2021, the Company’s new

acquired subsidiary entered into an operating lease agreement to rent office space in Mumbai, India.

This three-year agreement commenced

January 12, 2021 with an annual rent of approximately $ 50,000 .

On May 27, 2021, the Company’s new acquired

subsidiary entered into an operating lease agreement to rent office space in Mumbai, United Kingdom.

This ten-year agreement commenced

May 27, 2021 with an annual rent of approximately $ 85,000 with the first six months rent free.

The following table reconciles future minimum

operating lease payments to the discounted lease liability as of September 30, 2021:

Schedule of future minimum

operating lease payments

2025 and later

Total lease payments

Less imputed interest

Total lease obligations

Less current obligations

Long-term lease obligations

NOTE 9 – GOODWILL AND OTHER INTANGIBLE

following table sets forth the changes in the carrying amount of goodwill for the nine months ended September 30, 2021:

Schedule of changes in carrying amount of goodwill

Balance at December 31, 2020

2021 Acquisitions

Balance at September 30, 2021

Intangible Assets - Intrusion Detection Intellectual

The Company relies on patent laws and restrictions

on disclosure to protect its intellectual property rights.

As of September 30, 2021, the Company held 3 U.S.

and foreign patents on its

intrusion detection technology, which expire in calendar years 2025 through 2034 (depending on the payment of maintenance fees).

The DPTI issued patents cover a System and Method

for Brillouin Analysis, a System and Method for Resolution Enhancement of a Distributed Sensor, and a Flexible Fiber Optic Deformation

System Sensor and Method.

Maintenance of intellectual property rights and the protection thereof is important to our business.

that may be issued may not sufficiently protect the Company's intellectual property and third parties may challenge any issued patents.

Other parties may independently develop similar or competing technology or design around any patents that may be issued to the Company.

The Company cannot be certain that the steps it has taken will prevent the misappropriation of its intellectual property, particularly

in foreign countries where the laws may not protect proprietary rights as fully as in the United States.

Further, the Company may be

required to enforce its intellectual property or other proprietary rights through litigation, which, regardless of success, could result

in substantial costs and diversion of management's attention.

Additionally, there may be existing patents of which the Company is unaware

that could be pertinent to its business, and it is not possible to know whether there are patent applications pending that the Company's

products might infringe upon, since these applications are often not publicly available until a patent is issued or published.

For the three months

ended September 30, 2021 and 2020, the Company amortized $12,757 and $12,757, respectively.

Future amortization of intangible assets

is as follows:

Schedule of future amortization of intangible

NOTE 10 – DEBT AGREEMENTS

Secured Debenture

DPTI issued a convertible Debenture to the University

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the Canadian Dollar and the U.S.

Dollar on June 30, 2021, the quarterly principal repayment amounts will be US$49,750.

The Debenture is

secured by the Patents assigned by the University to DPTI by an Assignment Agreement on December 16, 2010.

Dollar on September 30, 2021, the quarterly principal repayment amounts will be US$49,750.

The Debenture

is secured by the Patents assigned by the University to DPTI by an Assignment Agreement on December 16, 2010.

DPTI has pledged the Patents,

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equivalent US Dollar amount of Canadian $1,500,000 as of December 16, 2010, the date of the original Debenture.

liability is being adjusted quarterly based on the current exchange value of the Canadian dollar to the US dollar at the end of each

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 June 30, 2021 and 2020, were $ 16,154

39,046 respectively.

These amounts are included in Accumulated Other Comprehensive Loss in the Equity section of the consolidated

balance sheet, and as Unrealized Loss on Foreign Exchange on the consolidated statement of comprehensive loss.

The Debenture also

includes a provision requiring DPTI to pay the University a two percent (2%) royalty on sales of any and all products or services

which incorporate the Patents for a period of five years from April 24, 2018.

For the three months ended June 30, 2021, and

2020, the Company recorded interest expense of $ 13,463 and $ 12,255 , respectively.

As of June 30, 2021 the debenture liability totaled

$ 1,210,155 , all of which was long term.

The liability is being

adjusted quarterly based on the current exchange value of the Canadian dollar to the US dollar at the end of each quarter.

The adjustment

is recorded as unrealized gain or loss in the change of the value of the two currencies during the quarter.

The amounts recorded as an

unrealized loss for the three months ended September 30, 2021 and 2020, were $ 16,155 and $ 39,047 respectively.

These amounts are included

in Accumulated Other Comprehensive Loss in the Equity section of the consolidated balance sheet, and as Unrealized Loss on Foreign Exchange

on the consolidated statement of comprehensive loss.

The Debenture also includes a provision requiring DPTI to pay the University a two

percent (2%) royalty on sales of any and all products or services which incorporate the Patents for a period of five years from April

For the three months ended September 30, 2021,

and 2020, the Company recorded interest expense of $ 13,168 and $ 12,255 , respectively.

As of September 30, 2021 the debenture liability

totaled $ 1,184,516 , all of which was long term.

Future minimum required payments over the

next 5 years and thereafter are as follows:

Future minimum required payments

Period ending June 30,

Schedule of future minimum debt payments

Period ending September 30,

2026 and after

NOTE 3 – CONVERTIBLE DEBT SECURITIES

Convertible Debt Securities

The Company uses the Black-Scholes Model to calculate

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The values of the common stock used were based on the price at the date of

issue of the debt security as of June 30, 2021.

issue of the debt security as of September 30, 2021.

Management determined the expected volatility of 359.78%,

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notes, with totals for the face amount, amortization of discount, initial loss, change in the fair market value, and the derivative liability.

Schedule of convertible debt

Schedule of debt

Transaction expense

$ ( 517,087 )

On April 5, 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 $ 64,200 with a $10,700 original issue discount and $ 3,500 in transactional expenses due to Geneva

and its counsel.

The note bears interest at 4.5 % per annum and may be converted into common shares of the Company's common stock at a

conversion price equal to 81% of the lowest two trading prices of the Company's common stock during the 10 prior trading days.

received $ 50,000 net cash.

On April 26, 2021, the Company entered a

Securities Purchase Agreement (the “ SPA ”) and Registration Rights Agreement (the “ Registration Rights

Agreement ”) with FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC, a Delaware limited liability company (the

“ FirstFire ”), pursuant to which we issued to FirstFire a Convertible Promissory Note in the principal amount of

(the “ FirstFire Note ”).

The SPA closed on April 30, 2021.

The purchase price of the FirstFire Note is $ 750,000 .

The FirstFire Note matures on January

26, 2022 upon which time all accrued and unpaid interest will be due and payable.

Interest accrues on the FirstFire Note at 10 %

per annum guaranteed until the FirstFire Note becomes due and payable, whether at maturity or upon acceleration or by prepayment or

The FirstFire Note is convertible at any time after 180 days from issuance, upon the election of the FirstFire, into

shares of our Common Stock at $ 0.015

The FirstFire Note is subject to various “Events of Default,” which are disclosed in the FirstFire Note.

the occurrence of an “Event of Default,” the conversion price will become $ 0.005 .

In the event of a DTC “chill” on our shares, an additional discount of 10% will apply to the conversion price while the

“chill” is in effect.

Upon the issuance of the FirstFire Note, we have initially agreed to reserve 550,000,000

shares of Common Stock.

In addition, on April 30, 2021, the Company issued 60,000,000

shares of common stock valued at $ 1,122,000

as compensation for loan acquisition costs, which will be amortized over the life of the note.

For the three months ended June 30,

2021, the Company expensed $ 249,333

to interest expense.

The Registration Rights Agreement provides that

the Company shall (i) use its best efforts to file with the Securities and Exchange Commission (the “ Commission ”)

an S-1 Registration Statement within 90 days of the date of the Registration Rights Agreement to register the shares into which the FirstFire

Note is convertible;

and (ii) have the Registration Statement declared effective by the Commission within 180 days after the date the

Registration Statement is filed with the Commission.

On May 19, 2021, the Company entered into a Stipulation

of Settlement with four note holders pursuant to which the Company agreed to pay $173,000 to the note holders.

On June 3, 2021, the Company entered into a

Settlement and Mutual Release Agreement with Auctus Fund, LLC (the “Lender”).

Pursuant to the Agreement, the Lender

agreed to convert the Promissory Note issued on September 25, 2018 by the Company to the Lender in the principal amount of $ 100,000

(the “Auctus Note”) into 12,500,000

shares of the Company’s Common stock (the “Shares”) as consideration for full and complete satisfaction of and

settlement of the Auctus Note, which also terminates all obligations owing under both the Auctus Note and the corresponding

Securities Purchase Agreement dated September 25, 2018 between the Company and the Lender.

The Lender also agreed to limit the

resales of the Shares in the public market to no more than 2,500,000

shares per calendar week until all of the Shares have been sold.

As of June 30, 2021 and 2020 respectively, there

was 1,584,574 and $ 1,072,663 of convertible debt outstanding, net of debt discount of $ 965,921 , and $ 1,313 , As of June 30, 2021 and 2020

respectively, there was derivative liability of $ 893,381 and $ 1,232,344 related to convertible debt securities.

On July 14, 2021, the Company entered a Securities

Purchase Agreement (the “ GS SPA ”) with GS Capital Partners, LLC (the “Lender”), pursuant to which the Company

issued to the Lender a 6% Redeemable Note in the principal amount of $ 2,000,000 (the “Note”).

The purchase price of the Note

is $ 1,980,000 .

The Note matures on July 14, 2022 upon which time all accrued and unpaid interest will be due and payable.

Interest accrues

on the Note at 6 % per annum until the Note becomes due and payable.

The Note is subject to various “Events of Default,” which

are disclosed in the Note.

Upon the occurrence of an “Event of Default,” the interest rate on the Note will be 18%.

is not convertible into shares of the Company’s Common Stock and is not dilutive to existing or future shareholders and the Company

plans on using a portion of the proceeds of the Note to retire existing convertible debt.

As of September 30, 2021 and 2020 respectively,

there was 1,584,574 and $ 1,072,663 of convertible debt outstanding, net of debt discount of $ 965,921 , and $ 1,313 , As of September 30,

2021 and 2020 respectively, there was derivative liability of $ 893,381 and $ 1,232,344 related to convertible debt securities.

NOTE 11 - STOCKHOLDERS' DEFICIT

As of September

30, 2021, there were 4,922,968,442 shares of common stock and 88,235 shares of preferred

stock issued and outstanding.

Preferred Stock

In accordance with the Company’s Certificate

of Incorporation, the Company has authorized a total of 2,000,000 shares of preferred stock, par value $ 0.01 per share, for all classes.

As of September 30, 2021, and December 31, 2020, there were 88,235 total preferred shares issued and outstanding for all classes.

During the three months ended September 30, 2021,

the Company issued no shares of preferred stock .

In accordance with the Company’s bylaws,

the Company has authorized a total of 20,000,000,000 shares of common stock, par value $ 0.0001 per share.

As of September 30, 2021 and

December 31, 2020, there were 4,922,968,442 and 4,088,762,156 common shares issued and outstanding.

During the three months ended September 30, 2021,

the Company issued the following shares of common stock :

On July 12, 2021, the Company issued an aggregate

of 1,784,146 shares of common stock upon the conversion of convertible debt, as issued on January 12, 2021, in the amount of $ 42,350 .

On July 14, 2021, the Company issued an aggregate

of 45,037,115 shares of common stock upon the conversion of convertible debt, as issued on October 7, 2020, in the amount of $ 93,864 and

interest of $ 26,246 .

On July 19, 2021, the Company issued an aggregate

of 2,898,382 shares of common stock upon the conversion of convertible debt, as issued on October 7, 2020, in the amount of $ 10,497 and

interest of $ 6,748 .

Stock Options

During the three months ended September 30, 2021,

the Company did not issue any stock options and had no stock options outstanding at September 30, 2021.

Public Offerings

On August 19, 2021, we entered into the Purchase

Agreement with GHS, for the offering of up to $ 45,000,000 worth of Common Stock.

Pursuant to the Purchase Agreement, on August 19, 2021,

we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from the Company, 31,799,260 shares of Common Stock for

total proceeds to the Company, net of discounts, of $ 3,300,000 , at an effective price of $ 0.1038 per share (the “ First Closing ”).

We received approximately $ 2,790,000 in net proceeds from the First Closing after deducting the fees and other estimated offering expenses

payable by us.

We used the net proceeds from the First Closing for working capital and for general corporate purposes.

The shares were

issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration statement on

Form S-3 (File No.

333-257826), which was initially filed with the SEC on July 12, 2021, and was declared effective on August 18, 2021.

On September 30, 2021, the Company paid a $ 275,000 placement fee to J.H.

Darbie & Co, $ 125,000 cash and $ 150,000 with 1,073,730 shares

of common stock.

Pursuant to the Purchase Agreement, on August

31, 2021, we and GHS agreed that the Company would issue and sell to GHS, and GHS would purchase from us, 27,297,995

shares of Common Stock for total proceeds to us, net of discounts, of $ 3,300,000 ,

at an effective price of $ 0.120888 per share (the “ Second Closing ”).

We received approximately $ 2,885,000 in net

proceeds from the Second Closing after deducting the fees and other estimated offering expenses payable by us.

We used the net proceeds

from the Second Closing for working capital and for general corporate purposes.

The shares were issued to GHS in a registered direct

offering, pursuant to a prospectus supplement to our currently effective registration statement on Form S-3 (File No.

333-257826), which

was initially filed with the SEC on July 12, 2021, and was declared effective on August 18, 2021.

On September 30, 2021, the Company

paid a $ 262,000 placement fee to J.H.

Darbie & CO, $ 112,000 cash and $ 150,000 with 1,185,771 shares of common stock.

Pursuant to the Purchase Agreement, on September

22, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us, 25,630,272

shares of Common Stock for total proceeds to us, net of discounts, of $ 2,000,000 , at an effective price of $ $ 0.085836 per share

(the “ Third Closing ”).

We received approximately $ 1,915,000 in net proceeds from the Third Closing after deducting

the fees and other estimated offering expenses payable by us.

We used the net proceeds from the Third Closing for working capital and

for general corporate purposes.

The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to

our currently effective registration statement on Form S-3 (File No.

333-257826), which was initially filed with the SEC on July 12,

2021, and was declared effective on August 18, 2021.

On September 30, 2021, the Company paid a $ 185,000 placement fee to J.H.

& CO, $ 85,000 cash and $ 100,000 with 934,580 shares of common stock.

NOTE 12 – RELATED PARTY TRANSACTIONS

The Company follows subtopic

850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

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;

dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the

method of establishing the terms from that used in the preceding period;

and d) amounts due from or to related parties as of the date

of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

During the three months ended September 30, 2021

and 2020, the Company’s Chief Executive Officer advanced personal funds in the amount of $ 0 and $ 10,582 for Company expenses.

of September 30, 2021, the Company’s Chief Executive Officer is owed a total of $ 23,980 for advanced personal funds.

NOTE 13 - COMMITMENTS & CONTINGENCIES

1 unchanged sentence

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.

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

31 unchanged sentences

Former DarkPulse Officers

On June 10, 2021, Stephen Goodman, Mark Banash,

On September 10, 2021, Stephen Goodman, Mark Banash,

and David Singer (the “ Former Officers ”), all former officers and employees of the Company, commenced suit against

13 unchanged sentences

dismiss More’s complaint, arguing that the claims asserted against the Company fail to state a claim upon which relief can be granted.

The Company intends to defend itself against the

allegations asserted in More’s complaint and interpose the defenses provided under the Act, including but not limited to asserting

The Company intends to defend itself against

the allegations asserted in More’s complaint and interpose the defenses provided under the Act, including but not limited to asserting

that More is an unregistered dealer acting in violation of Section 15(a) of the Act and, pursuant to Section 29(b) of the Act, the Company

13 unchanged sentences

financial condition and operating results.

On March 11, 2020, the World Health Organization

announced that infections of the novel Coronavirus (COVID-19) had become pandemic, and on March 13, the U.S.

President announced a National

Emergency relating to the disease.

There is a possibility of continued widespread infection in the United States and abroad, with the

potential for catastrophic impact.

National, state and local authorities have required or recommended social distancing and imposed or

are considering quarantine and isolation measures on large portions of the population, including mandatory business closures.

These measures,

while intended to protect human life, are expected to have serious adverse impacts on domestic and foreign economies of uncertain severity

and duration.

Some economists are predicting the United States will soon enter a recession.

The sweeping nature of the coronavirus pandemic

makes it extremely difficult to predict how the Company’s business and operations will be affected in the longer run, but we expect

that it may materially affect our business, financial condition and results of operations.

The extent to which the coronavirus impacts

our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may

emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

the coronavirus outbreak has begun to have indeterminable adverse effects on general commercial activity and the world economy, and our

business and results of operations could be adversely affected to the extent that this coronavirus or any other epidemic harms the global

economy generally and/or the markets in which we operate specifically.

Any of the foregoing factors, or other cascading effects of the

coronavirus pandemic that are not currently foreseeable, could materially increase our costs, negatively impact our revenues and damage

the Company’s results of operations and its liquidity position, possibly to a significant degree.

The duration of any such impacts

cannot be predicted.

NOTE 6 – INTANGIBLE ASSETS

Intangible Assets - Intrusion Detection Intellectual

The Company relies on patent laws and restrictions

on disclosure to protect its intellectual property rights.

As of June 30, 2021, the Company held 3 U.S.

and foreign patents on its intrusion

detection technology, which expire in calendar years 2025 through 2034 (depending on the payment of maintenance fees).

The DPTI issued patents cover a System and Method

for Brillouin Analysis, a System and Method for Resolution Enhancement of a Distributed Sensor, and a Flexible Fiber Optic Deformation

System Sensor and Method.

Maintenance of intellectual property rights and the protection thereof is important to our business.

that may be issued may not sufficiently protect the Company's intellectual property and third parties may challenge any issued patents.

Other parties may independently develop similar or competing technology or design around any patents that may be issued to the Company.

The Company cannot be certain that the steps it has taken will prevent the misappropriation of its intellectual property, particularly

in foreign countries where the laws may not protect proprietary rights as fully as in the United States.

Further, the Company may be required

to enforce its intellectual property or other proprietary rights through litigation, which, regardless of success, could result in substantial

costs and diversion of management's attention.

Additionally, there may be existing patents of which the Company is unaware that could

be pertinent to its business, and it is not possible to know whether there are patent applications pending that the Company's products

might infringe upon, since these applications are often not publicly available until a patent is issued or published.

For the three months

ended June 30, 2021 and 2020, the Company amortized $ 12,757

and $ 12,757 , respectively.

Future amortization of intangible assets is as follows:

Schedule of Intangible Assets

NOTE 7 – 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;

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)

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

During the three months ended June 30, 2021 and

2020, the Company’s Chief Executive Officer advanced personal funds in the amount of $0 and $33,820 for Company expenses.

June 30, 2021, the Company’s Chief Executive Officer is owed a total of $98,930 for advanced personal funds.

NOTE 8 – PREFERRED STOCK

In accordance with the Company’s Certificate of Incorporation,

the Company has authorized a total of 2,000,000 shares of preferred stock, par value $ 0.01 per share, for all classes.

As of June 30,

2021, and December 31, 2020, there were 88,235 total preferred shares issued and outstanding for all classes.

During the three months ended June 30, 2021, the

Company issued no shares of preferred stock .

NOTE 9 – COMMON STOCK

In accordance with the Company’s bylaws,

the Company has authorized a total of 20,000,000,000 shares of common stock, par value $ 0.0001 per share.

As of June 30, 2021 and December

31, 2020, there were 4,770,327,191 and 4,088,762,156 common shares issued and outstanding.

During the three months ended June 30, 2021, the

Company issued the following shares of common stock :

On April 15, 2021, the Company issued an aggregate

of 8,065,040 shares of common stock upon the conversion of convertible debt, as issued on October 7, 2020, in the amount of $ 47,850 and

interest of $ 2,153 .25.

On April 30, 2021, the Company issued 60,000,000

shares of common stock as compensation for loan acquisition costs associated with the note issued on the same date for the amount of $ 825,000 .

On June 4, 2021, the Company issued an aggregate

of 12,500,000 shares of common stock upon the conversion of convertible debt, as issued on September 25, 2018, in the amount of $ 76,656 .83

and interest of $ 260 .61.

NOTE 10 – STOCK OPTIONS

During the three months ended June 30, 2021, the

Company did no t issue any stock options and had no stock options outstanding at June 30, 2021.

NOTE 14– SUBSEQUENT EVENTS

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identified the following subsequent events that it believes require disclosure:

On July 12, 2021, the Company issued an aggregate

of 1,784,146 shares of common stock upon the conversion of convertible debt, as issued on January 12, 2021, in the amount of $42,350.

On July 14, 2021, the Company issued an aggregate

of 45,037,115 shares of common stock upon the conversion of convertible debt, as issued on October 7, 2020, in the amount of $93,864 and

interest of $26,246.

On July 14, 2021, the Company entered a Securities

Purchase Agreement (the “ GS SPA ”) with GS Capital Partners, LLC (the “Lender”), pursuant to which the

Company issued to the Lender a 6% Redeemable Note in the principal amount of $2,000,000 (the “Note”).

The purchase price

of the Note is $1,980,000.

The Note matures on July 14, 2022 upon which time all accrued and unpaid interest will be due and payable.

Interest accrues on the Note at 6% per annum until the Note becomes due and payable.

The Note is subject to various “Events of

Default,” which are disclosed in the Note.

Upon the occurrence of an “Event of Default,” the interest rate on the Note

The Note is not convertible into shares of the Company’s Common Stock and is not dilutive to existing or future shareholders

and the Company plans on using a portion of the proceeds of the Note to retire existing convertible debt.

On July 19, 2021, the Company issued an aggregate of 2,898,382 shares of common stock upon the conversion of

convertible debt, as issued on October 7, 2020, in the amount of $10,497 and interest of $6,748.

On August 3, 2021, the Company entered into

an Engagement Agreement and Terms and Conditions (the “Agreement”) with Energy & Industrial Advisory Partners, LLC ( “EIAP”).

Pursuant to the Agreement, the Company has engaged EIAP to serve as an advisor to the Company in the proposed transaction for agreed target

company or any of its subsidiaries and/or the whole or any part of its or their business or assets (the “Transaction”).

will receive a monthly retainer of $10,000 per month payable upon receipt of an invoice.

EIAP will also receive a consulting bonus fee

of $350,000 payable upon completion of the Transaction.

In the event of successful completion of the Transaction as a result of EIAP’s

involvement, EIAP agrees to deduct the total retainer fee from the consulting bonus fee.

The Agreement may be terminated, with or without

cause, by either party upon ten days’ written prior notice thereof to the other party.

If (a) during the term of the Agreement,

or (b) within two years following the date of the Agreement’s termination by the Company (provided that such two-year period shall

be extended by the same period of time that the Company takes to settle in full all fees, expenses and/or outlays due or to become due

to EIAP as at the date of the Agreement’s termination), the Company completes a transaction with the target company or a similar

transaction to the Transaction, then the Company shall pay the consulting bonus fee at the completion of the transaction.

On August 9, 2021, the Company entered into a

Share Purchase Agreement with Optilan Guernsey Limited and Optilan Holdco 2 Limited (the “Sellers”), pursuant to which the

Company purchased from the Sellers all of the issued and outstanding equity interests of Optilan HoldCo 3 Limited, a private company incorporated

in England and Wales (“Optilan”) for £1.00 and also a commitment to enter into the Subscription (as defined below).

As of August 9, 2021, the Company owns all of the equity interests of Optilan.

On August 9, 2021, the Company entered into a

Subscription Agreement (the “Subscription”) with Optilan, pursuant to which the Company agreed to purchase an aggregate of

4,000,000 Ordinary Shares of Optilan (the “Shares”) for an aggregate purchase price of £4,000,000.

Effective October 1,

2021, we entered into and closed the Membership Purchase Agreement (the “ TerraData MPA ”) with TerraData Unmanned, PLLC,

a Florida limited liability company (“ TerraData ”), and Justin Dee, the sole shareholder of TerraData, pursuant to which

we agreed to purchase 60% of the equity interests in TerraData in exchange for 3,725,386 shares of our Common Stock and $400,000, subject

to adjustments as defined in the TerraData MPA, to be paid within 12 weeks of closing.

TerraData is now a subsidiary of the Company.

Pursuant to the Purchase Agreement, on October

1, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us, 37,187,289

shares of Common Stock for total proceeds to us, net of discounts, of $3,000,000, at an effective price of $0.08874 per share (the “ Fourth

We received approximately $2,850,000 in net proceeds from the Fourth Closing after deducting the fees and other estimated

offering expenses payable by us.

We used the net proceeds from the Fourth Closing for working capital and for general corporate purposes.

The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration

statement on Form S-3 (File No.

333-257826), which was initially filed with the SEC on July 12, 2021, and was declared effective on August

to the Purchase Agreement, on October 14, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us,

14,282,304 shares of Common Stock for total proceeds to us, net of discounts, of $1,055,000, at an effective price of $0.08125 per share

(the “ Fifth Closing ”).

We received approximately $1,002,250 in net proceeds from the Fifth Closing after deducting

the fees and other estimated offering expenses payable by us.

We used the net proceeds from the Fifth Closing for working capital and

for general corporate purposes.

The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to

our currently effective registration statement on Form S-3 (File No.

333-257826), which was initially filed with the SEC on July 12,

2021, and was declared effective on August 18, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements