What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-15 compared with 2021-08-16 · 378 added, 105 removed, 122 unchanged (80% of the section changed)

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Critical Accounting Policies

The following discussions are based upon our financial statements and accompanying notes, which have been prepared in accordance

with accounting principles generally accepted in the United States.

The following discussions are based upon our financial

statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the United

The preparation of these financial statements

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Actual amounts and results could differ from these estimates made by management.

Business Overview

DarkPulse, Inc., a Delaware corporation (the “ Company ”),

is a technology-security company created to develop, market, and distribute a full suite of engineering, monitoring, installation and

security management solutions for critical infrastructure/key resources to both industries and governments.

is a technology-security company focused on the manufacture, sale, installation, and monitoring of laser sensing systems based on its

patented BOTDA dark-pulse sensor technology.

The Company develops, markets, and distributes a full suite of engineering, monitoring, installation

and security management solutions for critical infrastructure/key resources to both industries and governments.

Coupled with our patented

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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.

Our activities since inception have consisted of developing

various solutions, obtaining patents and trademarks related to its technology, raising capital, creating key partnerships to expand our

suite of products and services.

Our activities have evolved to a sales-focused mission since the successful completion of our BOTDA system

in December 2020.

Our systems provide rapid, precise analysis and responsive

activities predetermined by the end-user customer.

The Company’s activities since inception have consisted of developing various

solutions, obtaining patents and trademarks related to its technology, raising capital, acquisition of companies deemed to expand global

operations and/or capabilities, creating key partnerships to expand our suite of products and services.

Our activities have evolved to

a sales-focused mission since the successful completion of our BOTDA system in December 2020.

Headquartered in New York, DarkPulse is a globally

based technology company with presence in United Kingdom, India, Dubai, Russian Federation, Turkey, Azerbaijan, Iraq, Libya, United States

In addition to the Company’s BOTDA systems, through a series of strategic acquisitions the Company offers the manufacture,

sale, installation, and monitoring of laser sensing systems, O & G pipeline leak detection, physical security services, telecommunications

and satellite communications services, drone and rover systems.

The Company is focused on expanding services through acquisitions and

partnerships to address global infrastructure and critical environmental resource challenges.

DarkPulse offers a full suite of engineering

and environmental solutions that provide safety and security infrastructure projects.

The sensing and monitoring capabilities offered

by DarkPulse and our subsidiary companies operate in the Air, Land, Sea.

Our patented technology provides rapid, precise analysis to protect

and safeguard oil and gas pipelines above or below ground, physical security countermeasures, mining operations, and other critical infrastructure

/ key resources subject to vulnerability or risk.

Our patented Brillouin scattering distributed fiber sensing system is best in class.

The Company is able to monitor areas in around critical infrastructure buried or above ground including pipelines 100km or more in length

and/ or localized pipes as small as 8 CM DIA, detecting internal anomalies before catastrophic failure.

We are developing an Intelligent

Rock Bolt, to prevent causalities and fatalities in mining operations and include a real time sensor system that can detect the location

& movement of personnel & equipment throughout a mining operation.

We monitor airflow, air quality, temperature, seismic events,

Our sensors cover extended areas, protecting an area from intrusion by detecting events at any location along the sensing cable.

Working safely every day is our first core value and employees at DarkPulse and our subsidiary companies are recognized experts in their

fields, providing comprehensive services for all our clients' needs.

Our Operating Units

Telecommunications, Energy, Rail, Critical Network

Infrastructure, Pipeline Integrity Systems, Renewables and Security.

Headquartered in Coventry, United Kingdom with a 30-year pedigree,

at Optilan our customers trust us to keep the integrity of their assets safe and secure, by managing the life cycle delivery risk of our

By fostering a collaborative design approach to complex problems, we provide innovative solutions, custom fit to even the most

demanding of sites and scale of projects.

Importantly, our commitment to our safety culture remains unaverred, to ensure that everyone

goes home safely every day.

We orchestrate business resilience with a suite of end-to-end solutions, combined with connectivity and professional

service at a global level.

Today's business environment is more dynamic than ever, with continuous change and disruption accepted as the

We complement our tailored, integrated expertise with a curated ecosystem of leading manufacturers, to achieve both high quality

and enduring results.

We are proud to foster a unique culture full of talented individuals.

Our sector focus ensures that our account

teams are fully accredited in their operational areas.

We are committed to creating individually tailored solutions, using collaborative

techniques and programming tools to deliver the networks of the future.

Optilan has provided integrated solutions for leading Oil and

Gas, Industrial and Energy companies around the world.

As an industry leader in deploying communication networks with exceptional reliability,

our reputation for delivering the highest quality products remains unsurpassed.

This spans mobile, broadband, security systems and customer

premise works.

Our professionals have the skill to adopt and embed our expertise into existing platforms, processes, and cultures, delivering

exceptional value for our clients.

Beyond our operational scope, we strive to consider the impact of our global footprint and mitigate

associated environmental and sustainability risks.

These factors combined set Optilan apart and establish why customers continue to trust

and invest in our services.

Remote Intelligence

Remote Intelligence provides Unmanned Aerial Drone

and UGC (unmanned ground crawler) Services to a variety of clients;

from Industrial Mapping and Ecosystem Services, to Search and Rescue,

to Pipeline Security, we provide sales and consulting services for all markets.

Remote Intelligence started in 2013 with a simple vision;

to use the new and developing field of unmanned aerial vehicles to produce higher quality, safer and more effective products for a variety

We strive to Equip, Educate and Advance the use of the most advanced Unmanned Aerial Systems and Unmanned Ground Crawlers

in the United States and around the world for commercial, government and domestic use.

Our top priorities as we do that are to find safe

and ethical ways to use this new and exciting field of technology to make life better.

Providing holistic intelligence consultation and

solutions including full-service Methane Detection and Monitoring.

Quick, comprehensive site mapping and aerial inspection services.

specialize in fully integrated, geo-rectified, 3D modeled mapping and AI for industrial applications, specializing in the energy

and environmental industries, with AI and live streaming capabilities anywhere in the world.

Also providing aerial survey, video inspection

services, emergency support services, wildlife and habitat surveys, and comprehensive system design, training, and sales for both the

commercial and private sectors.

Integrating the latest tech solutions like artificial intelligence.

Globally connected with a base of

operation in Wellsboro Pennsylvania.

TerraData Unmanned

Comprised of a team with more than 30 years cumulative

experience in the unmanned industry, TerraData is well equipped to provide solutions that meet your unique requirements.

We custom manufacture

NDAA compliant drones and unmanned ground crawlers to meet the needs of our customers.

Aerial based data collection is a powerful new

tool for your industry, and TerraData is prepared to be your partner.

TerraData Unmanned, has successfully delivered a custom drone platform

per a customer’s specifications which exceeds current industry offering by more than 30 minutes.

The team has manufactured, and

successfully flight tested a Quad Copter drone with 1.5KG payload capabilities that delivers more than 60 minutes of continuous flight.

This cutting-edge design is a combination of proprietary software and hardware.

The custom platform offers NDAA compliant autopilot, communications

links, TSO Certified GPS unit and ground control station.

Future designs include integrating RTK for mapping, methane detectors, and true

terrain following capabilities.

There are also improvements scheduled that are intended to further extend the endurance and provide over

4KG of payload capacity, not including batteries.

TerraData has also announced the research, development and successful testing of an

autonomous crawler soon to be released to the market with Methane and Multi Gas Detection capabilities.

Working seamlessly with our partners

at DarkPulse and our subsidiary companies.

We can custom design, build and operate a system to meet our customers' needs 24 hours a day

365 days a year around the block or around the globe.

Wildlife Specialists

Wildlife Specialists, LLC was founded in 2007

to provide clients with comprehensive wildlife and environmental assessment, planning, and monitoring services.

We currently maintain

two regional offices located in north central and southeastern Pennsylvania and are available to provide services to clients nationwide

and around the globe.

Our staff are well-established professionals who have a wide range of experience in wildlife management, research,

and monitoring at the local and statewide levels throughout the United States.

In addition, we have specific expertise in providing the

full range of sensitive species and habitat assessments necessary for your development projects.

Wildlife Specialists’ mission is

to provide consulting services that use the latest technology to produce the highest quality results compatible with our clients’

management goals and the appropriate protocols developed by state and federal wildlife management agencies.

Wildlife Specialists is fully

insured to industry standards and committed to the safety of our staff, our clients, and the public.

We have maintained safety certification

through ISNetWorld and other 3rd party certifiers.

We are also officially PennDOT, GSA, Small Business and HUBZone Certified.

TJM West Electronics

TJM West Electronics is an ISO9001 and AS9100

certified electronics and electro-mechanical assembly operation.

We operate out of a high tech, 20,000 Sq ft facility in Tempe, Arizona.

Our assembly team is trained to IPC 610 and J-STD-001 standards, Class 2 and 3.

We have been in business since 1999.

Our latest website

was developed to be a customer interface for rapid costing, build scheduling, open order status, and complete manufacturing history data

Registered users can enter build and fabrication parameters for quantities of 2-20 units.

Our calculator provides itemized labor,

PCB fabrication cost and delivery.

Registered users can also access factory floor for the updated status and delivery date of open orders,

a review of configuration, quotes and full quality history database.

manufacturer and test of

advanced electronics, cables and sub-assemblies.

we specialize in advanced package and complex CCA and hardware.

Certified to space

and flight AS9100D, TJM has over 20 years supplying ultra-high reliability, and fully documented electronic Hardware.

TJM maintains all material certifications, process and measurement reports electronically as part of a complete quality history

Manufacturing PCB Design services on the most popular platforms including Cadence, Altium, and Mentor.

Design output data

integrates seamlessly to our automated manufacturing line.

Test Development ICT to functional and burn-in.

We develop a test plan

and hardware system to deliver your 100% verified product.

Low Cost, High Reliability Manufacturing is the net result of quality

planning, optimizing automation technology, operational efficiency, and communication.

High value, low-cost domestic solution to

replace offshore manufacturing.

Protect your IP and keep direct line-of sight of manufacturing with products made in the USA.

West Is your one stop shop.

Recent Events

On August 9, 2021, we entered into a Share Purchase

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

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

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

is now a wholly-owned subsidiary of the Company.

On August 9, 2021, we entered into a Subscription

Agreement with Optilan (the “ Subscription ”), pursuant to which we agreed to purchase an aggregate of 4,000,000 Ordinary

Shares of Optilan for an aggregate purchase price of £4,000,000.

On August 30, 2021, we closed two separate Membership

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

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

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

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

of each of RI and WS.

RI and WS are now subsidiaries of the Company.

On September 8, 2021,

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

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

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

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

Effective October 1,

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

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

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

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

TerraData is now a subsidiary of the Company.

On January 4, 2021, we entered into a securities

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and its counsel.

The note bears interest at 8% per annum and may be converted into common shares of the Company's common stock at a conversion

price equal to 70% of the lowest trading price of our common stock during the 20 prior trading days.

The note bears interest at 8% per annum and may be converted into common shares of our Common Stock at a conversion price

equal to 70% of the lowest trading price of our common stock during the 20 prior trading days.

We received $35,000 net cash.

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We received $60,000 net cash.

On April 5, 2021, the Company entered into

a securities purchase agreement with Geneva Roth issuing to Geneva a convertible promissory

note in the aggregate principal amount of $64,200 with a $10,700 original issue discount and $3,500 in transactional expenses due to Geneva

and its counsel.

The note bears interest at 4.5% per annum and may be converted into common shares of 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.

received $50,000 net cash.

On April 5, 2021, we entered into a securities

purchase agreement with Geneva Roth issuing to Geneva a convertible promissory note in the aggregate principal amount of $64,200 with

a $10,700 original issue discount and $3,500 in transactional expenses due to Geneva and its counsel.

The note bears interest at 4.5%

per annum and may be converted into common shares of our Common Stock at a conversion price equal to 81% of the lowest two trading prices

of our Common Stock during the 10 prior trading days.

We received $50,000 net cash.

On April 26, 2021, we entered a Securities Purchase

Agreement (the “ SPA ”) and Registration Rights Agreement (the “ Registration Rights Agreement ”) with

FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC, a Delaware limited liability company (the “ FirstFire ”), pursuant to which

we issued to FirstFire a Convertible Promissory Note in the principal amount of $825,000 (the “ FirstFire Note ”).

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

Agreement (the “ FirstFire SPA ”) and Registration Rights Agreement (the “ Registration Rights Agreement ”)

with FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC, a Delaware limited liability company (the “ FirstFire ”), pursuant to

which we issued to FirstFire a Convertible Promissory Note in the principal amount of $825,000 (the “ FirstFire Note ”).

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

The FirstFire Note matures on January 26, 2022 upon which time all accrued and unpaid

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initially agreed to reserve 550,000,000 shares of Common Stock.

The Registration Rights Agreement

provides that we shall (i) use our best efforts to file with the Commission an S-1 Registration Statement within 90 days of the date

of the Registration Rights Agreement to register the shares into which the FirstFire Note is convertible;

and (ii) have the Registration

Statement declared effective by the Commission within 180 days after the date the Registration Statement is filed with the Commission.

On July 14, 2021, the Company entered a Securities

Purchase Agreement 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

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

The Note is not convertible

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

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

The Registration Rights Agreement provides that

we shall (i) use our best efforts to file with the Commission an S-1 Registration Statement within 90 days of the date of the Registration

Rights Agreement to register the shares into which the FirstFire Note is convertible;

and (ii) have the Registration Statement declared

effective by the SEC within 180 days after the date the Registration Statement is filed with the SEC.

On July 14, 2021, we entered a Securities Purchase

Agreement with GS Capital Partners, LLC (the “ GS ”), pursuant to which we issued to GS a 6% Redeemable Note in the principal

amount of $2,000,000 (the “ GS Note ”).

The purchase price of the GS Note is $1,980,000.

The GS Note matures on July

14, 2022 upon which time all accrued and unpaid interest will be due and payable.

Interest accrues on the GS Note at 6% per annum until

the GS Note becomes due and payable.

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

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

The GS Note is not convertible

into shares of our Common Stock and is not dilutive to existing or future shareholders and we plan on using a portion of the proceeds

of the GS Note to retire existing convertible debt.

On August 19, 2021, we entered into the Purchase

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

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

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

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

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

payable by us.

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

The shares were

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

Form S-3 (File No.

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

Pursuant to the Purchase Agreement, on August

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

shares of Common Stock for total proceeds to us, net of discounts, of $3,300,000, at an effective price of $0.

share (the “ Second Closing ”).

We received approximately $2,885,000 in net proceeds from the Second Closing after deducting

the fees and other estimated offering expenses payable by us.

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

for general corporate purposes.

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

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

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

and was declared effective on August 18, 2021.

Pursuant to the Purchase Agreement, on September

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

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

“ Third Closing ”).

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

and other estimated offering expenses payable by us.

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

corporate purposes.

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

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

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

effective on August 18, 2021.

Pursuant to the Purchase Agreement, on October

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

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

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

Pursuant to the Purchase Agreement, on October

14, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us, 14,282,304

shares of Common Stock for total proceeds to us, net of discounts, of $1,055,000, at an effective price of $0.08125 per share (the “ Fifth

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

We have entered into a consulting agreement with

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with federal contract opportunities.

We have entered into a partnership with Remote

Intelligence to expand our service offerings to include “eye in the sky” drone capabilities.

We have entered into a partnership with Unleash

Live to expand our service offerings to include AI enhanced image evaluation and secure private networking capabilities.

We continue to evaluate partnership and licensing

opportunities we deem important to our transformation to a sales-focused company.

On August 3, 2021, we entered into an Engagement

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

Pursuant to the EIAP Agreement, we have engaged EIAP to serve as an advisor to us in the proposed transaction for agreed target company

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

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

EIAP will also receive a consulting bonus fee

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

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

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

The EIAP Agreement may be terminated, with or

without cause, by either party upon ten days’ written prior notice thereof to the other party.

If (a) during the term of the EIAP

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

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

EIAP as at the date of the EIAP Agreement’s termination), we complete a transaction with the target company or a similar transaction

to the Transaction, then we will pay the consulting bonus fee at the completion of the transaction.

Going Concern Uncertainty

As shown in the accompanying financial statements,

during the 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.

We will require additional funding to finance

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Results of Operations

To date, the Company has not generated any operating

For the three months ended September 30, 2021,

total revenues were $3,500,970 compared to $0 for the same period in 2020, an increase of $3,500,970.

This increase primarily consisted

of revenues of $3,380,633 from the acquisition of Optilan in August 2021and $97,283 from the acquisition of Wildlife Specialists in August

For the nine months ended September 30, 2021,

total revenues were $3,500,970 compared to $0 for the same period in 2020, an increase of $3,500,970.

This increase primarily consisted

of revenues of $3,380,633 from the acquisition of Optilan in August 2021and $97,283 from the acquisition of Wildlife Specialists in August

Cost of Goods Sold and Gross Profit

For the three months ended September 30, 2021,

cost of goods sold were $2,767,229 compared to $0 for the same period in 2020, an increase of $2,767,229.

Gross profit for the three months ended September

30, 2021 was $733,731 with a gross profit margin of 21% compared to $0 for the same period in 2020 with no gross profit margin.

For the nine months ended September 30, 2021,

cost of goods sold were $2,767,229 compared to $0 for the same period in 2020, an increase of $2,767,229.

Gross profit for the nine months ended September

30, 2021 was $733,731 with a gross profit margin of 21% compared to $0 for the same period in 2020 with no gross profit margin.

Operating Expenses

General and administrative

expenses for three months ended June 30, 2021 increased by $50,455 to $95,165 from $44,710 for the three months ended June 30, 2020.

General and administrative expenses for six months

ended June 30, 2021 increased by $38,582 to $124,853 from $86,271 for the six months ended June 30, 2020.

Legal expenses for three months ended June 30,

2021, increased by $102,434 to $146,619 from $44,185 for the three months ended June 30, 2020.

The increase is related to legal expenses

associated with the increase in litigation.

Legal expenses for six months ended June 30, 2021,

increased by $172,675 to $220,972 from $48,297 for the six months ended June 30, 2020.

The increase is related to legal expenses associated

with the increase in litigation.

Amortization of patents expense for three months

ended June 30, 2021, remained the same at $12,757 for the three months ended June 30, 2020.

Selling, general and administrative expenses for

three months ended September 30, 2021 increased by $372,158 to $406,940 from $34,782 of 1,070% for the three months ended September 30,

General and administrative expenses for nine months

ended September 30, 2021 increased by $410,927 to $531,793 from $120,866 or 340% for the nine months ended September 30, 2020.

Payroll related expenses for three months ended

September 30, 2021, increased by $1,007,453 to $1,007,453 from $0 for the three months ended September 30, 2020.

The increase primarily

consisted of an increase to the numbers of employees inherited from our various acquisitions.

Payroll related for nine months ended September

30, 2021, increased by $1,007,266 to $1,007,453 from $187 for the nine months ended September 30, 2020.

The increase primarily consisted

of an increase to the numbers of employees inherited from our various acquisitions in the most recent three months period.

Professional fees for three months ended September

30, 2021, increased by $1,680,600 to $1,680,600 from $0 for the three months ended September 30, 2020.

This increase primarily consisted

of increased legal expenditures associated with the increase in litigation.

Professional fees for nine months ended September

30, 2021, increased by $1,853,275 to $1,901,572 from $48,297 for the nine months ended September 30, 2020.

This increase primarily consisted

of increased legal expenditures associated with the increase in litigation.

Depreciation and amortization for three months

ended September 30, 2021, increased by $78,465 to $91,222 from $12,757 for the three months ended September 30, 2020.

This increase is

primarily due to the increase in depreciable assets we acquired from new acquisitions.

Depreciation and amortization for nine months

ended September 30, 2021, increased by $78,465 to $116,736 from $38,271 for the three months ended September 30, 2020.

This increase is

primarily due to the increase in depreciable assets we acquired from new acquisitions.

Other Income (Expense)

Interest expense was $318,921 and $25,154 for

the three months ended June 30, 2021 and 2020, respectively.

This $293,767 increase is primarily related to the increase in non-cash expenses

related to notes payable issued in 2021.

Interest expense was $350,584 and $60,524 for

the six months ended June 30, 2021 and 2020, respectively.

This $290,060 increase is primarily related to the increase in non-cash expenses

related to notes payable issued in 2021

Gain on convertible notes expense was $138,615

for the three months ended June 30, 2021.

The gain on the change in fair market value of

derivative liabilities was $358,440 for the three months ended June 30, 2021.

Gain on convertible notes expense was $308,896

for the six months ended June 30, 2021.

The gain on the change in fair market value of derivative liabilities was $327,496 for the six

months ended June 30, 2021.

Provision for Income Taxes

The provision for income taxes was $0 and $0 for

the three months ended June 30, 2021 and 2020, respectively.

For the three months ended September 30, 2021,

other income $798,654 compared to other expense of $126,483 for the same period in 2020, an increase in income of $925,137.

This increase

primarily consisted of $785,240 of gain related to the extinguishment of debt, $434,206 of gain on convertible notes, $153,360 of gain

on foreign currency exchange rate variance offset by an increase in interest expense of $283,388 due to increased borrowings and $163,281

increase in the fair value of the Company’s derivative instruments.

For the nine months ended September 30, 2021,

other income $1,084,462 compared to other expense of $180,940 for the same period in 2020, an increase in income of $1,265,402.

This increase

primarily consisted of $785,240 of gain related to the extinguishment of debt, $781,203 of gain on convertible notes, $153,360 of gain

on foreign currency exchange rate variance offset by an increase in interest expense of $573,448 due to increased borrowings and $121,047

increase in the fair value of the Company’s derivative instruments.

Net Income (Loss)

As a result of the above, we reported a net loss

of $185,607 for the three months ended June 30, 2021 compared to a net loss of $140,240 for the three months ended June 30, 2020.

of $1,686,830 for the three months ended September 30, 2021 compared to a net loss of $174,022 for the three months ended September 30,

Additionally, as a result of the above, we reported

a net loss of $237,481 for the six months ended June 30, 2021 compared to a net loss of $214,538 for the six months ended June 30, 2020.

a net loss of $1,924,311 for the nine months ended September 30, 2021 compared to a net loss of $388,561 for the nine months ended September

Liquidity and Capital Resources

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During the three months

ended June 30, 2021, we had $889,200 in new cash proceeds compared to the three months ended June 30, 2020, when we had no new cash proceeds.

As of June 30, 2021, we had cash of $148,562,

ended September 30, 2021, we had $11,102,700 in new cash proceeds compared to the three months ended September 30, 2020, when we had

no new cash proceeds.

As of September 30, 2021, we had cash of $2,564,492,

compared to $337 as of December 31, 2020.

As of June 30, 2021, our current liabilities exceeded our current assets by $2,915,206.

As of September 30, 2021, our current liabilities exceeded our current assets by $12,139,503.

Cash Flows from Operating Activities

During the six months ended June 30, 2021, net cash

provided by operating activities was $712,611, resulting from our net loss of $237,481 and an increase in expenses related to our convertible

notes payables, including amortization of debt discount of $171,554, decrease in derivative liability of $327,496, decrease in accounts

payable of $148,344 and an increase in accrued liabilities of $34,759.

By comparison, during the six months ended June

During the nine months ended September 30, 2021,

net cash used by operating activities was $7,446,593, resulting from our net loss of $1,924,311 and an increase in expenses related to

our convertible notes payables, including amortization of debt discount of $404,087 and loan acquisition costs of $480,450, increase

in stock based compensation of $649,334, increase in inventory of $410,836 and operating lease liabilities of $1,398,068.

These increases

were offset by a decrease in derivative liability of $741,789, increase in accounts payable and accrued expenses of $4,362,016 and an

increase from the gain on the extinguishment of debt of $785,240, increase in accounts receivable of $893,366, unbilled revenue of $563,555

and increase in contract liability of $1,439,504.

By comparison, during the nine months ended September

30, 2020, net cash provided by operating activities was $4,278, resulting from our net loss of $388,561 and an increase in expenses related

to our convertible notes payables, including amortization of debt discount of $38,101, decrease in derivative liability of $43,169, increase

in accounts payable of $140,423 and accrued liabilities of $68,749.

to our convertible notes payables, including amortization of debt discount of $39,414, increase in derivative liability of $44,684, increase

in accounts payable and accrued expenses of $280,370.

Cash Flows from Investing Activities

During the six months ended June 30, 2021, we

had net cash used in investing activities of $87,864.

During the six months ended June 30, 2020, we had net cash used in investing activities

During the nine months ended September 30, 2021,

we had net cash used in investing activities of $546,765.

During the nine months ended September 30, 2020, we had net cash used in investing

activities of $4,969.

Cash Flows from Financing Activities

During the six months ended June 30, 2020, net

cash provided by financing activities was $952,700, comprised of proceeds from the issuance of convertible debt in the amount of $1,102,700,

offset by payments on convertible debt of $150,000.

During the six months ended June 30, 2020, we had no net cash provided by or used

in financing activities.

During the nine months ended September 30, 2021,

net cash provided by financing activities was $10,718,100, comprised of proceeds from the sale of common stock from offering of $8,000,000,

the issuance of convertible debt in the amount of $1,102,700, the issuance of notes payable of $2,000,000 offset by payments on convertible

debt of $384,600.

During the nine months ended September 30, 2020, we had no net cash provided by or used in financing activities.

Factors That May Affect Future Results

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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 2. Management’s Discussion and Analysis