DarkPulse, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We have established disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and, as such, is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, Dennis O’Leary, who serves as our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Mr. O’Leary, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of December 31, 2021. Based on his evaluation, Mr. O’Leary concluded that, due to a material weakness in our internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of December 31, 2021. In light of the material weakness in internal control over financial reporting, we completed substantive procedures, including validating the completeness and accuracy of the underlying data used for accounting prior to filing this Form 10-K. 28 These additional procedures have allowed us to conclude that, notwithstanding the material weakness in our internal control over financial reporting, the consolidated financial statements included in this Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America. Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal controls over financial reporting for the Company. Due to limited resources, management conducted an evaluation of internal controls based on criteria established in 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“ COSO ”). The results of this evaluation determined that our internal control over financial reporting was ineffective as of December 31, 2021, due to material weaknesses. A material weakness in internal control over financial reporting is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting. Management’s assessment identified the following material weaknesses in internal control over financial reporting: · The small size of our company limits our ability to achieve the desired level of separation of duties to achieve effective internal controls over financial reporting. We do not have a separate CEO and CFO, to review and oversee our financial policies and procedures, which does achieve a degree of separation. However, until such time as we are able to hire a controller, we do not believe we meet the full requirement for separation. · We do not have an audit committee. · We have not achieved the desired level of documentation of our internal controls and procedures. This documentation will be strengthened through utilizing a third-party consulting firm to assist management with its internal control documentation and further help to limit the possibility of any lapse in controls occurring. · We have not achieved the desired level of corporate governance to ensure that our accounting for all of our contractual and other agreements is in accordance with all of the relevant terms and conditions. As a result of the material weaknesses in internal control over financial reporting described above, our management has concluded that, as of December 31, 2021, our internal control over financial reporting was not effective based on the criteria in Internal Control - Integrated Framework issued by the COSO. We will continue to follow the standards for the Public Company Accounting Oversight Board (United States) for internal control over financial reporting to include procedures that: · Pertain to the maintenance of records in reasonable detail accurately that fairly reflect the transactions and dispositions of our assets; · Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and · Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. 29 Despite the material weaknesses in financial reporting noted above, we believe that our financial statements included in this report fairly present our financial position, results of operations and cash flows as of and for the years presented in all material respects. Changes in Internal Controls There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have taken limited steps to meet our Sarbanes-Oxley (SOX) Section 404 compliance requirements and implement procedures to assure financial reports are prepared in accordance with generally accepted accounting principles (GAAP) and therefore fairly represent the results and condition of the Company. We are not materially compliant with the Section 404 requirements due to economic constraints. ITEM 9B. OTHER INFORMATION None. 30 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Executive Officers and Directors The following table sets forth the name, age, and position of each executive officer and director of the Company: Director's Name Age Position Dennis O’Leary 58 Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, Secretary & Treasurer Dr. Anthony Brown 48 Director Carl Eckel 63 Director Bill Bayliss 59 Chief Executive Officer of Optilan Dennis M. O’Leary, Chairman, CEO, President, CFO . Mr. O’Leary was appointed as the Company’s Chief Executive Officer, President, Chief Financial Officer and Chairman of the Board in April 2018. Mr. O’Leary is a serial entrepreneur with significant international experience having founded Sulu Electric Power and Light Corp (Philippines), a firm with expertise in utility scale power generation and solar energy. In 2010, Mr. O’Leary co-founded DarkPulse Technologies Inc., a wholly-owned subsidiary of the Company, which is developing specialized devices that monitor activities along national borders and provide structural health and safety monitoring of oil and gas pipelines. He holds extensive start-up experience including multiple exit strategies. Mr. O’Leary is an Ambassador for the Province of New Brunswick, Canada, and a Research Member of the NATO Science and Technology Organization. He served as a member of the Board at Arizona State University’s School of Engineering, Global Resolve as Chair of the Impact Committee. His previous employment includes the NYPD where he worked as a member of the Manhattan North Tactical Narcotics Team, which prosecuted establishments involved in the illegal distribution of narcotics. He was a member of a joint taskforce working with the DEA and USINS in the execution of warrants related to narcotics trafficking. While at the NYPD, he was assigned to the Department of Justice as a member of the FBI’s investigative team with internal designation C14. He is a licensed private pilot with turbine experience. Mr. O’Leary was appointed as a Director due to his extensive experience in the industries in which we operate. Mr. O’Leary is not, and has not been during the past five years, the director of any other public companies. Dr. Anthony Brown, Director . Dr. Brown has served as a Director of the Company since April 2019. He is a physicist and scientist with extensive experience in the development of Brillouin scattering-based distributed fiber optic sensing. In 2010, Dr. Brown co-founded DarkPulse Technologies, Inc., a wholly-owned subsidiary of the Company. Dr. Brown has more than 25 years of research and lecturing experience gained at the University of New Brunswick (“ UNB ”), focusing primarily on the development of Brillouin scattering-based distributed fiber optic sensor technology. From 2001 to 2012, Dr. Brown served as an assistant professor and research associate at UNB. During Dr. Brown’s tenure at UNB, he was instrumental in developing numerous patents in the field of fiber optic sensing. From 2012 to 2015, Dr. Brown served as an Adjunct Professor at UNB. From 2013 through the present, Dr. Brown has served as a data scientist for Xplornet Communications, Inc. From 2018 through the present, Dr. Brown has served as a consultant for the Company. Dr. Brown received a Bachelor of Science degree in Physics from UNB in 1995, and a PhD in Physics from UNB in 2001. Dr. Brown was appointed as a Director due to his extensive experience in the development of Brillouin scattering-based distributed fiber optic sensing. Dr. Brown is not, and has not been during the past five years, the director of any other public companies. 31 Carl Eckel, Director . Mr. Eckel has served as a Director of the Company since April 2019. He is a U.S. military veteran with over 35 years of defense communications system development and support experience. Mr. Eckel’s career began in the field of telecommunications operations and continued to evolve with the rapid advancements in telecommunications technologies. While serving in the United States Air Force from 1977 to 1985, Mr. Eckel was responsible for managing leased communications accounting, planning, user requirement changes, and system upgrades and replacements for critical Air Force Satellite Control Network (“ AFSCN ”) Programs at Onizuka AFS, until his honorable discharge in 1985. As a private civilian, from 1985 to 1992, Mr. Eckel served as a Database Systems Administrator and Site Integrator for Ford Aerospace / Loral where he was responsible for into customer communications requirements analysis and development of training for operations and maintenance of the classified and unclassified systems supporting all Space Shuttle and satellite activities. In 1993 recognizing the government’s need for quality affordable training for operations and maintenance of complex software and hardware communications systems, Mr. Eckel started a successful training development and delivery business that provided training to Washington D.C. area clients such as the Pentagon 7th CG, the White House Communications Agency. and PACAF based in Hawaii. Mr. Eckel worked for Allied Signal/Honeywell in 1995-96 as a Group Field Engineer maintaining critical Control Center and Remote Tracking Communications Equipment around the world, and then rejoining communications systems support with Lockheed from 1997 to 1998. From 1999 to 2000, Mr. Eckel resumed support on the government side of the AFSCN serving initially in Network Security and Systems Integration. From 2000 to 2001, Mr. Eckel served as a Deputy Maintenance Manager for ITT where he was responsible for maintenance of AFSCN mission control communications systems. From 2001 to 2013, Mr. Eckel served as a Site Manager, Program Manager, and Program Director for IITC / Nortel / PEC / Avaya Government Solutions where he held a team leadership role transitioning back into program management. With this transition Mr. Eckel was a part of establishing and delivering contract performance that netted 99-100% contract satisfaction award fees. Mr. Eckel advanced to program director level managing contract team activities, including subcontractors, at multiple locations supporting programs for the Air Force, Army, and NOAA/NWS. In early 2014, Mr. Eckel transitioned into the Oil and Gas Industry as a safety professional in support of pipeline integrity work, station work, and mainline projects for clients including Enbridge, Hess, Tesoro, MarkWest, TransCanada, Kinder Morgan, and Shell. From 2014 through the present, Mr. Eckel has served as a Safety Manager for Minnesota Limited, LLC where he is responsible for safety compliance, including field safety inspections, incident and accident investigation, and reporting. Mr. Eckel received a diploma in Communications Systems from the USAF Technical School in Shepherd AFB, TX. Mr. Eckel holds numerous certifications, including OSHA 500 – Authorized OSHA 10 and 30 hour trainer, OSHA 510 HAZWOPER, CPR/AED/First aid, DOT – CSA & HAZMAT Driver Training. Mr. Eckel was appointed as a Director due to his extensive management experience within the government and the private sectors in such areas and industries where our technology systems may be advantageously utilized. Mr. Eckel is not, and has not been during the past five years, the director of any other public companies. Bill Bayliss, CEO, Optilan . Mr. Bayliss has served as the CEO of Optilan since February 2020. Mr. Bayliss has been actively involved in leadership positions in both the public and private industrial/energy sector; including living and working in North America, Middle East and Norway. Mr. Bayliss started his career in support to the power generation and petrochemical businesses in a wide range of roles including project management, sales and commercial. He entered the oil and gas business with Brown and Root (B&R) in both London and Aberdeen. He subsequently moved to Norway with Kvaerner Engineering and returned back to UK with Kellogg B&R (KBR) fulfilling various roles including Senior Manager for the Hibernia Development in Canada, Business Manager for the Conoco Southern North Sea operations, maintenance and major project work before being promoted to KBR Global Operations and Maintenance Director. In 2004, Mr. Bayliss moved to Petrofac to set up an engineering, procurement, construction and commissioning support business that grew significantly from an initial seed corn start up investment, and within his role as Vice President, developed the business into five divisional areas with an annual turnover of circa $300 million and a support staff of 1,800. In 2009, he moved to Dubai as Chief Operating Officer of Topaz Engineering and was accountable for four business units with a circa $300 million turnover and over 4000 personnel. Mr. Bayliss joined Viking Seatech in September 2011 as Group CEO to take the business through financial and organizational restructuring and professionalization. Mr. Bayliss led the sale of this HSBC private equity backed debt leveraged business which was sold in August 2013 for £150million to USA trade buyer Actuant. At the end of 2014 Mr. Bayliss moved to work as an independent consultant helping a number of Private Equity houses including Bluewater Energy and Energy Ventures in their due diligence activities for the acquisition of various targets covering are Operational, Commercial (including financial elements), HSEQ, the supply chain, organizational structures and general management support. In mid-2016 Bill joined ICR. As Group CEO, he developed and executed a comprehensive strategy with the “end in mind” that delivered valuable change not only in terms of EBITDA but attractiveness in terms of exit multiples with the addition of new organic product lines and geographies. At its peak under Bills guidance the business nearly doubled in size. During late 2019, Mr. Bayliss decided to pursue other activities and was appointed as the CEO of Optilan. Mr. Bayliss has a Master of Science Degree in Engineering and Risk Management. 32 Legal Proceedings During the past ten years there have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any of our directors or executive officers, and none of these persons has been involved in any judicial or administrative proceedings resulting from involvement in mail or wire fraud or fraud in connection with any business entity, any judicial or administrative proceedings based on violations of federal or state securities, commodities, banking or insurance laws or regulations, or any disciplinary sanctions or orders imposed by a stock, commodities or derivatives exchange or other self-regulatory organization. Family Relationships There are no family relationships between any of our directors and executive officers. Audit Committee As of December 31, 2021, we did not have a functioning Audit Committee. Our management is currently reviewing our SEC filings and relying on outside experts to assist with this process. Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Exchange Act requires the Company’s directors, executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file with the Commission reports regarding initial ownership and changes in ownership. Directors, executive officers, and greater than 10% stockholders are required by the Commission to furnish the Company with copies of all Section 16(a) forms they file. We are not aware of any common stock transactions during the year ended December 31, 2021 for which either Forms 3, 4, or 5 were required to be filed. Code of Ethics We have not adopted a formal, written code of ethics due to a small number of members of management,. We plan to adopt a Code of Ethics during the fiscal year ending December 31, 2022. 33 ITEM 11. EXECUTIVE COMPENSATION Summary Compensation for Named Executive Officers The following table shows the executive compensation paid to our named executive officers for the years ended December 31, 2021 and 2020. Name and Principal Position Year Ended Dec 31, Salary All Other Compensation Total Dennis O’Leary 2021 $ 60,000 $ – $ 60,000 Chairman/CEO and Director 2020 $ – $ – $ – Bill Bayliss 2021 $ 343,918 $ 68,782 $ 412,700 CEO, Optilan 2020 $ 321,655 $ 12,866 $ 334,521 Summary Compensation for Directors The following table shows the executive compensation paid to our directors (excluding named executive officers) for the year ended December 31, 2021. Name and Principal Position Year Ended Dec 31, Salary Total Dr. Anthony Brown, Director 2021 $ – $ – Carl Eckel, Director 2021 $ 60,000 $ 60,000 Equity Awards As of December 31, 2021, there were no outstanding equity awards. 34 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Principal Shareholders The table below sets forth information as to our directors, named executive officers, and executive officers and each person owning of record or was known by the Company to own beneficially shares of stock greater than 5% of the 5,379,559,651 (5,379,471,416 common plus 88,235 preferred) shares as of April 11, 2022. The table includes preferred stock that is convertible into common stock and information as to the ownership of the Company's Stock by each of its directors, named executive officers, and executive officers and by the directors and executive officers as a group. There were no stock options outstanding as of April 11, 2022. Except as otherwise indicated, all shares are owned directly, and the persons named in the table have sole voting and investment power with respect to shares shown as beneficially owned by them. The address for each of our directors, named executive officers, and executive officers is 1345 Avenue of the Americas, 2 nd Floor, New York, NY 10105. Name and Position Shares of Common Stock Owned Shares of Series D Preferred Stock Owned (1) Amount and Nature of Beneficial Ownership (2) Percentage of Beneficial Ownership Dennis O’Leary, CEO and Director – 67,647 135,294 * Dr. Anthony Brown, Director – 5,882 11,764 * Carl Eckel, Director – – – – Bill Bayliss, CEO, Optilan – – – – Total named executive officers, executive officers, and directors (four persons) – 73,529 147,058 * *Less than 1% (1) Each share of Series D Preferred Stock is convertible, at the option of the holder, into two shares of our Common Stock. (2) Under Rule 13d-3 of the Exchange Act, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the above table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on the date of this prospectus. 35 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Director Independence We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.” We currently have not established any committees of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, other than as described above, no security holders have made any such recommendations. The entire Board of Directors performs all functions that would otherwise be performed by committees. Given the present size of our board it is not practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities accordingly. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Audit Fees . Consists of fees billed for professional services rendered for the audits of our financial statements, reviews of our interim financial statements included in quarterly reports, services performed in connection with filings with the SEC, and related other services that were provided by Boyle CPA (“ Boyle ”), our previous independent registered public accounting firm, and Urish Popeck & Co., LLC (“ Urish ”), our current independent registered public accounting firm, in connection with statutory and regulatory filings or engagements. The following is a summary of the fees incurred by the Company to Boyle and Urish for professional services rendered for the years ended December 31, 2021 and 2020, respectively. Service 2021 2020 Audit Fees $ 179,750 $ 10,000 Audit-Related Fees – – Total $ 179,750 $ 10,000 Tax Fees . Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions. There were no tax fees incurred by the Company for the years ended December 31, 2021 and 2020. Board of Directors Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors The Board of Directors may pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services as allowed by law or regulation. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specifically approved amount. The independent auditors and management are required to periodically evaluate the extent of services provided by the independent auditors in accordance with this pre-approval and the fees incurred to date. The Board of Directors may also pre-approve particular services on a case-by-case basis. The Board of Directors pre-approved 100% of the Company’s 2021 and 2020 audit fees, audit-related fees and all other fees. 36 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Exhibits The following exhibits are included as part of this Form 10-K: Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed Here- with 2.1 Form of Agreement and Plan of Merger by and between Klever Marketing, Inc., DarkPulse Technologies Inc. and DPTH Acquisition Corporation dated April 27, 2018 8-K 000-18730 2.1 5/1/18 2.2 Form of Amendment No. 1 to Agreement and Plan of Merger by and between Klever Marketing, Inc., DarkPulse Technologies Inc. and DPTH Acquisition Corporation dated June 29, 2018 8-K/A 000-18730 2.1 7/13/18 2.3 Form of Amendment No. 2 to Agreement and Plan of Merger by and between Klever Marketing, Inc., DarkPulse Technologies Inc. and DPTH Acquisition Corporation dated August 17, 2018, effective as of July 18, 2018 8-K 000-18730 2.1 8/21/18 3.1 Restated Certificate of Incorporation of Klever Marketing, Inc. a Delaware corporation 10-KSB 000-18730 3.01 6/20/97 3.2 Bylaws 10-KSB 000-18730 3.02 6/20/97 3.3 Amended Bylaws 10-KSB 000-18730 3.03 3/29/01 3.4 Certificate of Amendment to Certificate of Incorporation 8-K 000-18730 3.1 7/24/18 3.5 Certificate of Designation of Series D Preferred Stock 8-K 000-18730 3.2 7/24/18 3.6 Certificate of Amendment to Certificate of Incorporation filed February 5, 2019 10-K 000-18730 3.05 4/15/21 3.7 Certificate of Amendment to Certificate of Incorporation filed February 20, 2020 10-K 000-18730 3.06 4/15/21 3.8 Certificate of Amendment for Series D Preferred Stock filed December 23, 2021 8-K 000-18730 3.01 12/27/21 4.1 & 10.1 Convertible Promissory Note dated July 14, 2018 10-Q 000-18730 99.1 8/15/18 4.2 & 10.2 Convertible Promissory Note dated July 14, 2018 10-Q 000-18730 99.2 8/15/18 4.3 & 10.3 Convertible Promissory Note dated July 14, 2018 10-Q 000-18730 99.3 8/15/18 4.4 & 10.4 Convertible Promissory Note dated July 14, 2018 10-Q 000-18730 99.4 8/15/18 4.5 & 10.5 Convertible Promissory Note dated July 17, 2018, effective July 18, 2018 10-Q 000-18730 99.5 8/15/18 4.6 & 10.6 Convertible Promissory Note dated July 24, 2018, and effective July 27, 2018 10-Q 000-18730 99.6 8/15/18 4.7 & 10.7 Convertible Promissory Note dated August 20, 2018, effective August 24, 2018 8-K 000-18730 10.1 8/27/18 4.8 & 10.8 Convertible Promissory Note issued to EMA dated September 25, 2018, effective September 28, 2018 8-K 000-18730 10.1 10/5/18 4.9 & 10.9 Convertible Promissory Note issued to Auctus dated September 25, 2018, effective September 27, 2018 8-K 000-18730 10.2 10/5/18 4.10 & 10.10 Convertible Promissory Note issued to FirstFire dated September 24, 2018, and effective October 9, 2018 8-K 000-18730 10.1 10/15/18 4.11 & 10.11 8% Convertible Redeemable Note issued to GS Capital Partners, LLC dated January 10, 2019 8-K 000-18730 4.1 1/15/19 4.12 & 10.12 Form of Convertible Promissory Note issued to Crown Bridge Partners, LLC dated February 5, 2019 8-K 000-18730 4.1 2/14/19 4.13 & 10.13 Convertible Promissory Note issued to Geneva Roth Remark Holdings, Inc. dated September 2, 2020 10-K 000-18730 4.13 4/15/21 4.14 & 10.14 Convertible Promissory Note Issued as of April 26, 2021 to FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC 10-Q 000-18730 4.1 8/16/21 4.15 & 10.15 6% Redeemable Note dated July 14, 2021 issued to GS Capital Partners, LLC in the principal amount of $2,000,000 10-Q 000-18730 4.1 11/15/21 37 10.16 Securities Purchase Agreement dated July 14, 2021 with GS Capital Partners, LLC 10-Q 000-18730 10.1 11/15/21 10.17 Securities Purchase Agreement by and between DarkPulse, Inc. and GS Capital Partners, LLC dated January 10, 2019 8-K 000-18730 10.1 1/15/19 10.18 Form of Securities Purchase Agreement between DarkPulse, Inc. and Crown Bridge Partners, LLC dated February 5, 2019 8-K 000-18730 10.1 2/14/19 10.19 Securities Purchase Agreement with Geneva Roth Remark Holdings, Inc. dated September 2, 2020 10-K 000-18730 10.03 4/15/21 10.20 Consulting Agreement effective December 23, 2020 with Faisal Farooqui 10-K 000-18730 10.04 4/15/21 10.21 Assignment Agreement with the University of New Brunswick, Canada 10-K 000-18730 10.05 4/15/21 10.22 Convertible Debenture (Secured) Issued April 24, 2017 10-K 000-18730 10.06 4/15/21 10.23 Finder’s Fee Agreement dated January 8, 2021 with J.H. Darbie & Co., Inc. 10-Q 000-18730 10.1 5/17/21 10.24 Securities Purchase Agreement dated as of April 26, 2021 with FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC 10-Q 000-18730 10.1 8/16/21 10.25 Registration Rights Agreement dated April 26, 2021 to FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC 10-Q 000-18730 10.2 8/16/21 10.26 Heads of Terms with Remote Intelligence LLC and Unleash Live, Inc. dated May 10, 2021 10-Q 000-18730 10.3 8/16/21 10.27 Consulting Agreement with Dr. Joseph Catalino Jr. dated May 17, 2021 10-Q 000-18730 10.4 8/16/21 10.28 Settlement and Mutual Release Agreement with Auctus Fund, LLC dated June 3, 2021 10-Q 000-18730 10.5 8/16/21 10.29 Letter of Intent with Remote Intelligence, Limited Liability Company dated June 8, 2021 10-Q 000-18730 10.6 8/16/21 10.30 Letter of Intent with Wildlife Specialists, LLC dated June 8, 2021 10-Q 000-18730 10.7 8/16/21 10.31 Teaming Agreement with Crae-Con Construction Inc. dated June 22, 2021 10-Q 000-18730 10.8 8/16/21 10.32 Teaming Agreement with SurSafe LLC dated June 24, 2021 10-Q 000-18730 10.9 8/16/21 10.33 Letter of Intent with TerraData Unmanned, PLLC dated June 25, 2021 10-Q 000-18730 10.10 8/16/21 10.34 Consulting Agreement dated effective July 22, 2021 with Rick Gibson 10-Q 000-18730 10.2 11/15/21 10.35 Engagement Agreement and Terms and Conditions dated August 3, 2021 with Energy & Industrial Advisory Partners, LLC 10-Q 000-18730 10.3 11/15/21 10.36 Letter of Intent dated June 8, 2021 with Remote Intelligence, Limited Liability Company 10-Q 000-18730 10.4 11/15/21 10.37 Letter of Intent dated June 8, 2021 with Wildlife Specialists, LLC 10-Q 000-18730 10.5 11/15/21 10.38 Share Purchase Agreement dated August 9, 2021with Optilan Guernsey Limited and Optilan Holdco 2 Limited 10-Q 000-18730 10.6 11/15/21 10.39 Subscription Agreement August 9, 2021 with Optilan HoldCo 3 Limited 10-Q 000-18730 10.7 11/15/21 10.40 Letter of Intent dated effective August 18, 2021 with TJM Electronics West, Inc. 10-Q 000-18730 10.8 11/15/21 10.41 Membership Interest Purchase Agreement dated August 30, 2021 with Remote Intelligence, Limited Liability Company 10-Q 000-18730 10.9 11/15/21 10.42 Membership Interest Purchase Agreement dated August 30, 2021 with Wildlife Specialists, LLC 10-Q 000-18730 10.10 11/15/21 10.43 Letter of Intent dated June 25, 2021 with TerraData Unmanned, PLLC 10-Q 000-18730 10.11 11/15/21 10.44 Amendment No. 1 to Letter of Intent with TerraData Unmanned, PLLC dated effective August 24, 2021 10-Q 000-18730 10.12 11/15/21 10.45 Amendment No. 2 to Letter of Intent with TerraData Unmanned, PLLC dated effective September 3, 2021 10-Q 000-18730 10.13 11/15/21 10.46 Amendment to Letter of Intent with TJM Electronics West, Inc. dated effective August 31, 2021 10-Q 000-18730 10.14 11/15/21 10.47 Stock Purchase Agreement dated September 8, 2021 with TJM Electronics West, Inc. 10-Q 000-18730 10.15 11/15/21 10.48 Research Agreement dated September 21, 2021 with the Arizona Board of Regents 10-Q 000-18730 10.16 11/15/21 38 10.49 Membership Purchase Agreement with TerraData Unmanned, PLLC dated effective October 1, 2021 S-1 333-261453 10.48 12/1/21 10.50 Teaming Agreement with CADG Engineering Pte Ltd dated effective October 5, 2021 S-1 333-261453 10.49 12/1/21 10.51 Equity Financing Agreement with GHS Investments LLC dated November 9, 2021 S-1 333-261453 10.50 12/1/21 10.52 Registration Rights Agreement with GHS Investments LLC dated November 9, 2021 S-1 333-261453 10.51 12/1/21 10.53 Investor Relations Agreement dated December 15, 2021 with RedChip Companies, Inc. X 16.1 Letter from Boyle CPA Dated January 28, 2022 Regarding Change in Certifying Accountant 8-K 000-18730 16.1 1/28/22 21.1 List of Subsidiaries S-1 333-261453 21.1 12/1/21 23.1 Consent of Boyle CPA, independent registered public accounting firm S-1 333-261453 23.1 12/1/21 23.2 Consent of Attorney S-1/A 333-261453 23.2 12/8/21 31.1 Rule 13a-14(a) Certification by Principal Executive Officer and Principal Financial and Accounting Officer X 32.1 Section 1350 Certification of Principal Executive Officer and Principal Financial and Accounting Officer X 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted in Inline XBRL, and included in exhibit 101). ITEM 16. FORM 10-K SUMMARY None. 39 SIGNATURES Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DARKPULSE, INC. Dated: April 15, 2022 By: /s/ Dennis M. O’Leary Dennis M. O’Leary Chairman, Chief Executive Officer and President, and Chief Financial Officer (Principal Executive Officer, Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on this 15th day of April 2022. Signature Title /s/ Dennis M. O’Leary Dennis M. O’Leary Chairman, Chief Executive Officer, President, Chief Financial Officer, Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer April 15, 2022 /s/ Dr. Anthony Brown Director April 15, 2022 Dr. Anthony Brown /s/ Carl Eckel Director April 15, 2022 Carl Eckel 40 DARKPULSE, INC. Index to Financial Statements As of December 31, 2021 and 2020 and for the Years Ended December 31, 2021 and 2020 Report of Independent Registered Public Accounting Firm (2021 PCAOB ID 1013 ) (2020 PCAOB ID 6285 ) F-2 Consolidated Balance Sheets F-7 Consolidated Statements of Operations F-8 Consolidated Statements of Comprehensive Loss F-9 Consolidated Statements of Stockholders’ Deficit F-10 Consolidated Statements of Cash Flows F-11 Notes to the Financial Statements F-12 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Board of Directors Of DarkPulse, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of DarkPulse, Inc. and its subsidiaries (the “Company”) as of December 31, 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021 , in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt about the Company’s Ability to Continue as a Going Concern – See also Critical Audit Matters Section Below The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency at December 31, 2021. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. F- 2 Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate) to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Accounting for Embedded Derivative Liabilities Related to Convertible Debentures As described in Note 6 to the financial statements, the Company had convertible debentures that required accounting considerations and significant estimates. The Company determined that variable conversion features issued in connection with certain convertible debentures required derivative liability classification. These variable conversion features were initially measured at fair value and subsequently have been remeasured to fair value at each reporting period. The Company determined the fair value of the embedded derivatives using the Black-Scholes-Merton option pricing model. The value of the embedded derivative liabilities related to the convertible debentures was $533,753 at December 31, 2021. We identified the accounting considerations and related valuations, including the related fair value determinations of the embedded derivative liabilities of such as a critical audit matter. Our audit procedures related to the Company’s accounting considerations and significant estimate included the following, among others: · We reviewed the accounting considerations made by the Company in determining the nature of the various features; · We evaluated of the potential derivatives and potential bifurcation in the instruments; · We evaluated the determination of the fair value of the various debt and equity instruments and the conversion features that include valuation models and assumptions utilized by management against current accounting guidance. · We tested the mathematical accuracy of management’s calculations related to the estimate. Auditing these elements is especially challenging and requires auditor judgement due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed. Going Concern Uncertainty – See also Going Concern Uncertainty explanatory paragraph above As described further in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and does not have an established source of revenues sufficient to cover its operating costs. The ability of the Company to continue as a going concern is dependent on executing its business plan and ultimately to attain profitable operations. Accordingly, the Company has determined that these factors raise substantial doubt as to the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. Management intends to continue to fund its business by way of public or private offerings of the Company’s stock or through loans from private investors, in order satisfy the Company’s obligations as they come due for at least one year from the financial statement issuance date. However, the Company has not concluded that these plans alleviate the substantial doubt related to its ability to continue as a going concern. F- 3 We determined the Company’s ability to continue as a going concern is a critical audit matter due to the estimation and uncertainty regarding the Company’s available capital and the risk of bias in management’s judgments and assumptions in their determination. Our audit procedures related to the Company’s assertion on its ability to continue as a going concern included the following, among others: · We performed testing procedures such as analytical procedures to identify conditions and events that indicate that there could be substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. · We reviewed and evaluated management's plans for dealing with adverse effects of these conditions and events. · We inquired of Company management and reviewed company records to assess whether there are additional factors that contribute to the uncertainties disclosed. · We assessed whether the Company’s determination that there is substantial doubt about its ability to continue as a going concern was adequately disclosed. Revenue Recognition The Company recognizes revenue upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services. Significant judgment is exercised by the Company in determining revenue recognition for customer agreements, and include the pattern of delivery (i.e., timing of when revenue is recognized) for each distinct performance obligation. The related audit effort in evaluating management’s judgments in determining revenue recognition for customer agreements required a high degree of auditor judgment. Our principal audit procedures related to the Company’s revenue recognition for customer agreements included the following: · We gained an understanding of internal controls related to revenue recognition. · We evaluated management’s significant accounting policies for reasonableness. · We selected a sample of revenues recognized and performed the following procedures: o Obtained and read contract source documents for each selection and other documents that were part of the agreement, if applicable. o Assessed the terms in the customer agreement and evaluated the appropriateness of management’s application of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions. o We tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements. Business Combinations – Valuation of Intangible Assets As described in note 4 of the Consolidated Financial Statements, the Company completed the acquisitions of 100% of Optilan Guernsey Limited and Optilan Holdco 2 Limited (Optilan) and TJM Electronics West for $694,527 and $450,000, respectively and 60% of Wildlife Specialists LLC, Remote Intelligence, LLC and TerraData Unmanned, PLLC for $1,478,000 and $1,478,000, and $600,000 respectively (collectively referred to as the “Acquisitions”) and accounted for as business combinations. The acquired intangible assets included Optilan Holdco 3, Limited tradename for valued at $4,033,638. The Company recorded the acquired intangible assets at fair value on the date of acquisition considering a discounted cash flow methodology. The methods used to estimate the fair value of acquired intangible assets involve assumptions. The assumptions applied by management in estimating the fair value of acquired intangible assets included income projections and discount rates. F- 4 The principal considerations for our determination that performing procedures relating to the valuation of intangible assets in the Acquisitions is a critical audit matter are (1) there was a degree in significant auditor judgement and subjectivity in applying procedures to the fair value of the intangible assets acquired due to the judgment by management when developing estimates and (2) audit effort was required relating to the estimates, projections, discount rates, and weighted average cost of capital utilized by the Company. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the conclusions. Our principal audit procedures to evaluate the valuation of intangible assets included the following: · We read the purchase agreements used in the underlying acquisitions and utilized by the Company to allocate the purchase price. · We obtained the valuation reports prepared by management’s third-party expert. · Utilized professionals with specialized skill and knowledge to evaluate the reasonableness of the methodology, assumptions, including the discount rate and weighted average cost of capital, as compared to their experience and publically available market data. · Considered the reasonableness of the overall allocation of the total purchase price. /s/ Urish Popeck & Co., LLC We have served as the Company's auditor since 2021. Pittsburgh, PA April 15, 2022 F- 5 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of DarkPulse, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of DarkPulse, Inc. (the “Company”) as of December 31, 2020, the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt About the Company’s Ability to Continue as a Going Concern As discussed in Note 3 to the consolidated financial statements, the Company’s net losses, lack of revenues, and working capital deficiency raise substantial doubt about its ability to continue as a going concern for one year from the issuance of these financial statements. Management’s plans are also described in Note 3. The financial statements do not include adjustments that might result from the outcome of this uncertainty. Basis of Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Boyle CPA, LLC We have served as the Company’s auditor from 2019 through 2022 Bayville, NJ April 15, 2021 F- 6 DARKPULSE, INC. Consolidated Balance Sheets December 31, 2021 2020 ASSETS CURRENT ASSETS: Cash $ 3,658,846 $ 337 Accounts receivable, net 4,223,990 – Inventory 865,019 – Unbilled revenue 497,773 – Other current assets 181,000 – TOTAL CURRENT ASSETS 9,426,628 337 NON-CURRENT ASSETS: Property and equipment, net 2,370,711 – Operating lease right-of-use assets 2,038,106 – Patents, net 342,962 393,990 Intangible assets 3,886,588 – Goodwill 17,088,501 – Other assets, net 282,884 91,464 TOTAL NON-CURRENT ASSETS 26,009,752 485,454 TOTAL ASSETS $ 35,436,380 $ 485,791 LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 7,844,271 $ 1,089,869 Convertible notes, net of discount $ 0 and $ 35,525 respectively 378,263 931,158 Notes payable 2,000,000 – Customer deposits 2,802,809 – Derivative liability 533,753 1,220,877 Contract liabilities 3,216,562 – Operating lease liabilities - current 747,422 – Other current liabilities 2,024,433 – TOTAL CURRENT LIABILITIES 19,547,513 3,241,904 NON-CURRENT LIABILITIES: Secured debenture 1,172,364 1,176,092 Operating lease liabilities – non-current 2,474,530 – Other liabilities – non-current 676,331 – TOTAL NON-CURRENT LIABILITIES 4,323,225 1,176,092 TOTAL LIABILITIES 23,870,738 4,417,996 Commitments and contingencies – – STOCKHOLDERS’ DEFICIT: Convertible preferred stock - Class D (par value $ 0.01 ; 100,000 shares authorized; 88,235 issued and outstanding at December 31, 2021 and, 2020, respectively) 883 883 Common stock (par value $ 0.0001 ), 20,000,000,000 shares authorized, 5,197,821,885 and 4,088,762,151 shares issued and outstanding at December 31, 2021 and, 2020, respectively 519,782 408,876 Treasury stock, 100,000 shares at December 31, 2021 and 2020 ( 1,000 ) ( 1,000 ) Paid-in capital in excess of par value 20,248,703 1,805,813 ) Non-controlling interest in variable interest entity and subsidiary 2,358,227 ( 12,439 ) Accumulated other comprehensive income ( 284,463 ) 315,832 Accumulated deficit ( 11,276,490 ) ( 6,450,170 ) TOTAL STOCKHOLDERS’ DEFICIT 11,565,642 ( 3,932,205 ) TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $ 35,436,380 $ 485,791 See accompanying notes to consolidated financial statements. F- 7 DARKPULSE, INC. Consolidated Statements of Operations For the Year Ended December 31, 2021 2020 REVENUES $ 7,783,340 $ – COST OF GOODS SOLD 6,685,210 – GROSS PROFIT 1,098,130 – OPERATING EXPENSES: Selling, general and administrative 3,918,967 149,259 Salaries, wages and payroll taxes 2,653,683 187 Professional fees 2,930,245 50,415 Depreciation and amortization 258,306 51,028 Debt transaction expenses 184,950 7,850 TOTAL OPERATING EXPENSES 9,946,150 258,739 OPERATING LOSS ( 8,848,020 ) ( 258,739 ) OTHER INCOME (EXPENSE): Interest expense ( 130,359 ) ( 135,064 ) Gain (Loss) on change in fair market value of derivative liabilities 687,124 54,623 Gain (Loss) on convertible notes ( 35,525 ) ( 3,889 ) Gain on forgiveness of debt 3,488,860 67,227 Foreign currency exchange rate variance 11,600 – TOTAL OTHER INCOME (EXPENSE) 4,021,700 ( 17,103 ) NET LOSS ( 4,826,320 ) ( 275,842 ) Net loss attributable to non-controlling interests in variable interest entity and subsidiary 133,702 – Net loss attributable to Company stockholders $ ( 4,692,618 ) $ ( 275,842 ) LOSS PER SHARE Basic and Diluted $ ( 0.00 ) $ ( 0.00 ) WEIGHTED AVERAGE SHARES OUTSTANDING: Basic and Diluted 4,775,929,690 2,323,180,245 See accompanying notes to consolidated financial statements. F- 8 DARKPULSE, INC. Consolidated Statements of Comprehensive Loss For the Year Ended December 31, 2021 2020 NET LOSS $ ( 4,692,618 ) $ ( 275,842 ) OTHER COMPREHENSIVE LOSS Unrecognized Gain (Loss) on Foreign Exchange 26,539 ( 20,943 ) COMPREHENSIVE LOSS $ ( 4,666,079 ) $ ( 296,785 ) See accompanying notes to consolidated financial statements. F- 9 DARKPULSE, INC. Consolidated Statement of Stockholders' Deficit For the Years Ended December 31, 2021 and 2020 Preferred Stock Common Stock Treasury Paid in Capital in Excess of Par Non- Controlling Interest in Accumulated Other Comprehensive Accumulated Total Stockholders’ Shares Amount Shares Amount Stock Value Subsidiary Income Deficit Deficit Balance, December 31, 2019 88,235 $ 883 1,392,042,112 $ 13,920,421 $ ( 1,000 ) $ ( 11,877,864 ) $ ( 12,439 ) $ 336,775 $ ( 6,174,328 ) $ ( 3,807,552 ) Conversion of convertible notes – – 2,696,720,039 26,967,200 – ( 26,794,968 ) – – – 172,232 Change to Par Value – – – ( 40,478,745 ) 40,478,745 – – – – Closing of DarkPulse East LLC – – – – – ( 100 ) – – – ( 100 ) Foreign currency adjustment – – – – – – – ( 20,943 ) – ( 20,943 ) Net loss – – – – – – – – ( 275,842 ) ( 275,842 ) Balance, December 31, 2020 88,235 $ 883 4,088,762,151 $ 408,876 $ ( 1,000 ) $ 1,805,813 $ ( 12,439 ) $ 315,832 $ ( 6,450,170 ) $ ( 3,932,205 ) Conversion of convertible notes – – 908,659,678 90,866 – 1,610,853 – – – 1,701,719 Common stock issued for cash – – 179,974,598 17,997 14,575,330 – – 14,593,327 Common stock issued for acquisitions – – 15,000,000 1,500 1,654,500 2,370,666 – – 4,026,666 Stock based compensation – – 5,425,453 543 602,207 – – 602,750 Foreign currency adjustment – – – – – – ( 600,295 ) – ( 600,295 ) Net loss – – – – – – – ( 4,826,320 ) ( 4,826,320 ) Balance, December 31, 2021 88,235 $ 883 5,197,821,885 $ 519,782 $ ( 1,000 ) $ 20,248,703 $ 2,358,227 $ ( 284,463 ) $ ( 11,276,490 ) $ 11,565,642 See accompanying notes to consolidated financial statements. F- 10 DARKPULSE, INC. Consolidated Statements of Cash Flows For the Year Ended December 31, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 4,826,320 ) $ ( 275,842 ) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 129,493 86,607 Loan acquisition costs ( 480,450 ) 7,850 Stock based compensation 602,750 – Gain on reduction of loan default penalty – ( 9,900 ) Gain on extinguishment of debt ( 3,488,860 ) ( 67,227 ) Operating lease expense ( 1,346,808 ) – Amortization of debt discount 515,975 51,739 Derivative liability ( 687,124 ) ( 54,624 ) Changes in operating assets and liabilities: Accounts receivable 771,432 – Inventory 1,175,869 – Unbilled revenue 822,031 – Contract liability ( 922,631 ) – Customer deposits ( 365,684 ) – Accounts payable and accrued expenses ( 2,041,131 ) 269,589 Operating lease liabilities 2,451,692 – Other current liabilities ( 3,672,703 ) – Net cash used by operating activities ( 11,363,470 ) 8,192 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 754,961 ) – Business acquisitions, net of cash received ( 583,319 ) – Capitalized patents ( 191,420 ) ( 4,969 ) Deposits ( 159,453 ) – Net cash used by investing activities ( 1,689,153 ) ( 4,969 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of common stock 14,593,327 – Proceeds from convertible debentures 1,102,700 40,000 Repayments of convertible debentures ( 384,600 ) – Proceeds from related party notes payable – ( 44,096 ) Proceeds from notes payable 2,000,000 – Net cash provided by financing activities 17,311,427 ( 4,096 ) NET INCREASE (DECREASE) IN CASH 4,258,804 ( 873 ) Effect of exchange rate on cash ( 600,295 ) – CASH, beginning of year 337 1,210 CASH, end of year $ 3,658,846 $ 337 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year ended December 31: Interest $ – $ – Income taxes $ – $ – Non-cash finance and investing activities during the year ended December 31: Issuance of common stock for convertible notes payable and interest 181,560 – Issuance of common stock for Wildlife Specialists and Remote Intelligence 1,654,500 – Non-controlling interest for Wildlife Specialists and Remote Intelligence 2,370,666 – See accompanying notes to consolidated financial statements. F- 11 DARKPULSE, INC. Notes to the Consolidated Financial Statements For the Years ended December 31, 2021 and 2020 NOTE 1 – BASIS OF FINANCIAL STATEMENT PRESENTATION Organization and Description of Business DarkPulse, Inc. (“DPI” or “Company”) is a technology-security company incorporated in 1989 as Klever Marketing, Inc. (“Klever”). Its’ wholly-owned subsidiary, DarkPulse Technologies Inc. (“DPTI”), originally started as a technology spinout from the University of New Brunswick, Fredericton, Canada. The Company’s security and monitoring systems will initially be delivered in applications for border security, pipelines, the oil and gas industry and mine safety. Current uses of fiber optic distributed sensor technology have been limited to quasi-static, long-term structural health monitoring due to the time required to obtain the data and its poor precision. The Company’s patented BOTDA dark-pulse sensor technology allows for the monitoring of highly dynamic environments due to its greater resolution and accuracy. On April 27, 2018, Klever entered into an Agreement and Plan of Merger (the “Merger Agreement” or the “Merger”) involving Klever as the surviving parent corporation and acquiring a privately held New Brunswick corporation known as DarkPulse Technologies Inc. as its wholly owned subsidiary. On July 18, 2018, the parties closed the Merger Agreement, as amended on July 7, 2018, and the name of the Company was subsequently changed to DarkPulse, Inc. With the change of control of the Company, the Merger is being be accounted for as a recapitalization in a manner similar to a reverse acquisition. On July 20, 2018, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the State of Delaware, changing the name of the Company to DarkPulse, Inc. The Company filed a corporate action notification with the Financial Industry Regulatory Authority (FINRA), and the Company's ticker symbol was changed to DPLS. NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements are as follows: Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”). The consolidated financial statements of the Company include the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. Our consolidated financial statements as of December 31, 2021 and 2020 include the accounts of DarkPulse Inc. and its subsidiaries: DarkPulse Technologies Inc. (“DPTI”), a New Brunswick, Canada corporation, a wholly owned subsidiary, incorporated December 16, 2010. DPTI owns 100% of DarkPulse Technology Holdings Inc., a New York corporation, incorporated July 6, 2017. DPTI indirectly owns 37.572% of DarkPulse Technologies International Inc., ("DPTINY") a New York corporation, incorporated on September 7, 2017. On or about September 18, 2017, DPTI entered into a shareholder agreement with three investors, whereby DPTI would own 50.2% of DPTINY and the investors would own 49.8%. On or about October 3, 2017, another investor entered into an agreement with DPTINY to fund it $37,500 for a 0.5% equity interest in DPTINY. On December 26, 2017, DPTI’s CEO incorporated another corporation named DarkPulse Technologies International Inc., ("DPTIDel") in the State of Delaware. On or about April 16, 2018, seven investors and DPTI entered into a new agreement whereby it was agreed that the investors would own 62.428% of DPTIDel, and the September 18, 2017 agreement with respect to DPTINY was considered null and void. Accordingly, the funding of $37,500 to DPTINY in October 2017 has been converted to an equity interest in DPTIDel as of April 2018. As of April 16, 2018, DPTI owns approximately 37.572% of the shares of common stock of DPTIDel and 100% of the issued shares of Series A Preferred Stock of DPTIDel, pursuant to which the Company controls both DPTIDel and DPTINY. F- 12 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 30, 2021, the Company closed two separate Membership Interest Purchase Agreements 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 the Company agreed to pay to the majority shareholder of each of RI and WS an aggregate of 15,000,000 shares of the Company’s Common Stock and $ 1,000,000 in exchange for 60 % ownership of each of RI and WS. On September 8, 2021, the Company entered into and closed the Stock Purchase Agreement 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 . Effective October 1, 2021 the Company entered into and closed the Membership Purchase Agreement with TerraData Unmanned, PLLC, a Florida limited liability company (“ TerraData ”), and Justin Dee, the sole shareholder of TerraData, pursuant to which the Company agreed to purchase 60 % of the equity interests in TerraData in exchange for 3,725,386 shares of the Company’s Common Stock and $ 400,000 . Use of Estimates In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition, and revenues and expenses for the years then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the assumptions used to calculate stock-based compensation, derivative liabilities, preferred deemed dividend and common stock issued for services. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with high credit quality financial institutions. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits. Foreign Currency Translation The Company’s reporting currency is US Dollars. The accounts of one of the Company’s subsidiaries is maintained using the appropriate local currency, British Pound (“GBP”) as the functional currency. The accounts of one of the Company’s subsidiaries is maintained using the appropriate local currency, Canadian Dollar (“CAD”) as the functional currency. All assets and liabilities are translated into U.S. Dollars at balance sheet date, shareholders' equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are reported as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of operations. The relevant translation rates are as follows: for the year ended December 31, 2021 closing rate at 1.353583 US$: GBP, average rate at 1.375671 US$:GBP and for the Optilan acquisition closing rate at 1.38138 US$: GBP. The relevant translation rates are as follows: for the year ended December 31, 2021 closing rate at 1.2794 US$: CAD, average rate at 1.2534 US$:CAD and for the year ended December 31, 2020 closing rate at 1.2754 US$: CAD, average rate at 1.3388 US$:CAD. F- 13 Long-Lived Assets and Goodwill The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35, Property, Plant and Equipment, Impairment or Disposal of Long-lived Assets. This accounting standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other. Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. During the fourth quarter of 2020, the Company adopted ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The adoption of this standard had no material impact on the Consolidated Financial Statements. During fiscal 2021 and 2020, the Company recorded no impairments. Intangible Assets - Intrusion Detection Intellectual Property The Company relies on patent laws and restrictions on disclosure to protect its intellectual property rights. As of December 31, 2021, the Company held three U.S. and foreign patents on its intrusion detection technology, which expire in calendar years 2025 through 2034 (depending on the payment of maintenance fees). The DPTI issued patents cover a System and Method for Brillouin Analysis, a System and Method for Resolution Enhancement of a Distributed Sensor, and a Flexible Fiber Optic Deformation System Sensor and Method. Maintenance of intellectual property rights and the protection thereof is important to our business. Any patents that may be issued may not sufficiently protect the Company's intellectual property and third parties may challenge any issued patents. Other parties may independently develop similar or competing technology or design around any patents that may be issued to the Company. The Company cannot be certain that the steps it has taken will prevent the misappropriation of its intellectual property, particularly in foreign countries where the laws may not protect proprietary rights as fully as in the United States. Further, the Company may be required to enforce its intellectual property or other proprietary rights through litigation, which, regardless of success, could result in substantial costs and diversion of management's attention. Additionally, there may be existing patents of which the Company is unaware that could be pertinent to its business, and it is not possible to know whether there are patent applications pending that the Company's products might infringe upon, since these applications are often not publicly available until a patent is issued or published. For the year ended December 31, 2021, the Company had patent amortization costs on its intrusion detection technology totaling $ 51,028 . Patents costs are being amortized over the remaining life of each patent, which is from 7 to 16 years. The DPTI issued patents cover a System and Method for Brillouin Analysis, a System and Method for Resolution Enhancement of a Distributed Sensor, and a Flexible Fiber Optic Deformation System Sensor and Method. Maintenance of intellectual property rights and the protection thereof is important to our business. Any patents that may be issued may not sufficiently protect the Company's intellectual property and third parties may challenge any issued patents. Other parties may independently develop similar or competing technology or design around any patents that may be issued to the Company. The Company cannot be certain that the steps it has taken will prevent the misappropriation of its intellectual property, particularly in foreign countries where the laws may not protect proprietary rights as fully as in the United States. Further, the Company may be required to enforce its intellectual property or other proprietary rights through litigation, which, regardless of success, could result in substantial costs and diversion of management's attention. Additionally, there may be existing patents of which the Company is unaware that could be pertinent to its business, and it is not possible to know whether there are patent applications pending that the Company's products might infringe upon, since these applications are often not publicly available until a patent is issued or published. F- 14 The following is a summary of activity related to the DPTI patents for the year ended December 31, 2021: Intangible Assets Balance at January 1, 2021 $ 393,990 Additions – Amortization ( 51,028 ) Balance at December 31, 2021 $ 342,962 The following is a summary of the DPTI patents as of December 31, 2021: 2021 Historical cost $ 904,269 Accumulated amortization ( 561,307 ) Carrying Value $ 342,962 Future expected amortization of intangible assets is as follows: Future expected amortization of intangible assets Year Ending December 31, 2022 $ 51,028 2023 51,028 2024 51,028 2025 51,028 2026 51,028 Thereafter 87,822 Total $ 342,962 Property and Equipment Property and equipment are carried at historical cost less accumulated depreciation. Depreciation is based on the estimated service lives of the depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized. Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they are removed from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance are expensed as incurred. The estimated useful lives of property and equipment are generally as follows: Schedule of estimated useful lives Years Office furniture and fixtures 4 Plant and equipment 4 - 8 Leasehold Improvements 10 Motor Vehicles 3 F- 15 Revenue Recognition 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 for each. To determine the performance obligation, we consider all products and services promised in the contract regardless of whether they are explicitly stated or implied by customary business practices. The timing of satisfaction of the performance obligation is not subject to significant judgment. We measure revenue as the amount of consideration expected to be received in exchange for transferring goods and services. We generally recognize product revenues at the time of shipment, provided that all other revenue recognition criteria have been met. The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. The five-step model is applied to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services transferred to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize revenue in the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. In accordance with ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedient , which is to (1) clarify the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash consideration is contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. The amendments of this ASU are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. There was no impact as a result of adopting this ASU on the financial statements and related disclosures. Based on the terms and conditions of the product arrangements, the Company believes that its products and services can be accounted for separately as its products and services have value to the Company’s customers on a stand-alone basis. When a transaction involves more than one product or service, revenue is allocated to each deliverable based on its relative fair value; otherwise, revenue is recognized as products are delivered or as services are provided over the term of the customer contract. Contract liabilities is shown separately in the unaudited consolidated balance sheets as current liabilities. At December 31, 2021 and December 31, 2020, we had contract liabilities of $ 3,216,562 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. F- 16 Concentration of Credit Risk The Company has no significant concentrations of credit risk. Related Parties The Company accounts for related party transactions in accordance with ASC 850 (“Related Party Disclosures”). A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. Leases 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 term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. In calculating the right of use asset and lease liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term. Derivative Financial Instruments The Company evaluates the embedded conversion feature within its convertible debt instruments under ASC 815-15 and ASC 815-40 to determine if the conversion feature meets the definition of a liability and, if so, whether to bifurcate the conversion feature and account for it as a separate derivative liability. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a lattice model, in accordance with ASC 815-15 “Derivative and Hedging” to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument could be required within 12 months after the balance sheet date. Beneficial Conversion Features The Company evaluates the conversion feature for whether it was beneficial as described in ASC 470-30. The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the shares of common stock at the commitment date to be received upon conversion. F- 17 Fair Value of Financial Instruments The Company measures its financial assets and liabilities in accordance with the requirements of FASB ASC 820, “Fair Value Measurements and Disclosures”. As defined in FASB ASC 820, the fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 established a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement) as follows: Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities. Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars. Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Income Taxes The Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”) which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized. The Company follows the provision of ASC 740-10 related to Accounting for Uncertain Income Tax Positions. When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. F- 18 The Company believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits. The Company has adopted ASC 740-10-25, “Definition of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they are filed. The Company's U.S. subsidiaries were incorporated in 2017, and tax returns have not yet been filed. The Company does not anticipate a tax liability for the years 2021 and 2020. The Company has filed tax returns in Canada for the year ended December 31, 2018, and they are still subject to audit. Stock-based Compensation Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC Topic 718, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date. Further, ASC Topic 718, provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718, such as the repricing of share options, which would revalue those options and the accounting for the cancellation of an equity award whether a replacement award or other valuable consideration is issued in conjunction with the cancellation. If not, the cancellation is viewed as a replacement and not a modification, with a repurchase price of $ 0 . Income (Loss) Per Common Share The Company accounts for earnings per share pursuant to ASC 260, Earnings per Share, which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year. In periods where the Company has a net loss, all dilutive securities are excluded. Schedule of antidilutive shares December 31, 2021 December 31, 2020 Convertible preferred stock – – Stock Options – – Stock Warrants – – F- 19 Recently Issued Accounting Pronouncements In October 2016, the FASB issued ASU 2016-16, “ Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory ”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The adoption of ASU 2016-16 did not have a material impact on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04 Intangibles-Goodwill and Other (“ASC 350”): Simplifying the Accounting for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for annual or any interim goodwill impairment tests for fiscal years beginning after December 15, 2019. The adoption of ASU 2017-04 did not have a material impact on the consolidated financial statements. In July 2021, the FASB issued ASU No. 2021-05, Lessors—Certain Leases with Variable Lease Payments (Topic 842), Which requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate (hereafter referred to as “variable payments”) as an operating lease on the commencement date of the lease if specified criteria are met. ASU 2021-05 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s condensed consolidated financial statements upon the adoption of this ASU. In November 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , issued by the Financial Accounting Standards Board. This ASU requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The update will generally result in the recognition of contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value. The Company expects that there would be no material impact on the Company’s condensed consolidated financial statements upon the adoption of this ASU. Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its financial position or results of operations. F- 20 NOTE 3 – GOING CONCERN As shown in the accompanying financial statements, the Company generated net losses of $ 4,826,320 and $ 275,842 during the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, the Company’s current liabilities exceeded its current assets by $ 10,120,885 . As of December 31, 2021, the Company had $ 3,658,846 of cash. The Company will require additional funding during the next twelve months to finance the growth of its current operations and achieve its strategic objectives. These factors, as well as the uncertain conditions that the Company faces relative to capital raising activities, create substantial doubt as to the Company’s ability to continue as a going concern. The Company is seeking to raise additional capital principally through private placement offerings and is targeting strategic partners in an effort to finalize the development of its products and begin generating revenues. The ability of the Company to continue as a going concern is dependent upon the success of future capital offerings or alternative financing arrangements or expansion of its operations. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Management is actively pursuing additional sources of financing sufficient to generate enough cash flow to fund its operations through calendar year 2022. However, management cannot make any assurances that such financing will be secured. NOTE 4 – 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 for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at December 31, 2021: Schedule of fair value of assets and liabilities in acquisition (Amounts in US$’s) Amounts Recognized as of Acquisition Date Measurement Period Adjustments (1) Fair Value Cash $ 736,177 $ (6,000 ) $ 730,177 Accounts receivable 4,619,381 – 4,619,381 Inventory 2,040,887 – 2,040,887 Property & equipment 1,393,274 – 1,393,274 Right-of-use assets 1,385,825 (694,527 ) 691,298 Unbilled revenue 540,321 779,483 1,319,804 Intangible assets: Trade name – 4,033,638 4,033,638 Goodwill 12,181,350 (1,830,489 ) 10,350,861 Total assets 22,891,215 2,288,105 25,179,320 Accounts payable 11,622,018 (174,846 ) 11,447,172 Contract deposits 3,168,493 – 3,168,493 Contract liabilities, current 4,139,193 – 4,139,193 Lease liabilities, current 141,730 – 141,730 Other current liabilities 2,496,725 3,157,478 5,654,203 Lease liabilities, noncurrent 628,529 – 628,529 Total purchase consideration $ 694,527 $ (694,527 ) $ – F- 21 Wildlife Specialists, LLC and Remote Intelligence, LLC On August 30, 2021, the Company 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 the Company agreed to pay to the majority shareholder of each of RI and WS an aggregate of 15,000,000 shares of the Company’s 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 for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at December 31, 2021: Schedule of Condensed Consolidated Balance Sheet WILDLIFE SPECIALISTS Consideration Cash $ 500,000 Common stock 978,000 Purchase price $ 1,478,000 The allocation of the total purchase price to the tangible and intangible assets acquired and liabilities assumed by DarkPulse based on the estimated fair values as of August 29, 2021 was as follows: Schedule of fair value of assets and liabilities in acquisition WILDLIFE SPECIALISTS Amounts Measurement (Amounts in US$’s) Recognized as of Acquisition Date Period Adjustments (1) Fair Value Cash $ 33,910 $ (6,098 ) $ 27,812 Accounts receivable 161,866 170,486 332,352 Other current assets 600 20,947 21,547 Property & equipment 99,490 (77,945 ) 21,545 Goodwill 1,191,085 1,597,593 2,788,678 Total assets 1,486,951 1,704,983 3,191,934 Assumed liabilities 393,651 334,950 728,601 Non-controlling interest – 985,333 985,333 Total Consideration for 60% of equity interests $ 1,478,000 $ – $ 1,478,000 Schedule of Condensed Consolidated Balance Sheet REMOTE INTELLIGENCE Consideration Cash $ 500,000 Common stock 978,000 Purchase price $ 1,478,000 F- 22 The allocation of the total purchase price to the tangible and intangible assets acquired and liabilities assumed by the Company based on the estimated fair values as of August 29, 2021 was as follows: Schedule of fair value of assets and liabilities in acquisition REMOTE INTELLIGENCE Amounts (Amounts in US$’s) Recognized as of Acquisition Dat e Measurement Period Adjustments (1) Fair Value Cash $ 6,158 $ (5,800 ) $ 358 Accounts receivable 24,036 16,024 40,060 Property & equipment 111,636 76,710 188,346 Goodwill 1,729,800 1,080,103 2,809,903 Total assets 1,871,630 1,167,037 3,038,667 Assumed liabilities 393,630 181,704 575,334 Non-controlling interest – 985,333 985,333 Total Consideration for 60% of equity interests $ 1,478,000 $ – $ 1,478,000 TJM Electronics West, Inc. On September 8, 2021, the Company entered into and closed the Stock Purchase Agreement 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 . 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 for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at December 31, 2021: Schedule of fair value of assets and liabilities in acquisition Fair Value Accounts receivable $ 3,400 Property & equipment 91,051 Goodwill 355,549 Total assets 450,000 Total Consideration $ 450,000 TerraData Unmanned, PLLC. Effective October 1, 2021 the Company 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 the Company agreed to purchase 60 % of the equity interests in TerraData in exchange for 3,725,386 shares of the Company’s 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. F- 23 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 for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at December 31, 2021: Schedule of Condensed Consolidated Balance Sheet Consideration Cash $ 400,000 Common stock 200,000 Purchase price $ 600,000 The allocation of the total purchase price to the tangible and intangible assets acquired and liabilities assumed by the Company based on the estimated fair values as of October 1, 2021 was as follows: Schedule of fair value of assets and liabilities in acquisition (Amounts in US$'s) Fair Value Cash $ 8,691 Goodwill 992,049 Total assets 1,000,740 Assumed liabilities 740 Non-controlling interest 400,000 Total Consideration for 60% of equity interests $ 600,000 Unaudited Supplemental Pro Forma Data Unaudited pro forma results of operations for the nine months ended December 31, 2021 and 2020 as though the Company acquired Optilan, Wildlife Specialists, Remote Intelligence, TJM Electronic West and TerraData Unmanned (the “Acquired Companies”) on the first day of each fiscal year are set forth below. Proforma results of operations Year Ended December 31, 2021 2020 Pro forma revenues $ 23,329,213 $ 45,344,847 Pro forma operating income (loss) $ 11,477,923 $ ( 16,627,266 ) Pro forma net income (loss) $ 11,264,238 $ ( 11,308,866 ) Pro forma net income (loss) attributable to DarkPulse $ 11,912,054 $ ( 11,367,321 ) F- 24 NOTE 5 – REVENUE The following table is a summary of the Company’s timing of revenue recognition for the years ended December 31, 2021 and 2020: Schedule of timing of revenue recognition Years Ended December 31, 2021 2020 Timing of revenue recognition: Services and products transferred at a point in time $ 7,783,340 $ – Services and products transferred over time – – Total revenue $ 7,783,340 $ – 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 years ended December 31, 2021 and 2020: Schedule of revenue by source consisted Years Ended December 31, 2021 2020 Revenue by products and services: Products $ 1,533,378 $ – Services 6,249,962 – Total revenue $ 7,783,340 $ – Revenue by geographic destination consisted of the following for the for the years ended December 31, 2021 and 2020: Schedule of revenue by geographic destination Years Ended December 31, 2021 2020 Revenue by geography: North America $ 535,407 $ – International 7,247,933 – Total revenue $ 7,783,340 $ – F- 25 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 December 31, 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 Total Balance at December 31, 2020 $ – Additions through advance billings to or payments from vendors – Additions through business acquisition 4,139,193 Revenue recognized from current period advance billings to or payments from vendors – Revenue recognized from amounts acquired through business acquisition ( 922,631 ) Balance at December 31, 2021 $ 3,216,562 F- 26 NOTE 6 – CONVERTIBLE DEBT SECURITIES The Company uses the Black-Scholes Model to calculate the derivative value of its convertible debt. The valuation result generated by this pricing model is necessarily driven by the value of the underlying common stock incorporated into the model. The values of the common stock used were based on the price at the date of issue of the debt security as of December 31, 2021. Management determined the expected volatility between 475.55-624.25%, a risk free rate of interest between 0.10-0.13%, and contractual lives of the debt varying from zero months to eight months. Management made the determination to use an expected life rather than contractual life for the calculations for the matured debt as of December 31, 2021. The expected life is equal to the contractual life extended by one year which vary from two to seven months. The table below details the Company's outstanding convertible notes, with totals for the face amount, amortization of discount, initial loss, change in the fair market value, and the derivative liability. Schedule of convertible debt Face Debt Initial Change Derivative Balance Amount Discount Loss in FMV 12/31/2021 $ 90,228 $ – $ 58,959 $ 19,840 $ 128,370 162,150 – 74,429 35,654 230,692 72,488 – 11,381 15,938 103,130 53,397 – 7,850 ( 16,767 ) 71,561 Subtotal 378,263 – 152,619 54,665 533,753 Transaction expense – – – – – $ 378,263 $ – $ 152,619 $ 54,665 $ 533,753 Financings On October 7, 2020, the Company entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) issuing to Geneva a convertible promissory note in the aggregate principal amount of $ 47,850 with a $ 4,350 original issue discount and $ 3,500 in transactional expenses due to Geneva and its counsel. The note bears interest at 9 % per annum and may be converted into common shares of the Company's common stock at a conversion price equal to 70% of the lowest trading price of the Company's common stock during the 20 prior trading days. The Company received $ 40,000 net cash. On April 16, 2021, Geneva converted $ 47,850 of principal and $2,153 into 8,065,040 shares of common stock. On January 4, 2021, the Company entered into a securities purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of $ 42,350 with a $ 3,850 original issue discount and $ 3,500 in transactional expenses due to Geneva and its counsel. The note bears interest at 8 % per annum and may be converted into common shares of the Company's common stock at a conversion price equal to 70% of the lowest trading price of the Company's common stock during the 20 prior trading days. The Company received $ 35,000 net cash. On July 12, 2021, Geneva converted $ 42,350 of principal and $1,540 into 1,784,146 shares of common stock. On February 3, 2021, the Company entered into a securities purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of $ 94,200 with a $ 15,700 original issue discount and $ 3,500 in transactional expenses due to Geneva and its counsel. The note bears interest at 4.5 % per annum and may be converted into common shares of the Company's common stock at a conversion price equal to 81% of the lowest two trading prices of the Company's common stock during the 10 prior trading days. The Company received $ 75,000 net cash. On July 14, 2021, the Company repaid $ 94,200 of principal. On February 18, 2021, the Company entered into a securities purchase agreement with Geneva issuing to Geneva a convertible promissory note in the aggregate principal amount of $ 76,200 with a $ 12,700 original issue discount and $ 3,500 in transactional expenses due to Geneva and its counsel. The note bears interest at 4.5 % per annum and may be converted into common shares of the Company's common stock at a conversion price equal to 81% of the lowest two trading prices of the Company's common stock during the 10 prior trading days. The Company received $ 60,000 net cash. On July 14, 2021, the Company repaid $ 76,200 of principal. F- 27 On April 5, 2021, the Company entered into a securities purchase agreement with 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. The Company received $ 50,000 net cash. On July 14, 2021, the Company repaid $64,200 of principal. On April 26, 2021, the Company entered a Securities Purchase Agreement and Registration Rights with FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC, a Delaware limited liability company (the “ FirstFire ”), pursuant to which the Company 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 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 otherwise. The FirstFire Note is convertible at any time after 180 days from issuance, upon the election of the FirstFire, into shares of the Company’s Common Stock at $ 0.015 per share. The FirstFire Note is subject to various “Events of Default,” which are disclosed in the FirstFire Note. Upon the occurrence of an “Event of Default,” the conversion price would become $ 0.005 . On November 17, 2021, FirstFire converted $825,000 of principal and $61,875 of interest into 177,375,000 shares of common stock. On December 31, 2021, the Company commenced an action against FirstFire Global Opportunities Fund, LLC, and Eli Fireman (“Fireman”) in the United States District Court for the Southern District of New York. The complaint alleges that FirstFire is an unregistered dealer acting in violation of Section 15(a) of the Securities Exchange Act of 1934 (the “Act”), and that the Company is entitled to rescissionary relief from certain convertible promissory notes and securities purchase agreements entered into by the Company and FirstFire pursuant to Section 29(b) of the Act. The complaint also asserts claims against Fireman for control person liability under Section 20(a) of the Act, unjust enrichment of FirstFire, and constructive trust against FirstFire. 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. Pursuant to the Agreement, the Auctus 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 “ Auctus 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 Auctus. Auctus also agreed to limit the resales of the Auctus Shares in the public market to no more than 2,500,000 shares per calendar week until all of the Auctus Shares have been sold. On July 14, 2021, the Company entered a Securities Purchase Agreement (the “ GS SPA ”) with GS Capital Partners, LLC pursuant to which the Company issued to the Lender a 6% Redeemable Note in the principal amount of $ 2,000,000 (the “ GS Note ”). The purchase price of the GS Note is $ 1,980,000 . The GS Note matures on July 14, 2022 upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the GS Note at 6 % per annum until the GS Note becomes due and payable. The GS Note is subject to various “Events of Default,” which are disclosed in the GS Note. Upon the occurrence of an “Event of Default,” the interest rate on the GS Note will be 18%. The GS Note is not convertible into shares of the Company’s Common Stock and is not dilutive to existing or future shareholders and the Company used a portion of the proceeds of the GS Note to retire convertible debt. As of December 31, 2021, $2,000,000 remains outstanding. As of December 31, 2021 and 2020 respectively, there was $ 378,263 and $ 931,158 of convertible debt outstanding, net of debt discount of $ 0 , and $ 35,525 . As of December 31, 2021 and 2020 respectively, there was derivative liability of $ 533,753 and $ 1,220,880 related to convertible debt securities. F- 28 NOTE 7 - DEBENTURE DPTI issued a convertible Debenture to the University (see Note 1) in exchange for the Patents assigned to the Company, in the amount of Canadian $1,500,000, or US $1,491,923 on December 16, 2010, the date of the Debenture. On April 24, 2017 DPTI issued a replacement secured term Debenture in the same C$1,500,000 amount as the original Debenture. The interest rate is the Bank of Canada Prime overnight rate plus 1% per annum. The Debenture had an initial required payment of Canadian $42,000 (US$33,385) due on April 24, 2018 for reimbursement to the University of its research and development costs, and this has been paid. Interest-only maintenance payments are due annually starting after April 24, 2018. Payment of the principal begins on the earlier of (a) three years following two consecutive quarters of positive earnings before interest, taxes, depreciation and amortization, (b) six years from April 24, 2017, or (c) in the event DPTI fails to raise defined capital amounts or secure defined contract amounts by April 24 in the years 2018, 2019, and 2020. The Company has raised funds in excess of the amount required for 2020, 2019 and 2018. The principal repayment amounts will be due quarterly over a six year period in the amount of Canadian Dollars $62,500. Based on the exchange rate between the Canadian Dollar and the U.S. Dollar on December 31, 2018, the quarterly principal repayment amounts will be US$48,447. The Debenture is secured by the Patents assigned by the University to DPTI by an Assignment Agreement on December 16, 2010. DPTI has pledged the Patents, and granted a lien on them pursuant to an Escrow Agreement dated April 24, 2017, between DPTI and the University. The Debenture was initially recorded at the $1,491,923 equivalent US Dollar amount of Canadian $1,500,000 as of December 16, 2010, the date of the original Debenture. The liability is being adjusted quarterly based on the current exchange value of the Canadian dollar to the 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 gain (loss) for the years ended December 31, 2021 and 2020, were $ 20,941 and $ 20,941 respectively. These amounts are included in Accumulated Other Comprehensive Loss in the Equity section of the consolidated balance sheet, and as Unrealized Loss on Foreign Exchange on the consolidated statement of comprehensive loss. The Debenture also includes a provision requiring DPTI to pay the University a 2% royalty on sales of any and all products or services which incorporate the Patents for a period of five years from April 24, 2018. For the years ended December 31, 2021 and 2020, the Company recorded interest expense of $ 52,538 and $ 52,538 , respectively. As of December 31, 2021, the debenture liability totaled $ 1,172,364 , 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 December 31, 2022 $ – 2023 – 2024 – 2025 – 2026 and after 1,172,364 Total $ 1,172,364 F- 29 NOTE 8 – LEASES The Company adopted ASC 842 “Leases” using the modified retrospective approach, electing the practical expedient that allows the Company not to restate its 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 December 31, 2021 and 2020: Schedule of operating leases December 31, Operating leases 2021 2020 Assets ROU operating lease assets $ 2,038,106 $ – Liabilities Current portion of operating lease $ 747,422 $ – Operating lease, net of current portion $ 2,474,530 $ – Total operating lease liabilities $ 3,221,952 $ – The weighted average remaining lease term and weighted average discount rate at December 31, 2021 were as follows: Schedule of weighted average remaining lease term and weighted average discount rate Weighted average remaining lease term (years) December 31, 2021 Operating leases 8.25 Weighted average discount rate Operating leases 6.00 % Operating Leases On January 12, 2021, the Company’s newly acquired subsidiary entered into an operating lease agreement to rent office space in Mumbai, India. This three-year agreement commenced January 12, 2021 with an annual rent of approximately $ 50,000 . On May 27, 2021, the Company’s newly acquired subsidiary entered into an operating lease agreement to rent office space in Warwick, United Kingdom. This ten-year agreement commenced May 27, 2021 with an annual rent of approximately $ 85,000 with the first six months rent free. On August 31, 2021, the Company’s newly acquired subsidiary entered into an operating lease agreement to rent office space in Tempe, Arizona. This five-year agreement commenced August 31, 2021 with an annual rent of approximately $ 192,000 . On October 20, 2021, the Company’s newly acquired subsidiary entered into an operating lease agreement to rent office space in Warwick, United Kingdom. This ten-year agreement commenced October 20, 2021 with an annual rent of approximately $ 200,000 with the first six months rent free. F- 30 The following table reconciles future minimum operating lease payments to the discounted lease liability as of December 31, 2021: Schedule of future minimum operating lease payments 2022 $ 405,924 2023 498,401 2024 463,402 2025 472,343 2026 and later 1,751,345 Total lease payments 3,591,415 Less imputed interest ( 369,463 ) Total lease obligations 3,221,952 Less current lease obligations ( 747,422 ) Long-term lease obligations $ 2,474,530 NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accrued liabilities consist of the following as of December 31: Schedule of accounts payable and accrued liabilities 2021 2020 Accounts payable $ 7,227,129 $ 519,899 Accrued liabilities 617,142 569,970 $ 7,844,271 $ 1,089,869 NOTE 10 – INCOME TAXES The domestic and foreign components of loss before (benefit) provision for income taxes were as follows: Schedule of income components 2021 2020 Domestic: $ ( 4,285,237 ) $ (169,282 ) Foreign: ( 541,083 ) (106,560 ) Total income (loss) before income taxes $ ( 4,826,320 ) $ (275,842 ) The provision (benefit) for income taxes for the years ended December 31, 2021 and 2020 differs from the amount which would be expected as a result of applying the statutory tax rates to the losses before income taxes due primarily to the valuation allowance to fully reserve net deferred tax assets. The following table summarizes the significant differences between statutory rates for the years ended December 31, 2021 and 2020: Statutory tax rate 2021 2020 Statutory tax rate: U.S. 21.00 % 21.00 % State taxes 2.19 % 3.63 % Foreign rate differential 0.46 % 0.00 % Other ( 1.81 )% 0.00 % Change in valuation allowance: ( 21.84 ) % ( 24.63 ) % – % – % F- 31 The Company’s deferred tax assets and liabilities as of December 31, 2021 and 2020 are as follows: Deferred Tax assets and liabilities 2021 2020 Deferred Tax (Liabilities): Net operating losses $ 2,356,871 $ 1,351,897 Intangible assets ( 170,119 ) – Right of use asset (319,752 ) – Stock based compensation 498,571 – Less: Valuation allowance ( 2,365,571 ) ( 1,351,897 ) Deferred tax assets (liabilities) $ – $ – The Company has approximately $ 7,448,199 of federal and state net operating loss carryforwards as of December 31, 2021, which will not expire but will be limited to 80% utilization. The company also has net operating losses in the United Kingdom of $ 1,414,454 which will not expire and $ 636,852 of net operating loss carryforwards in Canada which will begin to expire in 2038. The Company records a tax valuation allowance when it is more likely than not that it will not be able to recover the value of its deferred tax assets. For the years ended December 31, 2021 and 2020, the Company calculated its estimated annualized effective tax rate at 0 % and 0 %, respectively, for both the United States, Canada and the United Kingdom. The Company had no income tax expense on its losses for the years ended December 31, 2021 and 2020, respectively. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest accrued on uncertain tax positions as well as interest received from favorable tax settlements within interest expense. The Company recognizes penalties accrued on unrecognized tax benefits within selling, general and administrative expenses. As of December 31, 2021 and 2020, the Company had no uncertain tax positions. The Company does not anticipate any significant changes to the total amounts of unrecognized tax benefits in the next twelve months. The Company files income tax returns in New Brunswick, Canada, and the U.S. federal, New York, and Delaware jurisdictions and the United Kingdom jurisdictions. Tax years 2011 to current remain open to examination by Canadian authorities; the tax year 2018 remains open to examination by U.S. authorities. NOTE 11 – PREFERRED STOCK In accordance with the Company’s bylaws, the Company has authorized a total of 2,000,000 shares of preferred stock, par value $ 0.01 per share, for all classes. As of December 31, 2021 and 2020 respectively, there were 88,235 and 88,235 total preferred shares issued and outstanding for all classes. On December 23, 2021, pursuant to the approval of the Board of Directors and a majority vote of the holders of Series D Preferred Stock, the Company amended the Certificate of Designation for the Series D Preferred Stock so that each share of Series D Stock is convertible, at the sole and exclusive election of the holder, into two shares of Common Stock of the Company. NOTE 12 – 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 December 31, 2021 and 2020, there were 5,197,821,885 and 4,088,762,156 common shares issued and outstanding. On February 18, 2020, the majority stockholders holding a majority of the issued and outstanding voting shares of the Company amended the Company’s Certificate of Incorporation to amend the par value of the Company’s common stock from $0.01 to $0.0001. On January 14, 2021, the Company issued an aggregate of 100,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $ 28,000 . F- 32 On January 25, 2021, the Company issued an aggregate of 150,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $ 42,000 . On February 1, 2021, the Company issued an aggregate of 30,999,995 shares of common stock upon the conversion of convertible debt, as issued on February 12, 2019, in the amount of $ 8,116 . On February 11, 2021, the Company issued an aggregate of 100,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $ 56,000 . On February 18, 2021, the Company issued an aggregate of 220,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 24, 2018, in the amount of $ 75,436 for principal and $ 39,638 for interest. 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. 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 . On August 25, 2021, the Company issued 31,799,260 shares of common stock for $ 3,000,000 . On August 31, 2021, the Company issued 27,297,995 shares of common stock for $ 3,000,000 . On September 22, 2021, the Company issued 25,630,272 shares of common stock for $ 2,000,000 . On September 30, 2021, the Company issued 15,000,000 shares of common stock pursuant to two separate Membership Interest Purchase Agreements with Remote Intelligence, and Wildlife Specialists, LLC. F- 33 On September 30, 2021, the Company issued 3,194,081 shares of common stock as compensation valued at $ 250,000 for loan acquisition costs associated with proceeds raised. On October 1, 2021, the Company issued 37,187,289 shares of common stock for $ 3,000,000 . On October 15, 2021, the Company issued 14,282,304 shares of common stock for $ 1,055,000 . On October 22, 2021, the Company issued 1,596,594 shares of common stock as compensation valued at $ 250,000 for loan acquisition costs associated with proceeds raised. On October 25, 2021, the Company issued 634,778 shares of common stock as compensation valued at $ 250,000 for loan acquisition costs associated with proceeds raised. On November 17, 2021, the Company issued an aggregate of 177,375,000 shares of common stock upon the conversion of convertible debt, as issued on April 30, 2021, in the amount of $ 825,000 and interest of $ 61,875 . On December 21, 2021, the Company issued an aggregate of 43,777,478 shares of common stock for $ 2,538,327 . At December 31, 2021, the Company had 1,589,257,888 in common shares reserved for issuance for convertible debt securities. NOTE 13 – STOCK OPTIONS As of December 31, 2021 and 2020, the Company had no outstanding stock options. NOTE 14 – COMMITMENTS AND CONTINGENCIES Potential Royalty Payments The Company, in consideration of the terms of the debenture to the University of New Brunswick, shall pay to the University a two percent royalty on sales of any and all products or services, which incorporate the Company's patents for a period of five years from April 24, 2018. Legal Matters DarkPulse, Inc. v. Twitter, Inc. On January 24, 2022, the Company filed a petition in the Supreme Court of the State of New York County of New York to compel a disclosure from Twitter, Inc. The petition sought to compel Twitter, Inc. to disclose the owner and operator of the “Investor News” Twitter account (@newsfilterio) so the Company could commence an action for damages arising from false, misleading, and untrue statements made by the Investor News. On February 23, 2022, the Court ordered Twitter to release information concerning the owner and operator of the Investor News account to the Company. T he Company will continue to pursue and expose the identities of those individuals or groups and shall take any and all legal action to pursue the violators . F- 34 Carebourn Capital, L.P. v. DarkPulse, Inc. As disclosed in greater detail in the Company’s Form 10-Q, filed November 15, 2021, the Company remains in active litigation with Carebourn Capital, L.P. (“Carebourn”). The remainder of this disclosure will address all material updates since the aforementioned Form 10-Q. On November 1, 2021, the Company filed a motion to compel Carebourn to produce certain documents and supplement its responses to certain interrogatories. On September 27, 2021, Carebourn filed a declaratory judgment and a motion for declaratory judgment, dismissal of the Company’s claims, and summary judgment (“Dispositive Motion”). On February 15, 2022, the Court rendered its decision on the aforesaid motions, denying the Dispositive Motion in its entirety and granting in part, and denying in part, the Company’s motion to compel. Pursuant to the Court’s ruling in the Company’s favor on its motion to compel, the Court has awarded the Company attorneys’ costs and fees in connection with the successful portions of its motion to compel. On January 19, 2022, the Company filed a motion for enforcement of a protective order. It is the Company’s position that Carebourn has violated a protective order that was entered into by the parties and seeks to protect confidential information exchanged during the litigation. The Court has not yet rendered a decision on this motion. On March 24, 2022, Carebourn filed a Motion to Compel against DarkPulse, alleging that DarkPulse failed to fulfill its discovery obligations by not producing a privilege log. DarkPulse contends that Carebourn’s motion is meritless and premature. The Company remains committed to actively litigating its claims for relief under the Securities Exchange Act of 1934. More Capital, LLC v. DarkPulse, Inc. et al As disclosed in greater detail in the Company’s Form 10-Q, filed November 15, 2021, the Company remains in active litigation with More Capital, LLC (“More”). The remainder of this disclosure will address all material updates since the aforementioned Form 10-Q. On October 27, 2021, the Company served its initial discovery requests, consisting of interrogatories, requests for admission, and requests for production, on More. On November 24, 2021, More served its responses to the Company’s initial discovery requests. After reviewing More’s responses, it is the Company’s position that More’s responses are false, misleading, untrue, and/or evasive. On February 28, 2022, the Company filed its motion to compel More to produce certain documents and supplement or otherwise modify its responses to certain interrogatories and requests for admission. DarkPulse’s motion will be heard on April 14, 2022. On March 9, 2022, More filed a motion for summary judgment against the Company. The Company’s opposition is being filed on or before March 23, 2022, and More’s motion will be heard on April 6, 2022. The Company remains committed to actively litigating its claims for relief under the Securities Exchange Act of 1934. F- 35 Goodman et al. v. DarkPulse, Inc. As disclosed in greater detail in the Company’s Form 10-Q, filed November 15, 2021, the Company remains in active litigation with Stephen Goodman (“Goodman”), Mark Banash (“Banash”), and David Singer (“Singer”) (Goodman, Banash, and Singer together, the “Series D Plaintiffs”). The remainder of this disclosure will address all material updates since the aforementioned Form 10-Q. On August 20, 2021, the Company and the Series D Plaintiffs entered into a stipulation, pursuant to which the Company withdrew its motion to dismiss and the Company was provided with an extended period of time to respond to the complaint. On September 8, 2021, the Company filed its Answer and Counterclaims, wherein the Company alleges counterclaims arising from various breaches of fiduciary duties by the Series D Plaintiffs while they were employed as officers of the Company. On December 9, 2021, the parties participated in private mediation. No understanding of settlement was reached at the conclusion thereof. The Company remains committed to actively litigating its claims and defenses against the Series D Plaintiffs. DarkPulse, Inc. v. FirstFire Global Opportunities Fund, LLC, and Eli Fireman (SDNY) On December 31, 2021, the Company commenced an action against FirstFire Global Opportunities Fund, LLC (“FirstFire”), and Eli Fireman (“Fireman”) (FirstFire and Fireman together, the “FirstFire Parties”) in the United States District Court for the Southern District of New York. The complaint alleges that FirstFire is an unregistered dealer acting in violation of Section 15(a) of the Securities Exchange Act of 1934 (the “Act”), and that the Company is entitled to rescissionary relief from certain convertible promissory notes and securities purchase agreements entered into by the Company and FirstFire pursuant to Section 29(b) of the Act. The complaint also asserts claims against Fireman for control person liability under Section 20(a) of the Act, unjust enrichment of FirstFire, and constructive trust against FirstFire. On January 14, 2022, the Company moved for entry of a temporary restraining order and award of a preliminary injunction against FirstFire to enjoin them from selling or attempting to sell, transfer, or otherwise dispose of the 177,275,000 common shares the Company believed were in FirstFire’s possession pursuant to a certain note. On January 14, 2022, the Court denied the Company’s order to show cause seeking a temporary restraining order. Following expedited briefing by the parties, on January 21, 2022, the Court denied the Company’s motion for preliminary injunction. On March 14, 2022, the FirstFire Parties filed their letter request for a motion to dismiss the Company’s complaint. The Company responded to the FirstFire Parties’ letter on March 17, 2022. As of the filing date, the Court has not yet issued a decision on the FirstFire Parties letter request to file its motion to dismiss. F- 36 FirstFire Global Opportunities Fund, LLC v. DarkPulse, Inc. (Del. Chancery Court) On December 13, 2021, FirstFire Global Opportunities Fund, LLC (“FirstFire”) commenced an action against the Company in the Court of Chancery of the State of Delaware. The complaint seeks declaratory judgment of the issuance of 177,375,000 shares of Company common stock pursuant to a certain convertible promissory note. On January 4, 2022, the Company filed a motion to dismiss FirstFire’s complaint. On February 11, 2022, the Company filed its opening memorandum of law in support of its motion to dismiss. The Company’s memorandum argues that FirstFire the certain convertible promissory note that the issuance was made under is void ab initio as it violates New York’s criminal usury laws, and that FirstFire improperly amended the governing law provision of the void convertible note to evade being declared void ab initio and, instead, continue to enforce the unlawful transaction. On March 14, 2022, FirstFire filed a notice of voluntary dismissal of its complaint. As of December 31, 2021, DarkPulse views the aforesaid FirstFire Delaware Chancery matter as fully closed. DarkPulse, Inc. v. EMA Financial, LLC et al On January 4, 2022, the Company commenced an action against EMA Financial, LLC (“EMA”), EMA Group, Inc. (“EMA Group”), and Felicia Preston (“Preston”) (EMA, EMA Group, and Preston together, the “EMA Parties”) in the United States District Court for the Southern District of New York. The complaint alleges that EMA is an unregistered dealer acting in violation of Section 15(a) of the Securities Exchange Act of 1934 (the “Act”), and that the Company is entitled to rescissionary relief from certain convertible promissory notes and securities purchase agreements entered into by the Company and EMA pursuant to Section 29(b) of the Act. The complaint also asserts claims against Preston for control person liability under Section 20(a) of the Act, unjust enrichment of EMA, EMA Group, and Preston, and constructive trust against the EMA Parties. On March 28, 2022, the Company filed its first amended complaint against the EMA Parties. The amended complaint alleges the same causes of action asserted in the initial complaint—(1) that EMA 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 is entitled to rescissionary relief from certain convertible promissory notes and securities purchase agreements entered into by the Company and EMA, (2) that Preston is liable pursuant to Section 20(a) of the Act, and (3) unjust enrichment—along with two claims: that the EMA Parties, first, violated and, second conspired to violate the Racketeer Influenced and Corrupt Organizations (RICO) Act for engaging in the collection of an unlawful debt. The Company remains committed to actively litigating its claims for relief under the Securities Exchange Act of 1934. From time to time, we may become involved in litigation relating to claims arising out of our operations in the normal course of business. We are not currently involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on our business, financial condition and operating results. F- 37 COVID-19 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. Moreover, 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 15 – RELATED PARTY TRANSACTIONS The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include a) affiliates of the Company; b) Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. During the years ended December 31, 2021 and 2020, the Company’s Chief Executive Officer advanced personal funds in the amount of $ 593 and $ 68,254 for Company expenses. NOTE 16 – SUBSEQUENT EVENTS On January 12, 2022, the Company issued 23,372,430 shares of common stock for $1,150,000. On January 21, 2022, the Company issued 33,454,988 shares of common stock for $1,150,000. On February 7, 2022, the Company issued 16,040,411 shares of common stock for $500,000. On March 7, 2022, the Company issued 75,798,921 shares of common stock for $2,500,000. On March 23, 2022, the Company issued 29,257,395 shares of common stock for $1,500,000. On April 11, 2022, the Company issued 23,746,816 shares of common stock for $1,000,000. F- 38