DarkPulse, Inc. 10-Q

Item 1. Financial Statements DARKPULSE, INC. Consolidated Balance Sheets September 30, 2022 (unaudited) December 31, 2021 ASSETS CURRENT ASSETS: Cash $ 5,967,984 $ 3,658,846 Accounts receivable, net 3,531,244 4,223,990 Inventory 260,613 865,019 Unbilled revenue 319,025 497,773 Other current assets 868,597 181,000 TOTAL CURRENT ASSETS 10,947,463 9,426,628 NON-CURRENT ASSETS: Property and equipment, net 1,712,950 1,787,824 Operating lease right-of-use assets 2,654,676 2,620,993 Patents, net 304,691 342,962 Intangible assets 3,098,379 3,886,588 Goodwill 15,286,010 17,088,501 Other assets, net 347,864 282,884 TOTAL NON-CURRENT ASSETS 23,404,570 26,009,752 TOTAL ASSETS $ 34,352,033 $ 35,436,380 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 4,048,227 $ 7,844,271 Convertible notes, net 378,263 378,263 Notes payable 2,000,000 2,000,000 Customer deposits 1,907,404 2,802,809 Derivative liability 296,308 533,753 Contract liabilities 4,050,438 3,216,562 Operating lease liabilities - current 1,779,238 364,105 Other current liabilities 2,802,374 2,407,750 TOTAL CURRENT LIABILITIES 17,262,252 19,547,513 NON-CURRENT LIABILITIES: Secured debenture 1,090,827 1,172,364 Operating lease liabilities – non-current 1,145,908 2,474,530 Other liabilities – non-current 582,240 676,331 TOTAL NON-CURRENT LIABILITIES 2,818,975 4,323,225 TOTAL LIABILITIES 20,081,227 23,870,738 Commitments and contingencies – – STOCKHOLDERS’ EQUITY: Preferred stock - Series A (par value $ 0.01 ; 100 shares authorized; 100 and 0 issued and outstanding at September 30, 2022 and December 31, 2021, respectively) 1 – Convertible preferred stock - Series D (par value $ 0.01 ; 100,000 shares authorized; 88,235 issued and outstanding at September 30, 2022 and December 31, 2021, respectively) 883 883 Common stock (par value $ 0.0001 ), 20,000,000,000 shares authorized, 6,145,852,186 and 5,197,821,885 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively 614,586 519,782 Treasury stock, 100,000 shares at September 30, 2022 and December 31, 2021 ( 1,000 ) ( 1,000 ) Paid-in capital in excess of par value 44,148,174 20,248,703 Non-controlling interest in variable interest entity and subsidiary 2,358,227 2,358,227 Accumulated other comprehensive income ( 3,198,065 ) ( 284,463 ) Accumulated deficit ( 29,652,000 ) ( 11,276,490 ) TOTAL STOCKHOLDERS’ EQUITY 14,270,806 11,565,642 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 34,352,033 $ 35,436,380 See accompanying notes to consolidated financial statements. 3 DARKPULSE, INC. Consolidated Statements of Operations (unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2022 2021 2022 2021 REVENUE $ 1,431,104 $ 3,500,970 $ 7,884,480 $ 3,500,970 COST OF GOODS SOLD 5,804,875 2,767,239 12,119,352 2,767,239 GROSS PROFIT ( 4,373,771 ) 733,731 ( 4,234,872 ) 733,731 OPERATING EXPENSES: Selling, general and administrative 1,498,717 406,940 3,579,326 531,793 Salaries, wages and payroll taxes 1,760,531 1,007,453 5,108,775 1,007,453 Professional fees 1,471,264 1,680,600 4,489,966 1,901,572 Depreciation and amortization 597,970 91,222 833,989 116,736 Debt transaction expenses – 33,000 – 184,950 TOTAL OPERATING EXPENSES 5,328,482 3,219,215 14,012,056 3,742,504 NET OPERATING LOSS ( 9,702,253 ) ( 2,485,484 ) ( 18,246,928 ) ( 3,008,773 ) OTHER INCOME (EXPENSE): Interest income (expense) 168,846 ( 320,706 ) ( 349,758 ) ( 671,290 ) Gain on the forgiveness of debt 231,377 785,240 267,127 785,240 Restructuring costs – – ( 501,431 ) – Change in fair market of derivative liabilities 70,289 ( 251,133 ) 237,445 76,363 Gain/(Loss) on convertible notes – 432,893 – 741,789 Foreign currency exchange rate variance 426,073 152,361 218,039 152,360 TOTAL INCOME (EXPENSE) 896,585 798,655 ( 128,578 ) 1,084,462 NET LOSS ( 8,805,668 ) ( 1,686,829 ) ( 18,375,506 ) ( 1,924,311 ) Net loss attributable to noncontrolling interests in variable interest entity and subsidiary 92,571 15,838 ( 255,835 ) 15,838 Net loss attributable to Company stockholders $ ( 8,898,239 ) $ ( 1,702,667 ) $ ( 18,119,671 ) $ ( 1,940,149 ) LOSS PER SHARE: Basic $ ( 0.00 ) $ ( 0.00 ) $ ( 0.00 ) $ ( 0.00 ) Diluted $ ( 0.00 ) $ ( 0.00 ) $ ( 0.00 ) $ ( 0.00 ) WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 5,840,449,453 4,835,935,495 5,539,124,247 4,679,197,410 Diluted 5,840,449,453 4,835,935,495 5,539,124,247 4,679,197,410 See accompanying notes to consolidated financial statements. 4 DARKPULSE, INC. Consolidated Statements of Operations (unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2022 2021 2022 2021 NET LOSS $ ( 8,805,668 ) $ ( 1,686,829 ) $ ( 18,375,506 ) $ ( 1,924,311 ) OTHER COMPREHENSIVE GAIN (LOSS) Unrealized Gain (Loss) on Foreign Exchange ( 1,956,159 ) 26,539 ( 2,913,602 ) ( 7,524 ) COMPREHENSIVE LOSS $ ( 10,761,827 ) $ ( 1,660,290 ) $ ( 21,289,108 ) $ ( 1,931,835 ) See accompanying notes to consolidated financial statements. 5 DARKPULSE, INC. Consolidated Statement of Stockholders' Equity For the Three Months Ended September 30, 2022 and 2021 (unaudited) Preferred Stock, Series A Preferred Stock, Series D Common Stock Treasury Shares Amount Shares Amount Shares Amount Stock Balance, December 31, 2021 – $ – 88,235 $ 883 – – 5,197,821,885 $ 519,782 $ ( 1,000 ) Common stock issued for cash – – – – 200,121,061 20,012 – Foreign currency adjustment – – – – – – – Net loss – – – – – – – – Balance, March 31, 2022 – $ – 88,235 $ 883 – – 5,397,942,946 $ 539,794 $ ( 1,000 ) Common stock issued for cash – – – – 192,488,404 19,250 – Common stock issued for TerraData acquisition – – – – 3,725,386 373 – Stock based compensation 100 1 – – – – – Foreign currency adjustment – – – – – – – Net loss – – – – – – – – Balance, June 30, 2022 100 $ 1 88,235 $ 883 – – 5,594,156,736 $ 559,417 $ ( 1,000 ) Common stock issued for cash – – – – 551,695,450 55,169 – Foreign currency adjustment – – – – – – – Net loss – – – – – – – – Balance, September 30, 2022 100 $ 1 88,235 $ 883 – – 6,145,852,186 $ 614,586 $ ( 1,000 ) Paid in Capital in Excess of Par Non- Controlling Interest in Accumulated Other Comprehensive Accumulated Total Stockholders’ Value Subsidiary Income Deficit Equity Balance, December 31, 2021 $ 20,248,703 – $ 2,358,227 $ ( 284,463 ) $ ( 11,276,490 ) $ 11,565,642 Common stock issued for cash 7,679,988 – – 7,700,000 Foreign currency adjustment – – – ( 219,569 ) – ( 219,569 ) Net loss – – – ( 5,384,270 ) ( 5,384,270 ) Balance, March 31, 2022 $ 27,928,691 – $ 2,358,227 $ ( 504,032 ) $ ( 16,660,760 ) $ 13,661,803 Common stock issued for cash 4,696,625 – – 4,715,875 Common stock issued for TerraData acquisition 199,627 – – – – 200,000 Stock based compensation ( 1 ) – – – – Foreign currency adjustment – – ( 737,874 ) – ( 737,874 ) Net loss – – – ( 4,185,572 ) ( 4,185,572 ) Balance, June 30, 2022 $ 32,824,943 – $ 2,358,227 $ ( 1,241,906 ) $ ( 20,846,332 ) $ 13,654,232 Common stock issued for cash 11,323,231 – – 11,378,400 Foreign currency adjustment – – – ( 1,956,159 ) – ( 1,956,159 ) Net loss – – – ( 8,805,668 ) ( 8,805,668 ) Balance, September 30, 2022 $ 44,148,174 – $ 2,358,227 $ ( 3,198,065 ) $ ( 29,652,000 ) $ 14,270,806 6 DARKPULSE, INC. Consolidated Statement of Stockholders' Equity For the Three Months Ended September 30, 2022 and 2021 (unaudited) Preferred Stock Common Stock Treasury Paid in Capital in Excess of Par Shares Amount Shares Amount Stock Value Balance, December 31, 2020 – – – – 88,235 $ 883 4,088,762,156 $ 408,876 $ ( 1,000 ) $ 1,805,813 Conversion of convertible notes – – 600,999,995 60,100 – 189,839 Foreign currency adjustment – – – – – – Net loss – – – – – – – – Balance, March 31, 2021 – – – – 88,235 $ 883 4,689,762,151 $ 468,976 $ ( 1,000 ) $ 1,995,652 Conversion of convertible notes – – 20,565,040 2,057 – 124,863 Stock based loan acquisition cost – – 60,000,000 6,000 – 243,333 Foreign currency adjustment – – – – – – Net loss – – – – – – – – Balance, June 30, 2021 – – – – 88,235 $ 883 4,770,327,191 $ 477,033 $ ( 1,000 ) $ 2,363,848 Conversion of convertible notes – – 49,719,643 4,972 – 183,679 Issuance of common stock for public offering – – 84,727,527 8,473 – 7,991,527 Issuance of common stock for Wildlife Specialist acquisition – – 7,500,000 750 – 654,380 Issuance of common stock for Remote Intelligence acquisition – – 7,500,000 750 – 733,975 Share-based compensation – – 3,194,081 319 – 399,681 Distributions – – – – – – Foreign currency adjustment - NCI – – – – – – Foreign currency adjustment – – – – – – Net loss – – – – – – – – Balance, September 30, 2021 – – – – 88,235 $ 883 4,922,968,442 $ 492,297 $ ( 1,000 ) $ 12,327,090 Non-Controlling Interest in Accumulated Other Comprehensive Accumulated Total Stockholders’ Distributions Subsidiary Income Deficit Deficit Balance, December 31, 2020 $ – $ ( 12,439 ) $ 315,832 $ ( 6,450,170 ) $ ( 3,932,205 ) Conversion of convertible notes – – – – 249,939 Foreign currency adjustment – – ( 17,909 ) – ( 17,909 ) Net loss – – – ( 51,874 ) ( 51,874 ) Balance, March 31, 2021 $ – $ ( 12,439 ) $ 297,923 $ ( 6,502,044 ) $ ( 3,752,049 ) Conversion of convertible notes – – – – 126,920 Stock based loan acquisition cost – – – – 249,333 Foreign currency adjustment – – ( 16,154 ) – ( 16,154 ) Net loss – – – ( 185,607 ) ( 185,607 ) Balance, June 30, 2021 $ – $ ( 12,439 ) $ 281,769 $ ( 6,687,651 ) $ ( 3,577,557 ) Conversion of convertible notes – – – – 188,651 Issuance of common stock for public offering – – – – 8,000,000 Issuance of common stock for Wildlife Specialist acquisition – – – – 655,130 Issuance of common stock for Remote Intelligence acquisition – – – – 734,725 Share-based compensation – – – – 400,000 Distributions ( 6,400 ) – – – ( 6,400 ) Foreign currency adjustment - NCI – ( 21,674 ) – – ( 21,674 ) Foreign currency adjustment – – ( 113,273 ) – ( 113,273 ) Net loss – – – ( 1,686,829 ) ( 1,686,829 ) Balance, September 30, 2021 $ ( 6,400 ) $ ( 34,113 ) $ 168,496 $ ( 8,374,480 ) $ 4,572,773 See accompanying notes to consolidated financial statements. 7 DARKPULSE, INC. Consolidated Statements of Cash Flows (unaudited) For the Nine Months Ended September 30, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 18,375,506 ) $ ( 1,924,311 ) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 833,990 116,736 Amortization of loan acquisition costs – ( 480,450 ) Stock based loan acquisition costs – 649,334 Gain on the extinguishment of debt ( 267,127 ) ( 785,240 ) Restructuring costs 501,431 – Operating lease expense ( 33,683 ) ( 90,946 ) Amortization of debt discount – 404,087 Derivative liability ( 237,445 ) ( 741,789 ) Changes in operating assets and liabilities: Accounts receivable 692,746 ( 893,366 ) Inventory 604,406 410,836 Unbilled revenue 178,748 ( 563,555 ) Contract liability 833,876 ( 1,439,504 ) Other current assets ( 730,370 ) – Customer deposits ( 895,405 ) 1,634,397 Accounts payable and accrued expenses ( 2,949,406 ) ( 4,362,016 ) Operating lease liabilities 86,511 1,398,068 Other current liabilities 300,533 ( 778,874 ) Net cash used by operating activities ( 19,456,701 ) ( 7,446,593 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 529,330 ) ( 78,662 ) Business acquisitions, net of cash received – ( 152,683 ) Deposits ( 124,000 ) Investment in patents ( 64,980 ) ( 191,420 ) Net cash used by investing activities ( 594,310 ) ( 546,765 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of common stock from offering 23,794,275 8,000,000 Proceeds from convertible notes payable – 1,102,700 Payments on convertible notes ( 384,600 ) Proceeds from notes payable – 2,000,000 Net cash provided by financing activities 23,794,275 10,718,100 NET INCREASE (DECREASE) IN CASH 3,743,264 2,724,742 Effect of exchange rate on cash ( 1,434,126 ) ( 160,587 ) CASH, beginning of period 3,658,846 337 CASH, end of period $ 5,967,984 $ 2,564,492 Non-cash finance and investing activities for the nine months ended September 30: Stock issued for acquisition of TerraData $ 200,000 $ – Stock issued for convertible notes payable and accrued interest – 181,560 Issuance of common stock for Wildlife Specialists 750 Issuance of common stock for Remote Intelligence 750 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the nine months ended September 30: Interest $ – $ – Income taxes $ – $ – See accompanying notes to consolidated financial statements. 8 DARKPULSE, INC. Notes to the Consolidated Financial Statements (Unaudited) NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The consolidated financial statements as of December 31, 2021 have been audited by an independent registered public accounting firm. The accounting policies and procedures employed in the preparation of these condensed consolidated financial statements have been derived from the audited financial statements of the Company for the year ended December 31, 2021, which are contained in Form 10-K as filed with the Securities and Exchange Commission on April 15, 2022. The consolidated balance sheet as of December 31, 2021 was derived from those financial statements. Basis of Presentation and Principles of Consolidation The consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles of the United States of America (“U.S. GAAP”) and the rules and regulations of the U.S Securities and Exchange Commission for Interim Financial Information. The condensed consolidated financial statements of the Company include the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated. All adjustments (consisting of normal recurring items) necessary to present fairly the Company’s financial position as of September 30, 2022, and the results of operations for three and nine months and cash flows for the nine months ended September 30, 2022 have been included. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year. Description of Business DarkPulse, Inc. (“DPI” or “Company”) is a technology 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 infrastructure monitoring systems have been installed into the Honcut Bridge in Marysville, California creating the first intelligent bridge. Additional applications of this technology will include border security, pipelines, the oil and gas industry, aviation & aerospace 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. The Company’s operating units consist of, Optilan HoldCo 3 Limited, a company headquartered in Coventry, United Kingdom (“Optilan”) whose focus is in telecommunications, energy, rail, critical network infrastructure, pipeline integrity systems, renewables and security; Remote Intelligence, Limited Liability Company, a company headquartered in Pennsylvania who provides unmanned aerial drone and unmanned ground crawler (UGC) services to a variety of clients from industrial mapping and ecosystem services, to search and rescue, to pipeline security; Wildlife Specialists, Limited Liability Company, a company headquartered in Pennsylvania who provides clients with comprehensive wildlife and environmental assessment, planning, and monitoring services; TerraData Unmanned, PLLC, a company headquartered in Florida who custom manufactures NDAA compliant drones and unmanned ground crawlers to meet the needs of its customers; and TJM Electronics West, Inc., a company headquartered in Arizona who is a U.S. manufacturer and tester of advanced electronics, cables and sub-assemblies specializing in advanced package and complex CCA and hardware. 9 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. Reclassifications Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods. Going Concern Uncertainty As shown in the accompanying financial statements, during the nine months ended September 30, 2022, the Company reported a net loss of $ 18,375,506 . As of September 30, 2022, the Company’s current liabilities exceeded its current assets by $ 6,314,789 . As of September 30, 2022, the Company had $ 5,967,984 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 generate 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. 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. 10 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 periods ended September 30, 2022 closing rate at 1.113030 USD:GBP, average rate at 1.259161 USD:GBP and for the year ended December 31, 2021 closing rate at 1.353583 USD: GBP, average rate at 1.375671 USD:GBP. The relevant translation rates are as follows: for the periods ended September 30, 2022 closing rate at 1.3751 CAD:USD, average rate at 1.3213 CAD:USD and for the year ended December 31, 2021 closing rate at 1.2794 CAD:USD, average rate at 1.2534 CAD:USD. Long-Lived Assets and Goodwill In accordance with ASC 350-30-65, “Intangibles - Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following: · Significant underperformance relative to expected historical or projected future operating results; · Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and · Significant negative industry or economic trends. When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. 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. 11 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 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 September 30, 2022 and December 31, 2021, we had contract liabilities of $ 4,050,438 and $ 3,216,562 , respectively. 12 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. 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. 13 Restructuring Costs The Company accounts for settlement of employment contracts and one-time salary expenses, such as severance, as restructuring costs when incurred due to specific restructuring event. For the quarter ended September 30, 2022, the Company recognized $ 501,431 related to the settlement of employment contracts and severance due to employment changes in our subsidiary, Optilan. 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. Fair Value of Financial Instruments The carrying amounts of the Company's financial assets and liabilities, such as cash, prepaid expenses, and accruals approximate their fair values because of the short maturity of these instruments. The Company believes the carrying value of its secured debenture payable approximates fair value because the terms were negotiated at arm’s length. 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. For the nine months ended September 30, 2022, there were no stock options outstanding. For the nine months ended September 30, 2022, common stock equivalents related to convertible preferred stock and convertible debt have not been included in the calculation of diluted loss per common share because they are anti-dilutive. Therefore, basic loss per common share is the same as diluted loss per common share. There are 28,316,441 common shares reserved for the potential conversion of the Company's convertible debt. 14 Recently Issued Accounting Pronouncements The Company has reviewed the accounting pronouncements issued during the nine months ended September 30, 2022 and concluded they were either not applicable or not expected to have a material impact on the Company’s condensed consolidated financial statements. NOTE 2 – REVENUE The following table is a summary of the Company’s timing of revenue recognition for the three and nine months ended September 30, 2022 and 2021: Schedule of timing of revenue recognition Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Timing of revenue recognition: Services and products transferred at a point in time $ 1,431,104 $ 3,500,970 $ 7,884,480 $ 3,500,970 Services and products transferred over time – – – – Total revenue $ 1,431,104 $ 3,500,970 $ 7,884,480 $ 3,500,970 The Company disaggregates revenue by source and geographic destination to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Revenue by source consisted of the following for the three and nine months ended September 30, 2022 and 2021: Schedule of revenue by source consisted Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Revenue by products and services: Products $ 154,534 $ 1,533,377 $ 1,246,610 $ 1,533,377 Services 1,276,570 1,967,593 6,619,870 1,967,593 Total revenue $ 1,431,104 $ 3,500,970 $ 7,884,480 $ 3,500,970 Revenue by geographic destination consisted of the following for the three and nine months ended September 30, 2022 and 2021: Schedule of revenue by geographic destination Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Revenue by geography: North America $ 590,028 $ 1,533,377 $ 1,124,462 $ 1,533,377 International 841,076 1,967,593 6,760,018 1,967,593 Total revenue $ 1,431,104 $ 3,500,970 $ 7,884,480 $ 3,500,970 15 Contract Balances The Company records contract assets when it has a right to consideration and records accounts receivable when it has an unconditional right to consideration. Contract liabilities consist of cash payments received (or unconditional rights to receive cash) in advance of fulfilling performance obligations. As of September 30, 2022, 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, 2021 $ 3,216,562 Additions through advance billings to or payments from vendors 4,192,899 Revenue recognized from current period advance billings to or payments from vendors ( 3,359,023 ) Balance at September 30, 2022 $ 4,050,438 NOTE 3 – ACCOUNTS RECEIVABLE Accounts receivable consisted of the following as of September 30, 2022 and December 31, 2021: Schedule of accounts receivable September 30, December 31, 2022 2021 Accounts receivable $ 3,531,244 $ 4,223,990 Less: Allowance for doubtful accounts – – Total accounts receivable $ 3,531,244 $ 4,223,990 NOTE 4 – INVENTORY Inventory consisted of the following as of September 30, 2022 and December 31, 2021: Schedule of inventory September 30, December 31, 2022 2021 Raw materials $ 162,835 $ 416,180 Work in progress 54,182 436,891 Finished goods 43,596 11,948 Total inventory 260,613 865,019 Reserve – – Total inventory, net $ 260,613 $ 865,019 16 NOTE 5 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of September 30, 2022 and December 31, 2021: Schedule of property, plant and equipment September 30, December 31, 2022 2021 Property and equipment $ 2,041,701 $ 1,867,794 Leasehold improvements 46,934 42,396 2,088,635 1,910,190 Less - accumulated depreciation ( 375,685 ) ( 122,366 ) $ 1,712,950 $ 1,787,824 NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following as of September 30, 2022 and December 31, 2021: Schedule of accounts payable and accrued liabilities September 30, December 31, 2022 2021 Accounts payable $ 3,288,094 $ 7,209,945 Accrued liabilities 760,133 634,326 Total accounts payable and accrued expenses $ 4,048,227 $ 7,844,271 NOTE 7 – LEASES We adopted ASC 842 “Leases” using the modified retrospective approach, electing the practical expedient that allows us not to restate our comparative periods prior to the adoption of the standard on January 1, 2019. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption. The following was included in our balance sheet as of September 30, 2022: Schedule of operating leases Operating leases September 30, 2022 Assets ROU operating lease assets $ 2,654,676 Liabilities Current portion of operating lease $ 1,779,238 Operating lease, net of current portion $ 1,145,908 Total operating lease liabilities $ 2,925,146 17 The weighted average remaining lease term and weighted average discount rate at September 30, 2022 were as follows: Schedule of weighted average remaining lease term and weighted average discount rate Weighted average remaining lease term (years) September 30, 2022 Operating leases 7.53 Weighted average discount rate Operating leases 6.00 % Operating Leases On March 9, 2022, the Company entered into an operating lease agreement to rent office space in Houston, Texas. This ten-year agreement commenced March 9. 2022 with an annual rent of approximately $ 81,000 with the first twelve months rent free. The following table reconciles future minimum operating lease payments to the discounted lease liability as of September 30, 2022: Schedule of future minimum operating lease payments 2022 122,777 2023 512,373 2024 497,411 2025 506,716 2026 and later 2,039,800 Total lease payments 3,679,077 Less imputed interest ( 753,931 ) Total lease obligations 2,925,146 Less current obligations ( 1,779,238 ) Long-term lease obligations $ 1,145,908 NOTE 8 – GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill The following table sets forth the changes in the carrying amount of goodwill for the nine months ended September 30, 2022: Schedule of changes in carrying amount of goodwill Total Balance at December 31, 2021 $ 17,088,501 Exchange rate variation ( 1,802,491 ) Balance at September 30, 2022 $ 15,286,010 18 Intangible Assets - Intrusion Detection Intellectual Property The Company relies on patent laws and restrictions on disclosure to protect its intellectual property rights. As of September 30, 2022, 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 nine months ended September 30, 2022 and 2021, the Company amortized $ 38,271 and $ 38,271 , respectively. Future amortization of intangible assets is as follows: Schedule of future amortization of intangible assets 2022 $ 12,757 2023 51,028 2024 51,028 2025 51,028 2026 51,028 Thereafter 87,822 Total $ 304,691 NOTE 9 – DEBT AGREEMENTS Secured Debenture DPTI issued a convertible Debenture to the University 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 by April 24, 2018. The principal repayment amounts will be due yearly 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 September 30, 2022, the quarterly principal repayment amounts will be US$49,750. The Debenture is secured by the Patents assigned by the University to DPTI by an Assignment Agreement on December 16, 2010. DPTI has pledged the Patents, and granted a lien on them pursuant to an Escrow Agreement dated April 24, 2017, between DPTI and the University. 19 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 loss for the three months ended September 30, 2022 and 2021, were $ 74,538 and $ 26,539 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 nine months ended September 30, 2022, and 2021, the Company recorded interest expense of $ 36,307 and $ 39,001 , respectively. As of September 30, 2022 the debenture liability totaled $ 1,090,827 , all of which was long term. Future minimum required payments over the next 5 years and thereafter are as follows: Schedule of future minimum debt payments Period ending September 30, 2023 $ – 2024 – 2025 – 2026 – 2027 and after 1,090,827 Total $ 1,090,827 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 September 30, 2022. Management determined the expected volatility of 124.08%, a risk-free rate of interest of 4.05%, and contractual lives of the debt of three months. The table below details the Company's four 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 debt Face Debt Initial Change Derivative Balance Amount Discount Loss in FMV 9/30/2022 $ 90,228 $ – $ 58,959 $ ( 16,827 ) $ 68,965 162,150 – 74,429 ( 30,240 ) 123,938 72,488 – 11,381 ( 13,519 ) 55,405 53,397 – 7,850 ( 9,706 ) 48,000 Subtotal 378,263 – 152,619 ( 70,292 ) 296,308 Transaction expense – – – – – $ 378,263 $ – $ 152,619 $ ( 70,292 ) $ 296,308 As of September 30, 2022 and December 31, 2021 respectively, there was $ 378,263 and of convertible debt outstanding, net of debt discount of $ 0 . As of September 30, 2022 and December 31, 2021 respectively, there was a derivative liability of $ 296,308 and $ 533,753 related to convertible debt securities. 20 NOTE 10 - STOCKHOLDERS' EQUITY As of September 30, 2022, there were 6,145,852,186 shares of common stock and 88,335 shares of preferred stock issued and outstanding. Preferred Stock In accordance with the Company’s Certificate of Incorporation, the Company has authorized a total of 2,000,000 shares of preferred stock, par value $ 0.01 per share, for all classes. As of September 30, 2022, and December 31, 2021, there were 88,335 and 88,235 , respectively total preferred shares issued and outstanding for all classes. On June 22, 2022, the Board of Directors of the Company approved the filing of an amendment to the Company’s Certificate of Incorporation (the “Certificate of Incorporation”), in the form of a Certificate of Designation that authorized for issuance of up to 100 shares of a new series of Preferred Stock, par value $ 0.01 per share, of the Company designated “Series A Super Voting Preferred Stock” and established the rights, preferences and limitations thereof. The Board authorized the Series A Preferred Stock pursuant to the authority given to the Board under the Certificate of Incorporation, which authorizes the issuance of up to 2,000,000 shares of Preferred Stock, par value $ 0.01 per share, and authorizes the Board, by resolution, to establish any or all of the unissued shares of Preferred Stock, not then allocated to any series into one or more series and to fix and determine the designation of each such shares, the number of shares which shall constitute such series and certain preferences, limitations and relative rights of the shares of each series so established. The holders of the Series A Preferred Stock shall be entitled to vote, on a pro-rata basis, on all matters subject to a vote or written consent of the holders of the Company’s Common Stock, and on all such matters, the shares of Series A Preferred Stock shall be entitled to that number of votes equal to the number of votes that all issued and outstanding shares of Common Stock and all other securities of the Company are entitled to, as of any such date of determination, on a fully diluted basis, plus one million (1,000,000) votes, it being the intention that the holders of the Series A Preferred Stock shall have effective voting control of the Company, on a fully diluted basis. Unless approved by a majority vote of the holders of Common Stock, the Series A Super Voting Preferred Stock will terminate five years after the issuance date, which is June 24, 2027. During the three months ended September 30, 2022, the Company issued 100 shares of Series A preferred stock. 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 September 30, 2022 and December 31, 2021, there were 6,145,852,186 and 5,197,821,885 common shares issued and outstanding. During the three months ended September 30, 2022, the Company issued the following shares of common stock: On July 1, 2022, the Company issued 33,525,465 shares of common stock for $ 556,750 . On July 11, 2022, the Company issued 32,756,532 shares of common stock for $ 556,750 . On July 20, 2022, the Company issued 29,386,519 shares of common stock for $ 556,750 . On July 28, 2022, the Company issued 35,884,040 shares of common stock for $ 556,750 . On August 10, 2022, the Company issued 44,505,857 shares of common stock for $ 680,110 . 21 On August 18, 2022, the Company issued 54,574,909 shares of common stock for $ 948,863 . On August 25, 2022, the Company issued 105,255,759 shares of common stock for $ 2,264,961 . On August 30, 2022, the Company received 33,898,377 shares of common stock for cancellation from a previous note holder. On September 2, 2022, the Company issued 140,073,757 shares of common stock for $ 3,000,000 . On September 14, 2022, the Company issued 79,092,686 shares of common stock for $ 1,757,466 . On September 30, 2022, the Company issued 30,538,303 shares of common stock for $ 500,000 . Stock Options During the three months ended September 30, 2022, the Company did not issue any stock options and had no stock options outstanding at September 30, 2022. Public Offerings Financings On November 9, 2021, we entered an Equity Financing Agreement (the “ Equity Financing Agreement ”) and Registration Rights Agreement (the “ GHS Registration Rights Agreement ”) with GHS, pursuant to which GHS agreed to purchase up to $ 30,000,000 in shares of our Common Stock, from time to time over the course of 24 months (the “ Contract Period ”) after effectiveness of a registration statement on Form S-1 (the “ Registration Statement ”) of the underlying shares of Common Stock. The GHS Registration Rights Agreement provides that we shall (i) use our best efforts to file with the SEC a Registration Statement within 45 days of the date of the GHS Registration Rights Agreement; and (ii) have the Registration Statement declared effective by the SEC within 30 days after the date the GHS Registration Statement is filed with the SEC, but in no event more than 90 days after the GHS Registration Statement is filed. Below is a table of all puts made by the Company under the Equity Financing Agreement during 2022: Schedule of equity financing agreement Date of Put Number of Shares Sold Total Proceeds, Net of Discounts Effective Price per Share Net Proceeds 1/12/22 23,372,430 $ 1,150,000 $ 0.054124 $ 1,033,975 1/21/22 33,454,988 $ 1,150,000 $ 0.037812 $ 1,033,975 2/7/22 16,040,411 $ 500,000 $ 0.0342884 $ 448,975 3/23/22 29,257,395 $ 1,500,000 $ 0.056396 $ 1,348,975 4/11/22 23,746,816 $ 1,000,000 $ 0.04211091 $ 898,975 5/3/22 29,522,276 $ 1,000,000 $ 0.03387273 $ 898,975 5/13/22 26,100,979 $ 556,750 $ 0.0213306 $ 500,050 5/23/22 25,025,540 $ 556,750 $ 0.0222473 $ 500,050 6/1/22 25,901,921 $ 556,750 $ 0.02149454 $ 500,050 6/16/22 23,799,766 $ 402,086 $ 0.018584 $ 360,852 22 On February 21, 2022, we sold 75,798,921 shares of our Common Stock at $ 0.032982 per share for total consideration of $ 2,500,000 . On March 3, 2022, we sold 16,579,569 shares of our Common Stock at $ 0.0301576 per share for total consideration of $ 500,000 . On March 14, 2022, we sold 5,617,347 shares of our Common Stock at $ 0.071208 per share for total consideration of $ 400,000 . On May 27, we entered an Equity Financing Agreement (the “ EFA ”) and Registration Rights Agreement (the “ RRA ”) with GHS, pursuant to which GHS agreed to purchase up to $70,000,000 in shares of our Common Stock, from time to time over the course of 24 months after effectiveness of a registration statement on Form S-1 (the “ Registration Statement ”) of the underlying shares of Common Stock. The RRA provides that we shall (i) use our best efforts to file with the SEC a Registration Statement within 45 days of the date of the GHS Registration Rights Agreement; and (ii) have the Registration Statement declared effective by the SEC within 30 days after the date the GHS Registration Statement is filed with the SEC, but in no event more than 90 days after the GHS Registration Statement is filed. Below is a table of all puts made by the Company under the EFA during 2022: Date of Put Number of Shares Sold Total Proceeds, Net of Discounts Effective Price per Share Net Proceeds 6/24/22 38,391,106 $ 643,539 $ 0.01978 $ 578,160 7/1/22 33,525,465 $ 556,750 $ 0.019596 $ 500,050 7/11/22 32,756,532 $ 556,750 $ 0.01699661 $ 550,050 7/20/22 29,386,519 $ 556,750 $ 0.01894558 $ 550,050 7/28/22 35,884,040 $ 556,750 $ 0.018308 $ 500,050 8/10/22 44,505,857 $ 680,109 $ 0.015281 $ 611,073 8/18/22 54,574,909 $ 948,863 $ 0.017386441 $ 852,952 8/25/22 105,255,759 $ 2,264,961 $ 0.021518644 $ 2,128,038 9/2/22 140,073,757 $ 3,000,000 $ 0.021417288 $ 2,788,975 9/14/22 79,092,686 $ 1,757,466 $ 0.022220339 $ 1,757,466 9/30/22 30,538,303 $ 500,000 $ 0.0163729 $ 463,975 NOTE 11 – 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 nine months ended September 30, 2022 and 2021, certain executives of the Company received $ 270,000 in Directors fees from Optilan for being members of Optilan’s Board of Directors with an additional $90,000 accrued but unpaid. 23 NOTE 12 - COMMITMENTS & 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. As disclosed in greater detail in the Company’s Form 10-K, filed April 15, 2022, the Company’s investigation of the Investor News matter remains ongoing. On October 21, 2022, the Company filed a petition against Twitter, Inc. in the Supreme Court of the State of New York County of New York to compel disclosure of the owner(s) and operator(s) of two certain Twitter accounts: “Mike Wood” (@MIKEWOOD) and “Bull Meechum” (@BullMeechum3). The petition seeks disclosure of the owner(s) and operator(s) of the aforementioned accounts so the Company can commence an action against such individuals for damages arising from false, misleading, and untrue statements made by the same. On October 25, 2022, the court signed an order to show cause directing Twitter to show cause on or before November 4, 2022 as to why an order compelling disclosure of the identities of the owner(s) / operator(s) of the @MIKEWOOD and @BullMeechum3 Twitter accounts should not be made. Carebourn Capital, L.P. v. DarkPulse, Inc. As disclosed in greater detail in the Company’s Form 10-Q, filed August 10, 2022, the Company remains in active litigation with Carebourn Capital, L.P. (“Carebourn”) in Minnesota State Court. There are no material updates to this litigation. The Company remains committed to actively litigating its affirmative defenses and 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 August 10, 2022, the Company remains in active litigation with More Capital, LLC (“More”) in Minnesota State Court. There are no material updates to this litigation. The Company remains committed to actively litigating its affirmative defenses and claims for relief under the Securities Exchange Act of 1934. Goodman et al. v. DarkPulse, Inc. As disclosed in greater detail in the Company’s Form 10-Q, filed November 15, 2021, on September 10, 2021, Stephen Goodman, Mark Banash, and David Singer (“Former Officers”) commenced suit against the Company in Arizona Superior Court, Maricopa County. As of the date hereof, the Company is engaged in settlement negotiations with the Former Officers. 24 DarkPulse, Inc. v. FirstFire Global Opportunities Fund, LLC, and Eli Fireman As disclosed in greater detail in the Company’s Form 10-Q, filed August 10, 2022, the Company remains in active litigation with FirstFire Global Opportunities Fund, LLC (“FirstFire”), and Eli Fireman (“Fireman”) (FirstFire and Fireman together, the “FirstFire Parties”). As previously disclosed therein, the FirstFire Parties’ motion to dismiss the Company’s first amended complaint has been fully submitted to the Court. On May 26, 2022, the FirstFire Parties requested oral arguments on their motion to dismiss. As of the date hereof, oral arguments have not been scheduled and, further, no decision has been rendered on the FirstFire Parties’ motion to dismiss. The Company remains committed to actively litigating its claims for relief under the Securities Exchange Act of 1934. DarkPulse, Inc. v. EMA Financial, LLC et al As disclosed in greater detail in the Company’s Form 10-Q, filed August 10, 2022, the Company remains in active litigation with EMA Financial, LLC (“EMA”), EMA Group, Inc. (“EMA Group”), and Felicia Preston (“Preston”) (EMA, EMA Group, and Preston together, the “EMA Parties”). As of July 22, 2022, the EMA Parties’ motion to dismiss the Company’s first amended complaint is fully submitted. As of the date hereof, no decision has been rendered on the EMA Parties’ motion to dismiss. The Company remains committed to actively litigating its claims for relief under the Securities Exchange Act of 1934 and Racketeer Influenced and Corrupt Organizations Act. 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. NOTE 13 – SUBSEQUENT EVENTS On October 12, 2022 the Company entered into and closed the Purchase Agreement pursuant to which the Company purchased 2,623,120 shares of Class B Common Stock and 4,298,496 Private Placement Warrants, each of which is exercisable to purchase one share of Class A Common Stock of Gladstone Acquisition Corp., a Delaware corporation (NASDAQ: GLEE) (the " SPAC "), from Gladstone Sponsor, LLC (" Original Sponsor ") for $1,500,000 (the “ Purchase Price ”). In addition to the payment of the Purchase Price, the Company also assumed the following obligations: (i) responsibility for all of SPAC’s public company reporting obligations, (ii) the right to provide an extension payment and extend the deadline of the SPAC to complete an initial business combination from 15 months from August 9, 2021 to 18 months for an additional $1,150,000, and (iii) all other obligations and liabilities of the Original Sponsor related to the SPAC. On October 14, 2022, the Company and GHS agreed that the Company would issue and sell to GHS, and GHS would purchase from the Company, 30,538,303 shares of Common Stock for total proceeds to the Company, net of discounts, of $500,000, at an effective price of $0.0140339 per share (the “ Closing ”). The Company received approximately $463,975 in net proceeds from the Closing after deducting the fees and other estimated offering expenses payable by the Company. The Company used the net proceeds from the Closing for working capital and for general corporate purposes. 25