UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON,~~Washington, D.C. 20549

FORM 10-Q

(Mark One)

ox		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended September 30, 2021

~~For the quarterly period ended September 30, 2020~~Or

x☐		TRANSITION REPORT ~~UNDER~~PURSUANT TO SECTION 13 OR ~~15(d)~~15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from _______________________to___________________________

~~For the transition period from ___________ to ___________~~

Commission File ~~No.~~ Number: 000-18730

~~DARKPULSE, INC.~~DarkPulse, Inc.

(Exact name of registrant as specified in its charter)

~~DELAWARE~~Delaware		87-0472109
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
		~~(I.R.S. Employer~~ ~~Identification No.)~~

1345 Ave of the Americas 2^nd, 2nd Floor

, New York, NY

10105

(Address of principal executive offices)

(Zip Code)

(800)436-1436

(Registrant’s telephone number, including area ~~code:~~ ~~(800) 436-1436~~code)

Securities registered pursuant to section 12(b) of the Act:

Title of Each Class		Trading Symbol(s)		Name of each exchange on which registered
Not applicable		Not applicable		Not applicable

Indicate by check mark whether the ~~Registrant (1)~~registrant has filed (1) all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ~~Registrant~~registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x☐ No¨☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yesx No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”,~~filer,” “smaller reporting ~~company”,~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one)~~

Large accelerated filero	☐	Accelerated filero	☐
Non-accelerated filero	☐	Smaller reporting company	x
		Emerging growth companyo	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the ~~Registrant~~registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐Nox

~~Securities registered pursuant to Section 12(b)~~The number of shares outstanding of the ~~Act:~~

~~Title of each class~~		~~Trading Symbol(s)~~		~~Name of each exchange on which registered~~
~~None~~		~~N/A~~		~~N/A~~

~~As of November 10, 2020, there were 4,088,762,156 shares of the Registrant’s~~registrant’s common stock ~~$0.01 par value per share, issued.~~on November 12, 2021, was 4,976,669,407.

DARKPULSE, INC.

FORM 10-Q

~~FORM 10-Q~~

TABLE OF CONTENTS

FOR THE QUARTER ENDED SEPTEMBER 30, ~~2020~~2021

PART ~~I - Financial Information~~I—FINANCIAL INFORMATION


Item 1.	Financial Statements	3

	~~Condensed Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019~~	3
	~~Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)~~	4
	~~Condensed Consolidated Statements of Comprehensive Gain/Loss (unaudited)~~	5
	~~Condensed Consolidated Statements of Stockholders’ Deficit for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)~~	6
	~~Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (unaudited)~~	7
	~~Notes to Condensed Consolidated Financial Statements (unaudited)~~	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1827

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2135

	Item 4.	Controls and Procedures	2135

PART ~~II - Other Information~~II—OTHER INFORMATION

	Item 1. Legal Proceedings	36

~~Item 1.~~	~~Legal Proceedings~~	22

~~Item 1A.~~	~~Risk Factors~~	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2236

~~Item 3.~~	~~Defaults upon Senior Securities~~Item 6. Exhibits	2237

~~Item 4.~~		~~Mine Safety Disclosures~~SIGNATURES	22

~~Item 5.~~	~~Other Information~~	23

~~Item 6.~~	~~Exhibits~~	23

~~Signatures~~		2438

PART ~~I -~~ I—FINANCIAL INFORMATION

Item 1. Financial Statements

DARKPULSE, INC.

~~Condensed Consolidated Balance Sheets~~

~~Unaudited~~CONDENSED CONSOLIDATED BALANCE SHEETS


										Audited
							September 30,			December 31,
	September 30,			December 31,			2021			2020
	2020			2019
ASSETS

CURRENT ASSETS:
Cash	$	519		$	1,210		$	2,564,492		$	337
Prepaid expenses		746			746
Accounts receivable, net								5,812,003			0
Inventory								1,630,051			0
Unbilled revenue								1,103,876			0
Other current assets								137,979			0
TOTAL CURRENT ASSETS		1,265			1,956			11,248,401			337

NON-CURRENT ASSETS:
Property and equipment, net								1,837,399			0
Operating lease right-of-use assets								1,476,771			0
Patents, net								355,719			393,990
Goodwill								15,536,899			0
Other assets, net		121,464			116,495			282,881			91,464
Patents, net		406,747			445,018
TOTAL NON-CURRENT ASSETS								19,489,673			485,454

TOTAL ASSETS	$	529,476		$	563,469		$	30,738,072		$	485,791

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Accounts payable	$	498,887		$	323,948
Convertible notes, net of discount $0 and $39,414 respectively		944,306			1,033,249
Derivative liability		1,320,184			1,275,500
Accrued liabilities		588,693			497,078
Contract liability, related party		42,000			42,000
Related party notes payable		44,096			44,096
Accounts payable and accrued expenses							$	9,549,305		$	1,089,869
Convertible notes, net of discount $111,888 and $39,414 respectively								1,091,375			931,158
Notes payable								2,000,000			0
Customer deposits								4,802,891			0
Derivative Liability								479,088			1,220,877
Contract liabilities								2,699,688			0
Operating lease liabilities - current								575,446			0
Other current liabilities								2,190,110			0
TOTAL CURRENT LIABILITIES		3,438,166			3,215,871			23,387,903			3,241,904

NON-CURRENT LIABILITIES:
Secured debenture		1,141,494			1,155,150			1,184,516			1,176,092
Operating lease liabilities - non-current								1,592,880			0
TOTAL NON-CURRENT LIABILITIES								2,777,396			1,176,092

TOTAL LIABILITIES		4,579,660			4,371,021			26,165,299			4,417,996

Commitments and contingencies

STOCKHOLDERS' DEFICIT
Common stock (par value $0.01), 20,000,000,000 shares authorized, 3,394,817,156 and 1,392,042,112 shares issued and outstanding respectively		33,948,172			13,920,421
Treasury stock, 100,000 shares		(1,000	)		(1,000	)
Convertible preferred stock, Series D (par value $0.01) 100,000 shares authorized, 88,235 shares issued and outstanding respectively		883			883
Common Stock, Par Value $0.0001, 20,000,000,000 shares authorized 4,922,968,442 and 4,088,762,156 shares issued and outstanding respectively								492,297			408,876
Treasury Stock, 100,000 shares								(1,000	)		(1,000	)
Convertible Preferred Stock, Series D, par value $0.01, 100,000 shares authorized, 88,235 shares issued and outstanding								883			883
Paid in capital in excess of par value		(31,773,340	)		(11,877,864	)		12,327,090			1,805,813
Distributions								(6,400	)		0
Non-controlling interest in a variable interest entity and subsidiary		(12,439	)		(12,439	)		(34,113	)		(12,439	)
Accumulated other comprehensive income		350,429			336,775			168,496			315,832
Accumulated deficit		(6,562,889	)		(6,174,328	)		(8,374,480	)		(6,450,170	)
TOTAL STOCKHOLDERS' DEFICIT		(4,050,184	)		(3,807,552	)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)								4,572,773			(3,932,205	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	529,476		$	563,469
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY							$	30,738,072		$	485,791

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

DARKPULSE, INC.

~~Condensed Consolidated Statements of Operations~~CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

~~(Unaudited)~~(UNAUDITED)

Three Months
Ended
September 30,

Nine Months
Ended
September 30,

2020 2019 2020 2019

REVENUES $ – $ – $ – $ –

OPERATING EXPENSES:
General and administrative expenses 34,782 40,453 120,866 144,965
Payroll and compensation – – 187 168,945
Legal expenses – 48,868 48,297 96,962
Amortization of patents 12,757 12,757 38,271 38,271
Debt transaction expenses – – – 24,900
TOTAL OPERATING EXPENSES 47,539 102,078 207,621 474,043

OPERATING LOSS (47,539 ) (102,078 ) (207,621 ) (474,043 )

OTHER INCOME (EXPENSE):
Interest expense (37,318 ) (50,649 ) (97,842 ) (399,895 )
Loss on convertible notes (1,313 ) (47,266 ) (39,414 ) (351,662 )
Gain on the forgiveness of debt – – 1,000 –
Gain(loss) on change in fair market values of derivative liabilities (87,852 ) 221,879 (44,684 ) 566,127
TOTAL OTHER INCOME (EXPENSE) (126,483 ) 123,964 (180,940 ) (185,430 )

NET INCOME (LOSS) (174,022 ) 21,886 (388,561 ) (659,473 )
Net loss attributable to noncontrolling interests in variable interest entity and subsidiary – – – –
Net loss attributable to Company stockholders $ (174,022 ) $ 21,886 $ (388,561 ) $ (659,473 )

GAIN (LOSS) PER SHARE:
Basic and Diluted $ (0.00 ) $ 0.00 $ (0.00 ) $ (0.00 )

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and Diluted 2,355,108,904 518,604,087 1,754,933,152 252,457,517


	FOR THE THREE MONTHS						FOR THE NINE MONTHS
	ENDED SEPTEMBER 30,						ENDED SEPTEMBER 30,
	2021			2020			2021			2020

REVENUE	$	3,500,970		$	0		$	3,500,970		$	0
COST OF GOODS SOLD		2,767,239			0			2,767,239			0
GROSS PROFIT		733,731			0			733,731			0

OPERATING EXPENSES:
Selling, general and administrative		406,940			34,782			531,793			120,866
Salaries, wages and payroll taxes		1,007,453			0			1,007,453			187
Professional fees		1,680,600			0			1,901,572			48,297
Depreciation and amortization		91,222			12,757			116,736			38,271
Debt transaction expenses		33,000			0			184,950			0
TOTAL OPERATING EXPENSES		3,219,215			47,539			3,742,504			207,621

NET OPERATING LOSS		(2,485,484	)		(47,539	)		(3,008,773	)		(207,621	)

OTHER INCOME (EXPENSE):
Interest expense		(320,706	)		(37,318	)		(671,290	)		(97,842	)
Gain on settlement of debt		785,240			0			785,240			1,000
Change in fair market of derivative liabilities		(251,133	)		(87,852	)		76,363			(44,684	)
Gain/Loss on convertible notes		432,893			(1,313	)		741,789			(39,414	)
Foreign currency exchange rate variance		152,361			0			152,360			0
TOTAL OTHER INCOME (EXPENSE)		798,655			(126,483	)		1,084,462			(180,940	)

NET LOSS		(1,686,829	)		(174,022	)		(1,924,311	)		(388,561	)
Net Loss attributable to noncontrolling interests in variable interest entity and subsidiary		15,838			0			15,838			0
Net loss attributable to Company stockholders	$	(1,670,991	)	$	(174,022	)	$	(1,908,473	)	$	(388,561	)

LOSS PER SHARE:
Basic and Diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and Diluted		4,835,935,495			2,355,108,904			4,679,197,410			1,754,933,152

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

DARKPULSE, INC.

~~Condensed Consolidated Statements of Comprehensive Gain/Loss~~CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

~~(Unaudited)~~(UNAUDITED)

	FOR THE					FOR THE
	THREE MONTHS ENDED SEPTEMBER 30,					NINE MONTHS ENDED SEPTEMBER 30,						FOR THE THREE MONTHS						FOR THE NINE MONTHS
	2020			2019		2020			2019			ENDED SEPTEMBER 30,						ENDED SEPTEMBER 30,
												2021			2020			2021			2020
NET INCOME (LOSS)	$	(174,022	)	$	21,886	$	(388,561	)	$	(659,473	)

NET LOSS												$	(1,670,991	)	$	(174,022	)	$	(1,908,473	)	$	(388,561	)

OTHER COMPREHENSIVE GAIN (LOSS)
Unrealized Gain (Loss) on Foreign Exchange		(39,945	)		12,671		13,656			(30,722	)		26,539			(39,945	)		(7,524	)		13,656
COMPREHENSIVE GAIN (LOSS)	$	(213,967	)	$	34,557	$	(374,905	)	$	(690,195	)
COMPREHENSIVE LOSS												$	(1,644,452	)	$	(213,967	)	$	(1,915,997	)	$	(374,905	)

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

DARKPULSE, INC.

Consolidated Statement of Stockholders' Deficit

For the Periods Ended September 30, ~~2020~~2021 and ~~2019~~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 – – – – – – – – – –
Foreign currency adjustment – – – – – – – 92,646 – 92,646
Net loss – – – – – – – – (74,298 ) (74,298 )
Balance, March 31, 2020 88,235 $ 883 1,392,042,112 $ 13,920,421 $ (1,000 ) $ (11,877,864 ) $ (12,439 ) $ 429,421 $ (6,248,626 ) $ (3,789,204 )
Conversion of convertible notes – – 217,142,858 2,171,429 – (2,156,228 ) – – – 15,201
Foreign currency adjustment – – – – – – – (39,047 ) – (39,047 )
Net loss – – – – – – – – (140,241 ) (140,241 )
Balance, June 30, 2020 88,235 $ 883 1,609,184,970 $ 16,091,850 $ (1,000 ) $ (14,034,092 ) $ (12,439 ) $ 390,374 $ (6,388,867 ) $ (3,953,291 )
Conversion of convertible notes – – 1,785,632,186 17,856,322 – (17,739,248 ) – – – 117,074
Foreign currency adjustment – – – – – – – (39,945 ) – (39,945 )
Net gain – – – – – – – – (174,022 ) (174,022 )
Balance, September 30, 2020 88,235 $ 883 3,394,817,156 $ 33,948,172 $ (1,000 ) $ (31,773,340 ) $ (12,439 ) $ 350,429 $ (6,562,889 ) $ (4,050,184 )

Balance, December 31, 2018 88,235 $ 883 89,680,467 $ 896,806 $ (1,000 ) $ 859,481 $ (12,439 ) $ 389,680 $ (4,348,859 ) $ (2,215,448 )
Conversion of convertible notes – – 12,488,347 124,883 – (45,837 ) – – – 79,046
Foreign currency adjustment – – – – – – – (22,050 ) – (22,050 )
Net loss – – – – – – – – (806,568 ) (806,568 )
Balance, March 31, 2019 88,235 $ 883 102,168,914 $ 1,021,689 $ (1,000 ) $ 813,644 $ (12,439 ) $ 367,630 $ (5,155,427 ) $ (2,965,020 )
Conversion of convertible notes – – 137,005,692 1,370,057 – (1,284,135 ) – – – 85,922
Foreign currency adjustment – – – – – – – (21,343 ) – (21,343
Net gain – – – – – – – – 125,210 125,210
Balance, June 30, 2019 88,235 $ 883 239,174,606 $ 2,391,746 $ (1,000 ) $ (471,491 ) $ (12,439 ) $ 346,287 $ (5,030,217 ) $ (2,775,231 )
Conversion of convertible notes – – 137,005,692 1,370,057 – (1,284,135 ) – – – 85,922
Foreign currency adjustment – – – – – – – 12,671 – 12,671
Net gain – – – – – – – – 21,886 21,886
Balance, September 30, 2019 88,235 $ 883 239,174,606 $ 2,391,746 $ (1,000 ) $ (471,491 ) $ (12,439 ) $ 358,958 $ (5,008,332 ) $ (2,642,069 )


	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

Balance, December 31, 2019		88,235	$	883		1,392,042,112	$	13,920,421	$	(1,000	)	$	(11,877,864	)
Conversion of convertible notes		–		–		–		–		–			–
Foreign currency adjustment		–		–		–		–		–			–
Net loss		–		–		–		–		–			–
Balance, March 31, 2020		88,235	$	883		1,392,042,112	$	13,920,421	$	(1,000	)	$	(11,877,864	)
Conversion of convertible notes		–		–		217,142,858		2,171,429		–			(2,156,228	)
Foreign currency adjustment		–		–		–		–		–			–
Net loss		–		–		–		–		–			–
Balance, June 30, 2020		88,235	$	883		1,609,184,970	$	16,091,850	$	(1,000	)	$	(14,034,092	)
Conversion of convertible notes		–		–		1,785,632,186		17,856,322		–			(17,739,248	)
Foreign currency adjustment		–		–		–		–		–			–
Net loss		–		–		–		–		–			–
Balance, September 30, 2020		88,235	$	883		3,394,817,156	$	33,948,172	$	(1,000	)	$	(31,773,340	)

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

DARKPULSE, INC.

~~Condensed~~ Consolidated Statement of ~~Cash Flows~~Stockholders' Deficit

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

FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Gain/(Loss) $ (388,561 ) $ (659,473 )
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 38,271 38,271
Loan acquisition costs – 24,900
Gain on reduction of loan default penalty (9,900 ) –
Interest on notes payable – 27,446
Debt discount (205,000 )
Amortization of debt discount 39,414 568,985
Derivative liability 44,684 (312,622 )
Changes in operating assets and liabilities:
Accounts payable 174,935 205,025
Accrued liabilities 105,435 110,340
Net cash used by operating activities 4,278 (202,128 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in patents (4,969 ) (54,930 )
Net Cash Used by Investing Activities (4,969 ) (54,930 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable – 180,100
Payments on convertible notes – (24,650 )
Net Cash Provided by Financing Activities – 155,450

NET INCREASE (DECREASE) IN CASH (691 ) (70,886 )
CASH, beginning of period 1,210 72,294
CASH, end of period $ 519 $ 1,408

Noncash investing and financing activities for the quarter ending September 30:
Stock issued for convertible notes payable and accrued interest $ 132,276 $ 232,535

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash $ – $ –
Taxes paid in cash $ – $ –


				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

Balance, December 31, 2019	$	(12,439	)	$	(12,439	)	$	336,775		$	(6,174,328	)	$	(3,807,552	)
Conversion of convertible notes		–			–			–			–			–
Foreign currency adjustment		–			–			92,646			–			92,646
Net loss		–			–			–			(74,298	)		(74,298	)
Balance, March 31, 2020	$	(12,439	)	$	(12,439	)	$	429,421		$	(6,248,626	)	$	(3,789,204	)
Conversion of convertible notes		–			–			–			–			15,201
Foreign currency adjustment		–			–			(39,047	)		–			(39,047	)
Net loss		–			–			–			(140,240	)		(140,240	)
Balance, June 30, 2020	$	(12,439	)	$	(12,439	)	$	390,374		$	(6,388,866	)	$	(3,953,290	)
Conversion of convertible notes		–			–			–			–			117,074
Foreign currency adjustment		–			–			(39,945	)		–			(39,945	)
Net loss		–			–			–			(174,022	)		(174,022	)
Balance, September 30, 2020	$	(12,439	)	$	(12,439	)	$	350,429		$	(6,562,889	)	$	(4,050,184	)

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

DARKPULSE, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)


	FOR THE NINE MONTHS
	ENDED SEPTEMBER 30,
	2021			2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Loss	$	(1,924,311	)	$	(388,561	)
Adjustments to reconcile net loss to net cash used by operating activities:
Gain on extinguishment of debt		(785,240	)		0
Stock based compensation		649,334			0
Operating lease expense		(90,946	)		0
Loan acquisition costs		(480,450	)		(9,900	)
Derivative liability		(741,789	)		44,684
Amortization of debt discount		404,087			39,414
Depreciation and amortization		116,736			38,271
Changes in operating assets and liabilities:					–
Accounts receivable		(893,366	)		0
Inventory		410,836			0
Unbilled Revenue		(563,555	)		0
Customer Deposits		1,634,397			0
Contract liability		(1,439,504	)		0
Accounts payable and accrued expenses		(4,362,016	)		280,370
Operating lease liabilities		1,398,068			0
Other current liabilities		(778,874	)		0

Net Cash Used by Operating Activities		(7,446,593	)		4,278

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment		(78,662	)		0
Business acquisitions, net of cash received		(152,683	)		0
Deposits		(124,000	)		0
Investment in patents		(191,420	)		(4,969	)

Net Cash Used by Investing Activities		(546,765	)		(4,969	)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from sale of common stock from offering		8,000,000			0
Proceeds from convertible notes payable		1,102,700			0
Payments on convertible notes		(384,600	)		0
Proceeds from notes payable		2,000,000			0

Net Cash Provided by Financing Activities		10,718,100			0

Net Cash Increase (Decrease)		2,724,742			(691	)

Effect of exchange rate on cash		(160,587	)		0

Cash, Beginning of Period		337			1,210
Cash, End of Period	$	2,564,492		$	519

Supplementary Cash Flow Information:
Interest paid in cash	$	0		$	0
Taxes paid in cash	$	0		$	0

Non-cash finance and investing activities for the quarter ending September 30:
Issuance of common stock for convertible notes payable and accrued interest		181,560			0
Issuance of common stock for Wildlife Specialists		750			0
Issuance of common stock for Remote Intelligence		750			0

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

DARKPULSE, INC.

Notes to Condensed 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, ~~2019~~2020 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, ~~2019,~~2020, which are contained in Form 10-K as filed with the Securities and Exchange Commission on ~~June 8, 2020.~~April 15, 2021. The consolidated balance sheet as of December 31, ~~2019~~2020 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, ~~2020,~~2021, and the results of operations for three and nine months and cash flows for the nine months ended September 30, ~~2020~~2021 have been included. The results of operations for the three and nine months ended September 30, ~~2020~~2021 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-security company incorporated in 1989 as Klever Marketing, Inc. ("Klever"). ~~The Company’s~~Its’ wholly-owned subsidiary, DarkPulse Technologies Inc. ("DPTI"), originally started as a technology spinout from the University of New Brunswick, ~~(the “University”) located in~~ 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 ~~was~~is being 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.

The Company has recently completed several acquisitions. See Note 2 – Business Acquisitions for more information.

Going Concern Uncertainty

As shown in the accompanying financial statements, during the nine months ended September 30, ~~2020,~~2021, the Company ~~did not generate any revenues and~~ reported a net loss of ~~$214,539.~~$1,924,311. As of September 30, ~~2020,~~2021, the Company’s current liabilities exceeded its current assets by ~~$3,436,901.~~$12,139,502. As of September 30, ~~2020,~~2021, the Company had ~~$519~~$2,564,492 of cash.

The Company will require additional funding ~~during the next nine months~~ to finance the growth of ~~its~~our operations and achieve ~~its~~our 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~~our ability to continue as a going concern. ~~The Company is~~We are seeking to raise additional capital ~~principally through private placement offerings~~ and isare targeting strategic partners in an effort to ~~finalize~~accelerate the ~~development~~sales and marketing of ~~its~~our products and begin generating revenues. ~~The~~Our ability ~~of the Company~~ to continue as a going concern is dependent upon the success of future capital offerings or alternative financing arrangements, ~~and~~ expansion of ~~its operations.~~our operations and generating sales. The accompanying financial statements do not include any adjustments that might be necessary should ~~the Company~~we 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. However,~~operations 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.

COVID-19 Pandemic

On January 30, 2020, the World Health Organization (WHO) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spread globally beyond the point of origin. On March 20, 2020 the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

The full impact of the COVID-19 outbreak continues to evolve as of the date of these condensed consolidated financial statements. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s combined financial condition, liquidity and future results of operations. Management is actively monitoring the impact of the global situation on its consolidated financial condition, liquidity, operations, suppliers, industry and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2021 beyond the results presented in these condensed consolidated financial statements and this quarterly report.

Due to the impacts of COVID-19 we have seen an increase in recruiting and labor costs as well as delays in supply chain.

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, 2021 and December 31, 2020, we had contract liabilities of $2,699,688 and $0, respectively.

Cost of Product Sales and Services

Cost of sales consists primarily of materials, airtime and overhead costs incurred internally and amounts incurred to contract manufacturers to produce our products, airtime and other implementation costs incurred to install our products and train customer personnel, and customer service and third-party original equipment manufacturer costs to provide continuing support to our customers. There are certain costs which are deferred and recorded as prepaids, until such revenue is recognized. Refer to revenue recognition above as to what constitutes deferred revenue.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with a high credit quality financial ~~institution.~~institutions. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to ~~$250,000.~~$250,000. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.

Intangible Assets

The Company reviews intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. The Company recognizes an impairment loss if the carrying value of the asset exceeds the expected future cash flows.

Goodwill and other intangible assets

In accordance with ASC 350-30-65, “Intangibles - Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Factors the Company considers to be important which could trigger an impairment review include the following:

Significant underperformance relative to expected historical or projected future operating results;

Significant changes in the manner of use of the acquired assets or the strategy for the overall business; 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.

Foreign Currency Translation

The ~~company translates monetary assets and liabilities (any item paid for or settled in foreign currency) into~~Company’s reporting currency is U.S. Dollars. The accounts of one of the ~~United States Dollar at exchange rates prevailing on~~Company’s subsidiaries, Optilan, is maintained using the ~~balance sheet date. Non-monetary~~appropriate local currency, Great British Pound, as the functional currency. All assets and liabilities are translated into U.S. Dollars at ~~the~~balance sheet date, shareholders’ equity is translated at historical ~~rate in effect when the transaction occurred. Revenues~~rates and ~~expenses~~revenue and expense accounts are translated at the ~~spot~~average exchange rate onfor the ~~date~~year or the ~~transaction occurred. Exchange~~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 ~~translation of monetary items~~functional currency are included in ~~unrealized gain/loss on Foreign Exchange as Other Comprehensive Loss.~~

~~The following table discloses~~ the ~~dates and exchange rates used for converting Canadian Dollar amounts to U.S. Dollar amounts disclosed in the balance sheet and the statement~~statements of operations.

The ~~spot exchange rate between the Canadian Dollar and the U.S. Dollar on, December 31, 2019 closing rate at 1.2988 US$: CAD, average rate at 1.3234 US$: CAD and~~relevant translation rates are as follows: for the three and nine months ended September 30, ~~2020~~2021, closing rate at ~~1.3141~~ 1.3468 US$: ~~CAD,~~GBP, quarterly average rate at ~~1.3340~~ 1.3787 US$.: GBP.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the "more likely than not" criteria of ASC 740.

ASC 740-10 requires that the Company recognize 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 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

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.

Accounting for Derivatives

The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. 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 probability weighted average series Binomial lattice formula pricing models 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 or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Fair Value of Financial Instruments

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.

Recent Accounting Pronouncements

There were no new accounting pronouncements issued or proposed by the Financial Accounting Standards Board during the three months ended September 30, ~~2020,~~2021, and through the date of filing of this report that the Company believes has had or will have a material impact on its financial position or results of operations, including the recognition of revenue, cash flow, the merger that was consummated on July 18, 2018. The Company has no lease obligations.

1013

Income (Loss) Per Common Share

Basic net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share of common stock is computed by dividing net income (loss) by the sum of the weighted average number of common shares outstanding and the dilutive potential common share equivalents outstanding. Potential dilutive common share equivalents consist of shares issuable upon exercise of outstanding convertible preferred stock and stock options.

For the three and nine months ended September 30, ~~2020,~~2021, there were no stock options ~~nor convertible preferred stock~~ outstanding. For the three and nine months ended September 30, ~~2020,~~2021, common stock equivalents related to convertible preferred stock and convertible debt have not been included in the calculation of diluted loss per common share because they are anti-dilutive. Therefore, basic loss per common share is the same as diluted loss per common share. There are ~~2,138,539,986~~1,970,029,676 common shares reserved for the potential conversion of the Company's convertible debt.

NOTE 2 – BUSINESS ACQUISITIONS

Optilan Holdco 3 Limited

On August 9, 2021, the Company entered into a Share Purchase Agreement with Optilan Guernsey Limited and Optilan Holdco 2 Limited (the “Sellers”), pursuant to which the Company purchased from the Sellers all of the issued and outstanding equity interests of Optilan HoldCo 3 Limited, a private company incorporated in England and Wales (“Optilan”) for £1.00 and also a commitment to enter into the Subscription (as defined below). As of August 9, 2021, the Company owns all of the equity interests of Optilan.

The Company has accounted for the purchase using the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at September 30, 2021:

Schedule of fair value of assets and liabilities in acquisition
	Fair Value
Cash	$	736,177
Accounts receivable		4,619,381
Inventory		2,040,887
Unbilled revenue		540,321
Property & equipment		1,393,274
Right of use		1,385,825
Goodwill		12,181,350
Total assets		22,891,215
Accounts payable		11,622,018
Contract deposits		3,168,493
Contract liabilities, current		4,139,193
Lease liabilities, current		141,730
Other current liabilities		2,496,725
Lease liabilities, noncurrent		628,529
Total purchase consideration	$	694,527

This purchase price allocation is preliminary and is pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed valuation analyses as of the filing date of this Form 10-Q.

Wildlife Specialists, LLC and Remote Intelligence, LLC

On August 30, 2021, we closed two separate Membership Interest Purchase Agreements (the “MPAs”) with Remote Intelligence, Limited Liability Company, a Pennsylvania limited liability company (“RI”) and Wildlife Specialists, LLC, a Pennsylvania limited liability company (“WS”) pursuant to which we agreed to pay to the majority shareholder of each of RI and WS an aggregate of 15,000,000 shares of our Common Stock, $500,000 to be paid on the closing date, and an additional $500,000 to be paid 12 weeks from closing date in exchange for 60% ownership of each of RI and WS. RI and WS are now subsidiaries of the Company.

Schedule of fair value of assets and liabilities in acquisition
WILDLIFE SPECIALISTS	Fair Value
Cash	$	33,910
Accounts receivable		161,866
Other current assets		600
Property & equipment		99,490
Goodwill		1,191,085
Total assets		1,486,951
Accounts payable		151,888
Other current liabilities		241,763
Total purchase consideration	$	1,478,000

Schedule of fair value of assets and liabilities in acquisition
REMOTE INTELLIGENCE	Fair Value
Cash	$	6,158
Accounts receivable		24,036
Property & equipment		111,636
Goodwill		1,729,800
Total assets		1,871,630
Accounts payable		141,859
Other long term liabilities		251,771
Total purchase consideration	$	1,478,000

These purchase price allocations are preliminary and are pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed valuation analyses as of the filing date of this Form 10-Q.

TJM Electronics West, Inc.

On September 8, 2021, we entered into and closed the Stock Purchase Agreement (the “TJM SPA”) with TJM Electronics West, Inc., an Arizona corporation (“TJM”), and TJM’s shareholders, pursuant to which we agreed to purchase all of the equity interests in TJM in exchange for $450,000, subject to adjustments as defined in the TJM SPA. TJM is now a wholly-owned subsidiary of the Company.

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 purchase consideration	$	450,000

NOTE 3 – REVENUE

The following table is a summary of the Company’s timing of revenue recognition for the three and nine months ended September 30, 2021 and 2020:

Schedule of timing of revenue recognition
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Timing of revenue recognition:
Services and products transferred at a point in time	$	3,500,970	$	0	$	3,500,970	$	0
Services and products transferred over time		138		0		328		0
Total revenue	$	3,500,970	$	0	$	3,500,970	$	0

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

Revenue by source consisted of the following for the three and nine months ended September 30, 2021 and 2020:

Schedule of revenue by source consisted	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenue by products and services:
Products	$	1,533,377	$	0	$	1,533,377	$	0
Services		1,967,593		0		1,967,593		0
Total revenue	$	3,500,970	$	0	$	3,500,970	$	0

Revenue by geographic destination consisted of the following for the for the three and nine months ended September 30, 2021 and 2020:

Schedule of revenue by geographic destination
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenue by geography:
North America	$	120,336	$	0	$	120,336	$	0
International		3,380,634		0		3,380,634		0
Total revenue	$	3,500,970	$	0	$	3,500,970	$	0

Contract Balances

The Company records contract assets when it has a right to consideration and records accounts receivable when it has an unconditional right to consideration. Contract liabilities consist of cash payments received (or unconditional rights to receive cash) in advance of fulfilling performance obligations. As of September 30, 2021, the Company did not have a contract assets balance.

The following table is a summary of the Company’s opening and closing balances of contract liabilities related to contracts with customers.

Schedule of contract liabilities related to contracts with customers
	Total
Balance at December 31, 2020	$	0
Additions through advance billings to or payments from vendors		0
Additions through business acquisition		4,139,193
Revenue recognized from current period advance billings to or payments from vendors		0
Revenue recognized from amounts acquired through business acquisition		1,439,505
Balance at September 30, 2021	$	2,699,688

NOTE 4 – ACCOUNTS RECEIVABLE

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

Schedule of accounts receivable
	September 30,		December 31,
	2021		2020
Accounts receivable	$	5,812,003	$	0
Less: Allowance for doubtful accounts		0		0
Total accounts receivable	$	5,812,003	$	0

NOTE 5 – INVENTORY

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

Schedule of inventory
	September 30,		December 31,
	2021		2020
Raw materials	$	209,478	$	–
Work in progress		1,401,521		–
Finished goods		19,052		–
Total inventory		1,630,051		–
Reserve		–		–
Total inventory, net	$	1,630,051	$	–

NOTE 6 – PROPERTY AND EQUIPMENT

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

Schedule of property, plant and equipment
	September 30,			December 31,
	2021			2020
Property and equipment	$	1,775,332		$	0
Leasehold improvements		63,180			0
		1,838,512			0
Less - accumulated depreciation		(1,113	)		0
	$	1,837,399		$	0

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following as of September 30, 2021 and December 31, 2020:

Schedule of accounts payable and accrued liabilities
	September 30,		December 31,
	2021		2020
Accounts payable	$	8,946,714	$	519,899
Accrued liabilities		602,591		569,970
Total accounts payable and accrued expenses	$	9,549,305	$	1,089,869

NOTE 8 – LEASES

We adopted ASC 842 “Leases” using the modified retrospective approach, electing the practical expedient that allows us not to restate our comparative periods prior to the adoption of the standard on January 1, 2019. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption.

The following was included in our balance sheet as of September 30, 2021:

Schedule of operating leases
Operating leases	September 30, 2021

Assets
ROU operating lease assets	$	1,476,771

Liabilities
Current portion of operating lease	$	575,446
Operating lease, net of current portion	$	1,592,880
Total operating lease liabilities	$	2,168,326

The weighted average remaining lease term and weighted average discount rate at September 30, 2021 were as follows:

Schedule of weighted average remaining lease term and weighted average discount rate
Weighted average remaining lease term (years)	September 30, 2021
Operating leases		6.61
Weighted average discount rate
Operating leases		6.00%

Operating Leases

On January 12, 2021, the Company’s new acquired subsidiary entered into an operating lease agreement to rent office space in Mumbai, India. This three-year agreement commenced January 12, 2021 with an annual rent of approximately $50,000.

On May 27, 2021, the Company’s new acquired subsidiary entered into an operating lease agreement to rent office space in Mumbai, United Kingdom. This ten-year agreement commenced May 27, 2021 with an annual rent of approximately $85,000 with the first six months rent free.

The following table reconciles future minimum operating lease payments to the discounted lease liability as of September 30, 2021:

Schedule of future minimum operating lease payments
2021		82,394
2022		330,171
2023		324,910
2024		279,112
2025 and later		842,673
Total lease payments		1,859,260
Less imputed interest		(391,127	)
Total lease obligations		1,468,133
Less current obligations		(330,171	)
Long-term lease obligations	$	1,137,962

NOTE 9 – 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, 2021:

Schedule of changes in carrying amount of goodwill
	Total
Balance at December 31, 2020	$	0
2021 Acquisitions		15,536,899
Balance at September 30, 2021	$	15,536,899

Intangible Assets - ~~DEBENTURE~~Intrusion Detection Intellectual Property

The Company relies on patent laws and restrictions on disclosure to protect its intellectual property rights. As of September 30, 2021, the Company held 3 U.S. and foreign patents on its intrusion detection technology, which expire in calendar years 2025 through 2034 (depending on the payment of maintenance fees).

The DPTI issued patents cover a System and Method for Brillouin Analysis, a System and Method for Resolution Enhancement of a Distributed Sensor, and a Flexible Fiber Optic Deformation System Sensor and Method. Maintenance of intellectual property rights and the protection thereof is important to our business. 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 three months ended September 30, 2021 and 2020, the Company amortized $12,757 and $12,757, respectively. Future amortization of intangible assets is as follows:

Schedule of future amortization of intangible assets
2021	$	12,757
2022		51,028
2023		51,028
2024		51,028
2025		51,028
Thereafter		138,850
Total	$	355,719

NOTE 10 – DEBT AGREEMENTS

Secured Debenture

DPTI issued a convertible ~~debenture~~Debenture to the University in exchange for the ~~patents (the “Patents”)~~Patents assigned to the Company, in the amount of ~~CAD$1,500,000,~~Canadian $1,500,000, or ~~USD$1,491,923~~US $1,491,923 on December 16, 2010, the date of the ~~convertible debenture.~~Debenture. On April 24, 2017 DPTI issued a replacement secured term ~~convertible debenture (the “Debenture”)~~Debenture in the same ~~CAD$~~C$1,500,000 amount as the original ~~convertible debenture.~~Debenture. The interest rate is the Bank of Canada Prime overnight rate plus 1% per annum. The Debenture had an initial required payment of ~~CAD~~Canadian $42,000 ~~(USD$~~(US$33,385) due on April 24, 2018 for reimbursement to the University ~~for~~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 quarterly over a ~~six year~~six-year period in the amount of ~~CAD$62,500.~~Canadian Dollars $62,500. Based on the exchange rate between the Canadian Dollar and the U.S. Dollar on September 30, ~~2020,~~2021, the quarterly principal repayment amounts will be USD$44,271. On May 1, 2020, the Company received an extension for this payment until July 23, 2020. Additionally on July 16, 2020, the Company received a further four month extension until November 2020.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~~Escrow Agreement dated April 24, 2017, between DPTI and the University.

The Debenture was initially recorded at ~~USD$1,491,923~~the $1,491,923 equivalent ~~to CAD$1,500,000~~US Dollar amount of Canadian $1,500,000 as of December 16, 2010, the date of the original ~~convertible debenture.~~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)~~loss for the three months ended September 30, 2021 and 2020, were $16,155and ~~2019, were ($39,945) and 12,671~~$39,047 respectively. These amounts are included in Accumulated Other Comprehensive Loss in the Equity section of the consolidated balance sheet, and as Unrealized Loss on Foreign Exchange on the consolidated statement of comprehensive loss. The Debenture also includes a provision requiring DPTI to pay the University a two percent (2%) royalty on sales of any and all products or services which incorporate the Patents for a period of five ~~(5)~~ years from April 24, 2018.

For the three months ended September 30, ~~2020,~~2021, and ~~2019,~~2020, the Company recorded interest expense of ~~$12,255~~$13,168 and ~~$12,745,~~$12,255, respectively.

As of September 30, ~~2020,~~2021 the ~~Debenture~~debenture liability totaled ~~$1,141,494,~~$1,184,516, all of which was long term.

1121

Future minimum required payments over the next ~~five~~5 years and thereafter are as follows:

Schedule of future minimum debt payments
Period ending September 30,
2021	$	–
2022		–	$	0
2023		–		0
2024		–		0
2025 and after		1,062,503
2025				0
2026 and after				1,184,516
Total	$	1,062,503	$	1,184,516

~~NOTE 3 – CONVERTIBLE DEBT SECURITIES~~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, ~~2020.~~2021. Management determined the expected volatility ~~between 489.35-582.90%~~of 359.78%, a ~~risk free~~risk-free rate of interest ~~between 0.12-0.13%~~of 0.09%, and contractual lives of the debt varying from six months to two years. The table below details the Company's nine 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			9/30/2021
	$	90,228	$	0	$	58,959	$	30,042		$	108,530
		162,150		0		74,429		42,819			195,041
		72,488		0		11,381		(25,482	)		87,192
		53,397		0		5,651		13,592			94,615
		53,864		0		28,566		(69,333	)		0
		18,613		0		16,558		(13,512	)		0
		40,000		0		10,605		(51,397	)		0
		42,350		0		7,350		54,120			0
		94,200		0		19,200		(105,683	)		0
		76,200		0		16,200		(86,548	)		0
		64,200		0		14,200		(74,788	)		0
		825,000		733,387		203,500		0			0
Subtotal		1,584,574		733,387		466,599		(517,087	)		479,088
Transaction expense		0		0		0		0			0
	$	1,584,574	$	733,387	$	466,599	$	(517,087	)	$	479,088

Face Debt Initial Q3 change Derivative Balance
Amount Discount Loss in FMV 9/30/2020
$ 90,228 $ – $ 58,959 $ 65,666 $ 147,000
162,150 – 74,429 106,304 264,566
72,488 – 11,381 (5,738 ) 109,166
201,436 – – (13,300 ) 279,035
76,657 – 8,904 (1,310 ) 106,219
60,115 – 5,651 (10,556 ) 106,405
53,864 – 28,566 (6,472 ) 64,690
25,468 – 16,558 (3,060 ) 30,587
29,250 – – 17,148 28,965
49,726 – – 29,152 49,241
41,774 – – 24,490 41,367
29,250 – – 17,148 28,965
40,000 – 10,605 (4,932 ) 47,835
11,900 – 17,676 (126,690 ) 16,143
Subtotal 944,306 – 232,729 (87,850 ) 1,320,184
Transaction expense – – – – –
$ 944,306 $ – $ 232,729 $ (87,850 ) $ 1,320,184

~~During~~

On July 14, 2021, the ~~three months ended September 30, 2020,~~Company entered a ~~total~~Securities Purchase Agreement (the “GS SPA”) with GS Capital Partners, LLC (the “Lender”), pursuant to which the Company issued to the Lender a 6% Redeemable Note in the principal amount of ~~$103,257~~$2,000,000 (the “Note”). The purchase price of the Note is $1,980,000. The Note matures on July 14, 2022 upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the Note at 6% per annum until the Note becomes due and payable. The Note is subject to various “Events of Default,” which are disclosed in ~~principal and $10,754~~the Note. Upon the occurrence of an “Event of Default,” the interest ~~was converted~~rate on the Note will be 18%. The Note is not convertible into ~~1,785,632,186~~ shares of the Company’s ~~common stock.~~Common Stock and is not dilutive to existing or future shareholders and the Company plans on using a portion of the proceeds of the Note to retire existing convertible debt.

As of September 30, ~~2020~~2021 and ~~2019~~2020 respectively, there was ~~$944,306~~1,584,574 and ~~$928,702~~$1,072,663 of convertible debt outstanding, net of debt discount of ~~$0,~~$965,921, and ~~$93,138,~~$1,313, As of September 30, ~~2020~~2021 and ~~2019~~2020 respectively, there was derivative liability of ~~$1,320,184~~$893,381 and ~~$341,209~~$1,232,344 related to convertible debt securities. ~~The Company recorded interest expense related to the outstanding convertible debt of $21,366 and $22,059 for the three months ended September 30, 2020 and 2019 respectively.~~

~~NOTE 4 - STOCKHOLDERS' DEFICIT~~

NOTE 11 - STOCKHOLDERS' DEFICIT

As of September 30, ~~2020,~~2021, there were ~~3,394,817,156~~ 4,922,968,442 shares of common stock and 88,235 shares of preferred stock issued and outstanding.

~~NOTE 5 - COMMITMENTS & CONTINGENCIES~~Preferred Stock

~~Potential Royalty Payments~~In accordance with the Company’s Certificate of Incorporation, the Company has authorized a total of 2,000,000 shares of preferred stock, par value $0.01 per share, for all classes. As of September 30, 2021, and December 31, 2020, there were 88,235 total preferred shares issued and outstanding for all classes.

~~The~~During the three months ended September 30, 2021, the Company ~~in consideration~~issued no shares of the terms of the debenture to the University, 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.preferred stock.

~~Legal Matters~~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, 2021 and December 31, 2020, there were 4,922,968,442 and 4,088,762,156 common shares issued and outstanding.

During the three months ended September 30, 2021, the Company issued the following shares of common stock:

On ~~March 27, 2019, Thomas A. Cellucci, et al. v. DarkPulse, Inc. et al. (the “Complaint”) was filed~~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 ~~United States District Court for the Southern District~~amount of New York by certain of the Company’s former executive officers, one also being a former director, and a non-employee shareholder (collectively, the “Plaintiffs”), against the Company, its sole officer and director, and others, claiming that the Plaintiffs brought the action to protect their individual rights as minority shareholders, as improperly-ousted officers (other than the non-employee shareholder), and as an improperly-ousted director, seeking equitable relief, damages, recovery of unpaid salaries and other relief. It is the Company's position that the Complaint represents a frivolous harassment lawsuit. The Company has filed a motion to dismiss all claims made in the Complaint and intends to otherwise defend itself vigorously in this matter. The Company is also considering filing counterclaims against the Plaintiffs in the action.

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.

~~COVID-19~~$42,350.

On ~~March 11,~~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, 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~~amount of $93,864 and ~~abroad, with~~interest of $26,246.

On July 19, 2021, 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~~Company issued an aggregate of 2,898,382 shares of common stock upon the conversion of convertible debt, as issued 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 affectedOctober 7, 2020, in the ~~longer run, but we expect that it may materially affect our business, financial condition~~amount of $10,497 and ~~results~~interest of ~~operations. The extent to which~~$6,748.

Stock Options

During the ~~coronavirus impacts our results will depend on future developments, which are highly uncertain~~three months ended September 30, 2021, the Company did not issue any stock options 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.had 0 stock options outstanding at September 30, 2021.

1323

~~NOTE 6 – INTANGIBLE ASSETS~~

Public Offerings

~~Intangible Assets - Intrusion Detection Intellectual Property~~On August 19, 2021, we entered into the Purchase Agreement with GHS, for the offering of up to $45,000,000 worth of Common Stock. Pursuant to the Purchase Agreement, on August 19, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from the Company, 31,799,260 shares of Common Stock for total proceeds to the Company, net of discounts, of $3,300,000, at an effective price of $0.1038 per share (the “First Closing”). We received approximately $2,790,000 in net proceeds from the First Closing after deducting the fees and other estimated offering expenses payable by us. We used the net proceeds from the First Closing for working capital and for general corporate purposes. The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration statement on Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, 2021, and was declared effective on August 18, 2021. On September 30, 2021, the Company paid a $275,000 placement fee to J.H. Darbie & Co, $125,000 cash and $150,000 with 1,073,730 shares of common stock.

Pursuant to the Purchase Agreement, on August 31, 2021, we and GHS agreed that the Company would issue and sell to GHS, and GHS would purchase from us, 27,297,995 shares of Common Stock for total proceeds to us, net of discounts, of $3,300,000, at an effective price of $0.120888 per share (the “Second Closing”). We received approximately $2,885,000 in net proceeds from the Second Closing after deducting the fees and other estimated offering expenses payable by us. We used the net proceeds from the Second Closing for working capital and for general corporate purposes. The ~~Company relies~~shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration statement on ~~patent laws~~Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, 2021, and ~~restrictions~~was declared effective on ~~disclosure to protect its intellectual property rights. As of~~August 18, 2021. On September 30, ~~2020,~~2021, the Company ~~held three U.S.~~paid a $262,000 placement fee to J.H. Darbie & CO, $112,000 cash and ~~foreign patents on its intrusion detection technology, which expire in calendar years 2025 through 2034 (depending on the payment~~$150,000 with 1,185,771 shares of ~~maintenance fees).~~common stock.

~~For~~Pursuant to the ~~three months ended~~Purchase Agreement, on September 22, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us, 25,630,272shares of Common Stock for total proceeds to us, net of discounts, of $2,000,000, at an effective price of $ $0.085836 per share (the “Third Closing”). We received approximately $1,915,000 in net proceeds from the Third Closing after deducting the fees and other estimated offering expenses payable by us. We used the net proceeds from the Third Closing for working capital and for general corporate purposes. The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration statement on Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, 2021, and was declared effective on August 18, 2021. On September 30, ~~2020 and 2019,~~2021, the Company ~~amortized $12,757, respectively. Future amortization~~paid a $185,000 placement fee to J.H. Darbie & CO, $85,000 cash and $100,000 with 934,580 shares of ~~intangible assets is as follows:~~common stock.

2020 $ 12,757
2021 51,028
2022 51,028
2023 51,028
2024 51,028
Thereafter 189,878
$ 406,747

NOTE 712 – 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.

In May 2018, the JV Entity received $42,000 for an order from Bravetek and the JV Entity then placed a corresponding order with the Company. The Company’s former executive office is also the CEO of Bravatek. The proceeds were to be used for marketing efforts to generate sales of our intrusion detection product. The order has been recorded as a prepaid sale and is a current liability as of September 30, 2020.

1424

~~NOTE 8 – 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 September 30, 2020 and December 31, 2019, there were 88,235 total preferred shares issued and outstanding for all classes.

During the three months ended September 30, 2021 and 2020, the Company’s Chief Executive Officer advanced personal funds in the amount of $0 and $10,582 for Company ~~issued no shares of preferred stock~~.

~~NOTE 9 – COMMON STOCK~~

~~In accordance with the Company’s bylaws, the Company has authorized a total of 20,000,000,000 shares of common stock, par value $0.01 per share.~~expenses. As of September 30, ~~2020~~2021, the Company’s Chief Executive Officer is owed a total of $23,980 for advanced personal funds.

NOTE 13 - 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 ~~December 31, 2019, there were 3,394,817,156~~all products or services which incorporate the Company's patents for a period of five years from April 24, 2018.

Legal Matters

Carebourn Capital, L.P.

On January 29, 2021, Carebourn Capital, L.P. (“Carebourn”) commenced suit against the Company in the 4th Judicial District (Hennepin County District Court) (Minnesota), alleging the Company breached the terms and ~~1,392,042,112 common shares issued~~conditions of two convertible promissory notes and ~~outstanding,~~accompanying securities purchase agreements Carebourn and the Company entered into on July 17, 2018 and July 24, 2018, respectively.

~~During the three months ended September 30, 2020,~~Also on January 29, 2021, Carebourn moved for a temporary injunction to enjoin the Company ~~issued the following~~from transferring any shares of its common stock: to any third parties. Following submission of briefing by both parties and oral arguments on Carebourn’s motion, on March 17, 2021, the Court denied Carebourn’s motion for a temporary injunction.

On ~~July 9, 2020,~~April 14, 2021, Carebourn filed an amended complaint and asserted new claims. On May 13, 2021, the Company ~~issued~~filed a motion to dismiss Carebourn’s amended complaint, arguing that Carebourn is conducting itself as an ~~aggregate~~unregistered dealer, in violation of ~~80,000,000 shares~~Section 15(a) of ~~common stock upon~~ the ~~conversion~~Securities and Exchange Act of ~~convertible debt, as~~1934 (the “Act”), and, pursuant to Section 29(b) of the Act, the Company is entitled to have all contracts arising under the unlawful securities transaction declared void ab initio and seek rescissionary damages for any unlawful securities transactions effected by Carebourn.

As of the date hereof, a ruling has not been issued on ~~May 3, 2019,~~the foregoing motions to dismiss filed by the Company and other defendants. Furthermore, as of the date hereof, the Company and Carebourn are conducting discovery. The Company intends to defend itself against the allegations asserted in Carebourn’s amended complaint and interpose the ~~amount~~defenses provided under the Act, including but not limited to asserting that Carebourn is an unregistered dealer acting in violation of ~~$5,600.~~Section 15(a) and, pursuant to Section 29(b), the Company interposing its right to rescind the unlawful securities contracts in their entirety and, furthermore, seek rescissionary damages for any unlawful securities transactions effected by Carebourn. The Company contends that its arguments are brought in good faith, particularly in light of recent SEC enforcement actions and the SEC’s ongoing investigation against Carebourn, among other parties, for violations of federal securities laws, including violations of Section 15(a) of the Act. See U.S. Securities and Exchange Commission v. Carebourn Capital, LP et al, Case No. 1:20-cv-07162 (N.D. Ill.).

Former DarkPulse Officers

On ~~July 16, 2020,~~September 10, 2021, Stephen Goodman, Mark Banash, and David Singer (the “Former Officers”), all former officers and employees of the Company, commenced suit against the Company in Arizona Superior Court, Maricopa County. The complaint alleges the Company breached the rights of the Former Officers in connection with Series D preferred stock issued ~~an aggregate of 82,857,143 shares of common stock upon~~to the ~~conversion of convertible debt, as issued on May 3, 2019,~~Former Officers. The Company intends to defend itself against the allegations asserted in the ~~amount of $5,800.~~

~~On July 28, 2020,~~Former Officers’ complaint. if the case progresses the Company ~~issued an aggregate of 82,857,143 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $5,800.~~

~~On August 3, 2020, the Company issued an aggregate of 91,428,571 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $6,400.~~

~~On August 6, 2020, the Company issued an aggregate of 91,428,571 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $6,400.~~

~~On August 10, 2020, the Company issued an aggregate of 91,428,571 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $6,400.~~

~~On August 13, 2020, the Company issued an aggregate of 91,428,571 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $6,400.~~

~~On August 18, 2020, the Company issued an aggregate of 110,000,000 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $7,700.~~

~~On August 20, 2020, the Company issued an aggregate of 115,714,286 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $8,100.~~will file countersuits against all plaintiffs.

1525

~~On August 31, 2020, the Company issued an aggregate of 115,714,286 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $8,100.~~More Capital, LLC

On ~~September 1, 2020,~~June 29, 2021, More Capital, LLC (“More”) commenced suit against the Company, ~~issued an aggregate of 115,714,286 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019,~~et al., in the ~~amount~~4th Judicial District (Hennepin County District Court) (Minnesota), alleging the Company breached the terms and conditions of ~~$8,100.~~a convertible promissory note and accompanying securities purchase agreement More and the Company entered into on August 20, 2018.

On ~~September 1, 2020,~~July 20, 2021, the Company ~~issued an aggregate of 119,157,924 shares of common stock upon~~filed a motion to dismiss More’s complaint, arguing that the ~~conversion of interest of convertible debt, as issued on July 17, 2018, in the amount of $6,315.~~

~~On September 1, 2020,~~claims asserted against the Company ~~issued an aggregate of 85,000,000 shares of common stock~~fail to state a claim upon ~~the conversion of convertible debt, as issued on September 24, 2018, in the amount of $7,000.~~

On September 2, 2020, the Company issued an aggregate of 123,474,262 shares of common stock upon the conversion of interest of convertible debt, as issued on September 24, 2018, in the amount of $4,439.

~~On September 3, 2020, the Company issued an aggregate of 115,714,286 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $8,100.~~

~~On September 11, 2020, the Company issued an aggregate of 115,714,286 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $8,100.~~

~~On September 30, 2020, the Company issued an aggregate of 158,000,000 shares of common stock upon the conversion of convertible debt, as issued on September 25, 2018, in the amount of $5,257.~~

~~NOTE 10 – STOCK OPTIONS~~which relief can be granted.

The ~~Company’s shareholders previously approved, by a majority vote,~~Company intends to defend itself against the ~~adoption~~allegations asserted in More’s complaint and interpose the defenses provided under the Act, including but not limited to asserting that More is an unregistered dealer acting in violation of Section 15(a) of the 1998 Stock Incentive Plan (the “Plan”). As amended on August 11, 2003, the Plan reserves 20,000,000 shares of common stock for issuance upon the exercise of options which may be granted from time-to-timeAct and, pursuant to ~~officers, directors, certain employees and consultants~~Section 29(b) of the Act, the Company orinterposing its ~~subsidiaries~~right to rescind the unlawful securities contracts in their entirety and, furthermore, seek rescissionary damages for any unlawful securities transactions effected by More. The Company contends that its arguments are brought in good faith, particularly in light of recent SEC enforcement actions and the ~~Board~~SEC’s ongoing investigation against More, among other parties, for violations of ~~Directors. The Plan permits~~federal securities laws, including violations of Section 15(a) of the ~~award of both qualified~~Act. See U.S. Securities and ~~non-qualified incentive stock options.~~Exchange Commission v. Carebourn Capital, LP et al, Case No. 1:20-cv-07162 (N.D. Ill.).

~~During~~From time to time, we may become involved in litigation relating to claims arising out of our operations in the ~~three months ended September 30, 2020,~~normal course of business. We are not currently involved in any pending legal proceeding or litigation and, to the ~~Company did not issue~~best of our knowledge, no governmental authority is contemplating any ~~stock options~~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 ~~had no stock options outstanding at September 30, 2020.~~ operating results.

NOTE ~~11 –~~ 14– SUBSEQUENT EVENTS

The Company evaluated events occurring after the date of the accompanying unaudited condensed consolidated balance sheets through the date the financial statements were issued and has identified the following subsequent events that it believes require disclosure:

OnEffective October ~~7, 2020,~~1, 2021, we entered into and closed the ~~Company issued an aggregate~~Membership Purchase Agreement (the “TerraData MPA”) with TerraData Unmanned, PLLC, a Florida limited liability company (“TerraData”), and Justin Dee, the sole shareholder of ~~161,428,571~~TerraData, pursuant to which we agreed to purchase 60% of the equity interests in TerraData in exchange for 3,725,386 shares of ~~common stock upon the conversion of convertible debt,~~our Common Stock and $400,000, subject to adjustments as ~~issued on May 3, 2019,~~defined in the ~~amount~~TerraData MPA, to be paid within 12 weeks of ~~$11,800.~~closing. TerraData is now a subsidiary of the Company.

OnPursuant to the Purchase Agreement, on October ~~7, 2020, the Company issued an aggregate of 169,000,000~~1, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us, 37,187,289 shares of ~~common stock upon~~Common Stock for total proceeds to us, net of discounts, of $3,000,000, at an effective price of $0.08874 per share (the “Fourth Closing”). We received approximately $2,850,000 in net proceeds from the ~~conversion of convertible debt, as~~Fourth Closing after deducting the fees and other estimated offering expenses payable by us. We used the net proceeds from the Fourth Closing for working capital and for general corporate purposes. The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration statement on ~~February~~Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, ~~2019, in~~2021, and was declared effective on August 18, 2021.

Pursuant to the ~~amount of $6,855.~~

OnPurchase Agreement, on October ~~7, 2020, the Company issued an aggregate of 143,519,000~~14, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us, 14,282,304 shares of ~~common stock upon the conversion~~Common Stock for total proceeds to us, net of ~~convertible debt, as issued on September 25, 2018, in the amount~~discounts, of ~~$4,677.~~

~~On October 12, 2020, the Company issued~~$1,055,000, at an ~~aggregate of 142,374,429 shares of common stock upon the conversion of convertible debt, as issued on May 3, 2019, in the amount of $600 in principal and $9,366 in interest.~~

~~On October 22, 2020, the Company issued an aggregate of 77,623,000 shares of common stock upon the conversion of convertible debt, as issued on September 25, 2018, in the amount of $2,041.~~

On September 2, 2020, the Company entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) issuing to Geneva a convertible promissory note in the aggregate principal amount of $47,850 (the “Financing”) 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 tradingeffective price of $0.08125 per share (the “Fifth Closing”). We received approximately $1,002,250 in net proceeds from the ~~Company's common stock during~~Fifth Closing after deducting the ~~20 prior trading days.~~fees and other estimated offering expenses payable by us. We used the net proceeds from the Fifth Closing for working capital and for general corporate purposes. The ~~Company received $40,000 net cash~~shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration statement on Form S-3 (File No. 333-257826), which was initially filed with the ~~Financing which closed~~SEC on ~~October 7, 2020.~~July 12, 2021, and was declared effective on August 18, 2021.

1726

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Background~~This Management’s Discussion and Analysis of Financial Condition and Results of Operations contain certain forward-looking statements. Historical results may not indicate future performance. Our forward-looking statements reflect our current views about future events; are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020. We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements

Critical Accounting Policies

The following discussions are based upon our financial statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingencies. We continually evaluate the accounting policies and estimates used to prepare the financial statements. We base our estimates on historical experiences and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management.

Business Overview

DarkPulse, Inc. ~~("DPI" or the "Company"~~, a Delaware corporation (the “Company”), is a technology-security company ~~incorporated in 1989 as Klever Marketing, Inc. ("Klever"). The Company’s wholly-owned subsidiary, DarkPulse Technologies Inc. ("DPTI"), originally started as a technology spinout from~~focused on the ~~University of New Brunswick, Fredericton, Canada. The Company’s security~~manufacture, sale, installation, and monitoring of laser sensing 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 andbased on its ~~poor precision.~~ ~~The Company’s~~ patented BOTDA dark-pulse sensor technology. The Company develops, markets, and distributes a full suite of engineering, monitoring, installation and security management solutions for critical infrastructure/key resources to both industries and governments. Coupled with our patented BOTDA dark-pulse technology ~~allows~~(the “DarkPulse Technology”), DarkPulse provides its customers a comprehensive data stream of critical metrics for assessing the health and security of their infrastructure. Our systems provide rapid, precise analysis and responsive activities predetermined by the end-user customer. The Company’s activities since inception have consisted of developing various solutions, obtaining patents and trademarks related to its technology, raising capital, acquisition of companies deemed to expand global operations and/or capabilities, creating key partnerships to expand our suite of products and services. Our activities have evolved to a sales-focused mission since the successful completion of our BOTDA system in December 2020.

Headquartered in New York, DarkPulse is a globally based technology company with presence in United Kingdom, India, Dubai, Russian Federation, Turkey, Azerbaijan, Iraq, Libya, United States and Canada. In addition to the Company’s BOTDA systems, through a series of strategic acquisitions the Company offers the manufacture, sale, installation, and monitoring of laser sensing systems, O & G pipeline leak detection, physical security services, telecommunications and satellite communications services, drone and rover systems. The Company is focused on expanding services through acquisitions and partnerships to address global infrastructure and critical environmental resource challenges. DarkPulse offers a full suite of engineering and environmental solutions that provide safety and security infrastructure projects. The sensing and monitoring capabilities offered by DarkPulse and our subsidiary companies operate in the Air, Land, Sea. Our patented technology provides rapid, precise analysis to protect and safeguard oil and gas pipelines above or below ground, physical security countermeasures, mining operations, and other critical infrastructure / key resources subject to vulnerability or risk. Our patented Brillouin scattering distributed fiber sensing system is best in class. The Company is able to monitor areas in around critical infrastructure buried or above ground including pipelines 100km or more in length and/ or localized pipes as small as 8 CM DIA, detecting internal anomalies before catastrophic failure. We are developing an Intelligent Rock Bolt, to prevent causalities and fatalities in mining operations and include a real time sensor system that can detect the location & movement of personnel & equipment throughout a mining operation. We monitor airflow, air quality, temperature, seismic events, etc. Our sensors cover extended areas, protecting an area from intrusion by detecting events at any location along the sensing cable. Working safely every day is our first core value and employees at DarkPulse and our subsidiary companies are recognized experts in their fields, providing comprehensive services for all our clients' needs.

Our Operating Units

Optilan

Telecommunications, Energy, Rail, Critical Network Infrastructure, Pipeline Integrity Systems, Renewables and Security. Headquartered in Coventry, United Kingdom with a 30-year pedigree, at Optilan our customers trust us to keep the integrity of their assets safe and secure, by managing the life cycle delivery risk of our solutions. By fostering a collaborative design approach to complex problems, we provide innovative solutions, custom fit to even the most demanding of sites and scale of projects. Importantly, our commitment to our safety culture remains unaverred, to ensure that everyone goes home safely every day. We orchestrate business resilience with a suite of end-to-end solutions, combined with connectivity and professional service at a global level. Today's business environment is more dynamic than ever, with continuous change and disruption accepted as the new normal. We complement our tailored, integrated expertise with a curated ecosystem of leading manufacturers, to achieve both high quality and enduring results. We are proud to foster a unique culture full of talented individuals. Our sector focus ensures that our account teams are fully accredited in their operational areas. We are committed to creating individually tailored solutions, using collaborative techniques and programming tools to deliver the networks of the future. Optilan has provided integrated solutions for leading Oil and Gas, Industrial and Energy companies around the world. As an industry leader in deploying communication networks with exceptional reliability, our reputation for delivering the highest quality products remains unsurpassed. This spans mobile, broadband, security systems and customer premise works. Our professionals have the skill to adopt and embed our expertise into existing platforms, processes, and cultures, delivering exceptional value for our clients. Beyond our operational scope, we strive to consider the impact of our global footprint and mitigate associated environmental and sustainability risks. These factors combined set Optilan apart and establish why customers continue to trust and invest in our services.

Remote Intelligence

Remote Intelligence provides Unmanned Aerial Drone and UGC (unmanned ground crawler) Services to a variety of clients; from Industrial Mapping and Ecosystem Services, to Search and Rescue, to Pipeline Security, we provide sales and consulting services for all markets. Remote Intelligence started in 2013 with a simple vision; to use the new and developing field of unmanned aerial vehicles to produce higher quality, safer and more effective products for a variety of markets. We strive to Equip, Educate and Advance the use of the most advanced Unmanned Aerial Systems and Unmanned Ground Crawlers in the United States and around the world for commercial, government and domestic use. Our top priorities as we do that are to find safe and ethical ways to use this new and exciting field of technology to make life better. Providing holistic intelligence consultation and solutions including full-service Methane Detection and Monitoring. Quick, comprehensive site mapping and aerial inspection services. We specialize in fully integrated, geo-rectified, 3D modeled mapping and AI for industrial applications, specializing in the energy and environmental industries, with AI and live streaming capabilities anywhere in the world. Also providing aerial survey, video inspection services, emergency support services, wildlife and habitat surveys, and comprehensive system design, training, and sales for both the commercial and private sectors. Integrating the latest tech solutions like artificial intelligence. Globally connected with a base of operation in Wellsboro Pennsylvania.

TerraData Unmanned

Comprised of a team with more than 30 years cumulative experience in the unmanned industry, TerraData is well equipped to provide solutions that meet your unique requirements. We custom manufacture NDAA compliant drones and unmanned ground crawlers to meet the needs of our customers. Aerial based data collection is a powerful new tool for your industry, and TerraData is prepared to be your partner. TerraData Unmanned, has successfully delivered a custom drone platform per a customer’s specifications which exceeds current industry offering by more than 30 minutes. The team has manufactured, and successfully flight tested a Quad Copter drone with 1.5KG payload capabilities that delivers more than 60 minutes of continuous flight. This cutting-edge design is a combination of proprietary software and hardware. The custom platform offers NDAA compliant autopilot, communications links, TSO Certified GPS unit and ground control station. Future designs include integrating RTK for mapping, methane detectors, and true terrain following capabilities. There are also improvements scheduled that are intended to further extend the endurance and provide over 4KG of payload capacity, not including batteries. TerraData has also announced the research, development and successful testing of an autonomous crawler soon to be released to the market with Methane and Multi Gas Detection capabilities. Working seamlessly with our partners at DarkPulse and our subsidiary companies. We can custom design, build and operate a system to meet our customers' needs 24 hours a day 365 days a year around the block or around the globe.

Wildlife Specialists

Wildlife Specialists, LLC was founded in 2007 to provide clients with comprehensive wildlife and environmental assessment, planning, and monitoring services. We currently maintain two regional offices located in north central and southeastern Pennsylvania and are available to provide services to clients nationwide and around the globe. Our staff are well-established professionals who have a wide range of experience in wildlife management, research, and monitoring at the local and statewide levels throughout the United States. In addition, we have specific expertise in providing the full range of sensitive species and habitat assessments necessary for your development projects. Wildlife Specialists’ mission is to provide consulting services that use the latest technology to produce the highest quality results compatible with our clients’ management goals and the appropriate protocols developed by state and federal wildlife management agencies. Wildlife Specialists is fully insured to industry standards and committed to the safety of our staff, our clients, and the public. We have maintained safety certification through ISNetWorld and other 3rd party certifiers. We are also officially PennDOT, GSA, Small Business and HUBZone Certified.

TJM West Electronics

TJM West Electronics is an ISO9001 and AS9100 certified electronics and electro-mechanical assembly operation. We operate out of a high tech, 20,000 Sq ft facility in Tempe, Arizona. Our assembly team is trained to IPC 610 and J-STD-001 standards, Class 2 and 3. We have been in business since 1999. Our latest website was developed to be a customer interface for rapid costing, build scheduling, open order status, and complete manufacturing history data records. Registered users can enter build and fabrication parameters for quantities of 2-20 units. Our calculator provides itemized labor, PCB fabrication cost and delivery. Registered users can also access factory floor for the ~~monitoring~~updated status and delivery date of ~~highly dynamic environments~~open orders, a review of configuration, quotes and full quality history database.

As a U.S. manufacturer and test of advanced electronics, cables and sub-assemblies. we specialize in advanced package and complex CCA and hardware. Certified to space and flight AS9100D, TJM has over 20 years supplying ultra-high reliability, and fully documented electronic Hardware. Per AS9100D, TJM maintains all material certifications, process and measurement reports electronically as part of a complete quality history record. Manufacturing PCB Design services on the most popular platforms including Cadence, Altium, and Mentor. Design output data integrates seamlessly to our automated manufacturing line. Test Development ICT to functional and burn-in. We develop a test plan and hardware system to deliver your 100% verified product. Low Cost, High Reliability Manufacturing is the net result of quality planning, optimizing automation technology, operational efficiency, and communication. High value, low-cost domestic solution to replace offshore manufacturing. Protect your IP and keep direct line-of sight of manufacturing with products made in the USA. TJM West Is your one stop shop.

Recent Events

Acquisitions

On August 9, 2021, we entered into a Share Purchase Agreement with Optilan Guernsey Limited and Optilan Holdco 2 Limited (the “Sellers”), pursuant to which we purchased from the Sellers all of the issued and outstanding equity interests of Optilan HoldCo 3 Limited, a private company incorporated in England and Wales (“Optilan”) for £1.00 and also a commitment to enter into the Subscription (as defined below). Optilan is now a wholly-owned subsidiary of the Company.

On August 9, 2021, we entered into a Subscription Agreement with Optilan (the “Subscription”), pursuant to which we agreed to purchase an aggregate of 4,000,000 Ordinary Shares of Optilan for an aggregate purchase price of £4,000,000.

Effective October 1, 2021, we entered into and closed the Membership Purchase Agreement (the “TerraData MPA”) with TerraData Unmanned, PLLC, a Florida limited liability company (“TerraData”), and Justin Dee, the sole shareholder of TerraData, pursuant to which we agreed to purchase 60% of the equity interests in TerraData in exchange for 3,725,386 shares of our Common Stock and $400,000, subject to adjustments as defined in the TerraData MPA, to be paid within 12 weeks of closing. TerraData is now a subsidiary of the Company.

Financings

On January 4, 2021, we entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) issuing to Geneva a convertible promissory note in the aggregate principal amount of $42,350 with a $3,850 original issue discount and $3,500 in transactional expenses due to Geneva and its ~~greater resolution~~counsel. The note bears interest at 8% per annum and ~~accuracy.~~may be converted into common shares of our Common Stock at a conversion price equal to 70% of the lowest trading price of our common stock during the 20 prior trading days. We received $35,000 net cash.

On February 3, 2021, we 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 our Common Stock at a conversion price equal to 81% of the lowest two trading prices of our Common Stock during the 10 prior trading days. We received $75,000 net cash.

On February 18, 2021, we 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 our Common Stock at a conversion price equal to 81% of the lowest two trading prices of our Common Stock during the 10 prior trading days. We received $60,000 net cash.

On April ~~27, 2018, Klever~~5, 2021, we entered into ~~an Agreement~~a securities purchase agreement with Geneva Roth issuing to Geneva a convertible promissory note in the aggregate principal amount of $64,200 with a $10,700 original issue discount and ~~Plan~~$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 ~~Merger (the “Merger Agreement” or the “Merger”) involving Klever as the surviving parent corporation and acquiring~~our Common Stock at 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 nameconversion price equal to 81% of the ~~Company was subsequently changed~~lowest two trading prices of our Common Stock during the 10 prior trading days. We received $50,000 net cash.

On April 26, 2021, we entered a Securities Purchase Agreement (the “FirstFire SPA”) and Registration Rights Agreement (the “Registration Rights Agreement”) with FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC, a Delaware limited liability company (the “FirstFire”), pursuant to ~~DarkPulse, Inc. With~~which we issued to FirstFire a Convertible Promissory Note in the ~~change~~principal amount of ~~control~~$825,000 (the “FirstFire Note”). The purchase price of the ~~Company,~~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 ~~Merger was accounted for as~~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 our 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 will become $0.005. In the event of a ~~recapitalization~~DTC “chill” on our shares, an additional discount of 10% will apply to the conversion price while the “chill” is in ~~a manner similar~~effect. Upon the issuance of the FirstFire Note, we have initially agreed to ~~a reverse acquisition.~~reserve 550,000,000 shares of Common Stock.

The Registration Rights Agreement provides that we shall (i) use our best efforts to file with the Commission an S-1 Registration Statement within 90 days of the date of the Registration Rights Agreement to register the shares into which the FirstFire Note is convertible; and (ii) have the Registration Statement declared effective by the SEC within 180 days after the date the Registration Statement is filed with the SEC.

On July ~~20, 2018,~~14, 2021, we entered a Securities Purchase Agreement with GS Capital Partners, LLC (the “GS”), pursuant to which we issued to GS a 6% Redeemable Note in the principal amount of $2,000,000 (the “GS Note”). The purchase price of the GS Note is $1,980,000. The GS Note matures on July 14, 2022 upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the GS Note at 6% per annum until the GS Note becomes due and payable. The GS Note is subject to various “Events of Default,” which are disclosed in the GS 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 our Common Stock and is not dilutive to existing or future shareholders and we plan on using a portion of the proceeds of the GS Note to retire existing convertible debt.

On August 19, 2021, we entered into the Purchase Agreement with GHS, for the offering of up to $45,000,000 worth of Common Stock. Pursuant to the Purchase Agreement, on August 19, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from the Company, ~~filed~~31,799,260 shares of Common Stock for total proceeds to the Company, net of discounts, of $3,300,000, at an effective price of $0.1038 per share (the “First Closing”). We received approximately $2,790,000 in net proceeds from the First Closing after deducting the fees and other estimated offering expenses payable by us. We used the net proceeds from the First Closing for working capital and for general corporate purposes. The shares were issued to GHS in a ~~Certificate of Amendment~~registered direct offering, pursuant to ~~its Certificate of Incorporation~~a prospectus supplement to our currently effective registration statement on Form S-3 (File No. 333-257826), which was initially filed with the ~~State~~SEC on July 12, 2021, and was declared effective on August 18, 2021.

Pursuant to the Purchase Agreement, on August 31, 2021, we and GHS agreed that the Company would issue and sell to GHS, and GHS would purchase from us, 27,297,995 shares of ~~Delaware, changing~~Common Stock for total proceeds to us, net of discounts, of $3,300,000, at an effective price of $0.120888 per share (the “Second Closing”). We received approximately $2,885,000 in net proceeds from the ~~name~~Second Closing after deducting the fees and other estimated offering expenses payable by us. We used the net proceeds from the Second Closing for working capital and for general corporate purposes. The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration statement on Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, 2021, and was declared effective on August 18, 2021.

Pursuant to the Purchase Agreement, on September 22, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us, 25,630,272 shares of Common Stock for total proceeds to us, net of discounts, of $2,000,000, at an effective price of $ $0.085836 per share (the “Third Closing”). We received approximately $1,915,000 in net proceeds from the Third Closing after deducting the fees and other estimated offering expenses payable by us. We used the net proceeds from the Third Closing for working capital and for general corporate purposes. The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration statement on Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, 2021, and was declared effective on August 18, 2021.

Pursuant to the Purchase Agreement, on October 1, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us, 37,187,289 shares of Common Stock for total proceeds to us, net of discounts, of $3,000,000, at an effective price of $0.08874 per share (the “Fourth Closing”). We received approximately $2,850,000 in net proceeds from the Fourth Closing after deducting the fees and other estimated offering expenses payable by us. We used the net proceeds from the Fourth Closing for working capital and for general corporate purposes. The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration statement on Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, 2021, and was declared effective on August 18, 2021.

Pursuant to the Purchase Agreement, on October 14, 2021, we and GHS agreed that we would issue and sell to GHS, and GHS would purchase from us, 14,282,304 shares of Common Stock for total proceeds to us, net of discounts, of $1,055,000, at an effective price of $0.08125 per share (the “Fifth Closing”). We received approximately $1,002,250 in net proceeds from the Fifth Closing after deducting the fees and other estimated offering expenses payable by us. We used the net proceeds from the Fifth Closing for working capital and for general corporate purposes. The shares were issued to GHS in a registered direct offering, pursuant to a prospectus supplement to our currently effective registration statement on Form S-3 (File No. 333-257826), which was initially filed with the SEC on July 12, 2021, and was declared effective on August 18, 2021.

Partnerships

We have entered into a consulting agreement with the Bachner Group to assist in the successful transformation from an R&D focused company to a sales-focused company, and assist us with federal contract opportunities.

Other Events

On August 3, 2021, we entered into an Engagement Agreement and Terms and Conditions (the “EIAP Agreement”) with Energy & Industrial Advisory Partners, LLC (“EIAP”). Pursuant to the EIAP Agreement, we have engaged EIAP to serve as an advisor to us in the proposed transaction for agreed target company or any of its subsidiaries and/or the whole or any part of its or their business or assets (the “Transaction”). EIAP will receive a monthly retainer of $10,000 per month payable upon receipt of an invoice. EIAP will also receive a consulting bonus fee of $350,000 payable upon completion of the ~~Company~~Transaction. In the event of successful completion of the Transaction as a result of EIAP’s involvement, EIAP agrees to ~~DarkPulse, Inc.~~deduct the total retainer fee from the consulting bonus fee. The ~~Company filed~~EIAP Agreement may be terminated, with or without cause, by either party upon ten days’ written prior notice thereof to the other party. If (a) during the term of the EIAP Agreement, or (b) within two years following the date of the EIAP Agreement’s termination by us (provided that such two-year period shall be extended by the same period of time that we take to settle in full all fees, expenses and/or outlays due or to become due to EIAP as at the date of the EIAP Agreement’s termination), we complete a ~~corporate action notification~~transaction with the ~~Financial Industry Regulatory Authority (FINRA), and~~target company or a similar transaction to the ~~Company's ticker symbol was changed to DPLS.~~Transaction, then we will pay the consulting bonus fee at the completion of the transaction.

Going Concern Uncertainty

~~The Company~~We will require additional funding ~~during the next nine months~~ to finance the growth of ~~its~~our operations and achieve ~~its~~our 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~~our ability to continue as a going concern. ~~The Company is~~We are seeking to raise additional capital ~~principally through private placement offerings~~ and isare targeting strategic partners in an effort to ~~finalize~~accelerate the ~~development~~sales and marketing of ~~its~~our products and begin generating revenues. ~~The~~Our ability ~~of the Company~~ to continue as a going concern is dependent upon the success of future capital offerings or alternative financing arrangements, ~~and~~ expansion of ~~its operations.~~our operations and generating sales. The accompanying financial statements do not include any adjustments that might be necessary should ~~the Company~~we 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. However,~~operations; however, management cannot make any assurances that such financing will be secured.

Results of Operations

Revenues

~~To date,~~For the ~~Company has not generated any operating revenues.~~three months ended September 30, 2021, total revenues were $3,500,970 compared to $0 for the same period in 2020, an increase of $3,500,970. This increase primarily consisted of revenues of $3,380,633 from the acquisition of Optilan in August 2021and $97,283 from the acquisition of Wildlife Specialists in August 2021.

For the nine months ended September 30, 2021, total revenues were $3,500,970 compared to $0 for the same period in 2020, an increase of $3,500,970. This increase primarily consisted of revenues of $3,380,633 from the acquisition of Optilan in August 2021and $97,283 from the acquisition of Wildlife Specialists in August 2021.

Cost of Goods Sold and Gross Profit

For the three months ended September 30, 2021, cost of goods sold were $2,767,229 compared to $0 for the same period in 2020, an increase of $2,767,229.

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

1832

~~Operating Expenses~~For the nine months ended September 30, 2021, cost of goods sold were $2,767,229 compared to $0 for the same period in 2020, an increase of $2,767,229.

~~General~~Gross profit for the nine months ended September 30, 2021 was $733,731 with a gross profit margin of 21% compared to $0 for the same period in 2020 with no gross profit margin.

Operating Expenses

Selling, general and administrative expenses for three months ended September 30, ~~2020, decreased~~2021 increased by ~~$5,671~~$372,158 to $406,940 from $34,782 ~~from $40,453~~of 1,070% for the three months ended September 30, ~~2019.~~ 2020.

General and administrative expenses for nine months ended September 30, ~~2020, decreased~~2021 increased by ~~$24,099~~$410,927 to $531,793 from $120,866 ~~from $144,965 for the nine months ended September 30, 2019.~~

Legal expenses for three months ended September 30, 2020, decreased by $48,868 to $0 from $48,868 for the three months ended September 30, 2019. Legal expenses for nine months ended September 30, 2020, decreased by $48,665 to $96,962 from $48,297 for the nine months ended September 30, 2019.

Payroll and compensation expenses for nine months ended September 30, 2020, decreased by $168,758 to $187 from $168,945 for the nine months ended September 30, 2019. The decrease is related to a significant reduction in payroll related expenses in 2019 because it terminated four employees during March 2019.

Amortization of Patents expense for three and nine months ended September 30, 2020, remained the same at $12,757 and $25,514, respectively compared to the three and nine months ended September 30, 2019.

~~Other Income (Expense)~~

Interest expense was $37,318 and $50,649 for the three months ended September 30, 2020 and 2019, respectively. This $13,331 decrease is primarily related to the decrease in non-cash expenses related to notes payable issued in 2019.

Interest expense was $97,842 and $399,895 for the nine months ended September 30, 2020 and 2019, respectively. This $302,053 decrease is primarily related to the decrease in non-cash expenses related to notes payable issued in 2019.

Loss on convertible notes expense was $1,313 for the three months ended September 30, 2020. The loss on the change in fair market value of derivative liabilities was $87,853 for the three months ended September 30, 2020.

~~Loss on convertible notes expense was $39,414 for the nine months ended September 30, 2020. The loss on the change in fair market value of derivative liabilities was $44,684~~or 340% for the nine months ended September 30, 2020.

~~Provision~~Payroll related expenses for ~~Income Taxes~~

~~The provision for income taxes was $0 and~~three months ended September 30, 2021, increased by $1,007,453 to $1,007,453 from $0 for the three ~~and~~months ended September 30, 2020. The increase primarily consisted of an increase to the numbers of employees inherited from our various acquisitions.

Payroll related for nine months ended September 30, ~~2020 and 2019, respectively.~~2021, increased by $1,007,266 to $1,007,453 from $187 for the nine months ended September 30, 2020. The increase primarily consisted of an increase to the numbers of employees inherited from our various acquisitions in the most recent three months period.

Professional fees for three months ended September 30, 2021, increased by $1,680,600 to $1,680,600 from $0 for the three months ended September 30, 2020. This increase primarily consisted of increased legal expenditures associated with the increase in litigation.

Professional fees for nine months ended September 30, 2021, increased by $1,853,275 to $1,901,572 from $48,297 for the nine months ended September 30, 2020. This increase primarily consisted of increased legal expenditures associated with the increase in litigation.

Depreciation and amortization for three months ended September 30, 2021, increased by $78,465 to $91,222 from $12,757 for the three months ended September 30, 2020. This increase is primarily due to the increase in depreciable assets we acquired from new acquisitions.

Depreciation and amortization for nine months ended September 30, 2021, increased by $78,465 to $116,736 from $38,271 for the three months ended September 30, 2020. This increase is primarily due to the increase in depreciable assets we acquired from new acquisitions.

Other Income (Expense)

For the three months ended September 30, 2021, other income $798,654 compared to other expense of $126,483 for the same period in 2020, an increase in income of $925,137. This increase primarily consisted of $785,240 of gain related to the extinguishment of debt, $434,206 of gain on convertible notes, $153,360 of gain on foreign currency exchange rate variance offset by an increase in interest expense of $283,388 due to increased borrowings and $163,281 increase in the fair value of the Company’s derivative instruments.

For the nine months ended September 30, 2021, other income $1,084,462 compared to other expense of $180,940 for the same period in 2020, an increase in income of $1,265,402. This increase primarily consisted of $785,240 of gain related to the extinguishment of debt, $781,203 of gain on convertible notes, $153,360 of gain on foreign currency exchange rate variance offset by an increase in interest expense of $573,448 due to increased borrowings and $121,047 increase in the fair value of the Company’s derivative instruments.

Net Income (Loss)

As a result of the above, we reported a net loss of ~~$174,023~~$1,686,830 for the three months ended September 30, ~~2020~~2021 compared to ~~$21,886~~a net loss of $174,022 for the three months ended September 30, ~~2019.~~2020.

Additionally, as a result of the above, we reported a net loss of $1,924,311 for the nine months ended September 30, 2021 compared to a net loss of $388,561 for the nine months ended September 30, ~~2020 compared to a loss of $659,473 for the nine months ended September 30, 2019.~~2020.

Liquidity and Capital Resources

~~The Company requires~~We require working capital to fund the ~~further~~continued development and commercialization of ~~its~~our proprietary fiber optic sensing devices, and for operating expenses. During the three months ended September 30, 2021, we had $11,102,700 in new cash proceeds compared to the three months ended September 30, 2020, when we had no new cash proceeds.

As of September 30, ~~2020,~~2021, we had cash of ~~$519,~~$2,564,492, compared to ~~$1,408~~$337 as of December 31, ~~2019.~~2020. As of September 30, ~~2020,~~2021, our current liabilities exceeded our current assets by ~~$2,508,467.~~$12,139,503.

Cash Flows ~~From~~from Operating Activities

During the nine months ended September 30, 2021, net cash used by operating activities was $7,446,593, resulting from our net loss of $1,924,311 and an increase in expenses related to our convertible notes payables, including amortization of debt discount of $404,087 and loan acquisition costs of $480,450, increase in stock based compensation of $649,334, increase in inventory of $410,836 and operating lease liabilities of $1,398,068. These increases were offset by a decrease in derivative liability of $741,789, increase in accounts payable and accrued expenses of $4,362,016 and an increase from the gain on the extinguishment of debt of $785,240, increase in accounts receivable of $893,366, unbilled revenue of $563,555 and increase in contract liability of $1,439,504.

By comparison, during the nine months ended September 30, 2020, net cash provided by operating activities was $4,278, resulting from our net loss of ~~$388,561and~~$388,561 and an increase in expenses related to our convertible notes payables, including amortization of debt discount of $39,414, increase in derivative liability of $44,684, increase in accounts payable ~~of $174,938~~ and accrued ~~liabilities~~expenses of ~~$105,435.~~$280,370.

Cash Flows from Investing Activities

During the nine months ended September 30, ~~2019,~~2021, we had net cash used ~~by operating~~in investing activities ~~was $202,128, resulting from our~~of $546,765. During the nine months ended September 30, 2020, we had net ~~loss~~cash used in investing activities of $659,473 and an increase in expenses related to our convertible notes payables, including amortization of debt discount of $568,985, debt discount of $205,000, increases in accounts payable of $205,025 and accrued liabilities of $110,340.$4,969.

Cash Flows ~~From Investing~~from Financing Activities

During the nine months ended September 30, ~~2020, Company had~~2021, net cash ~~used~~provided by financing activities was $10,718,100, comprised of proceeds from the sale of common stock from offering of $8,000,000, the issuance of convertible debt in ~~investing activities~~the amount of ~~$4,969. During~~$1,102,700, the ~~nine months ended September 30, 2019, the Company used $54,930 in investing activities with both periods relating to our patents and trademarks.~~

~~Cash Flows From Financing Activities~~

issuance of notes payable of $2,000,000 offset by payments on convertible debt of $384,600. During the nine months ended September 30, 2020, ~~Company~~we had no net cash provided by or used in financing activities. During the nine months ended September 30, 2019, net cash provided by financing activities was $155,450, comprised of proceeds from the issuance of convertible debt in the amount of $180,100, offset by payments on convertible debt of $24,650.

Factors That May Affect Future Results

Management’s Discussion and Analysis contains information based on management’s beliefs and forward-looking statements that involve a number of risks, uncertainties, and assumptions. There can be no assurance that actual results will not differ materially from the forward-looking statements as a result of various factors, including but not limited to, our ability to obtain the equity funding or borrowings necessary to market and launch our products, our ability to successfully serially produce and market our products; our success establishing and maintaining collaborative licensing and supplier arrangements; the acceptance of our products by customers; our continued ability to pay operating costs; our ability to meet demand for our products; the amount and nature of competition from our competitors; the effects of technological changes on products and product demand; and our ability to successfully adapt to market forces and technological demands of our customers.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity capital expenditures or capital resources.

Recent Accounting Pronouncements

~~The Company has~~We have provided a discussion of recent accounting pronouncements in Note 1 to the Condensed Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Not Applicable: The Company is~~As a ~~“smaller~~smaller reporting ~~company.”~~company, we have elected not to provide the disclosure required by this item.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We ~~maintain~~have established disclosure controls and procedures that are designed to ~~help~~ ensure that information required to be disclosed in ~~our filings~~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. This information~~Securities and Exchange Commission and, as such, is accumulated and communicated to our Chief Executive Officer, Dennis O’Leary, who serves as our principal executive officer and ~~Chief Financial Officer~~principal financial officer, as appropriate to allow timely decisions regarding required disclosure. ~~Our Chief Executive Officer and Chief Financial Officer~~Mr. O’Leary, evaluated the effectiveness of our disclosure controls and procedures, ~~(as~~as defined in Rule 13a-15(e) ~~and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation and the requirements~~ of the Exchange Act, ~~our Chief Executive Officer concluded that,~~ as of September 30, ~~2020,~~2021. Based on his evaluation, Mr. O’Leary concluded that our disclosure controls and procedures ~~continue to be ineffective. The small size~~were effective as of our Company does not provide for the desired segregation of duty control functions, and we do not have the required level of documentation of our monitoring and control procedures. Currently, our financial constraints prevent us from fully implementing the internal controls prescribed by the Sarbanes-Oxley Act.September 30, 2021.

Changes in Internal Control Over Financial Reporting

Management and directors will continue to monitor and evaluate the effectiveness of the Company's internal controls and procedures and the Company's internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. The Company will continue to use outside accounting consultants to assist with the Company’s financial reporting. Otherwise, there haveThere has been no ~~changes~~change in our internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the quarter ended September 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial ~~reporting during the quarter ended September 30, 2020.~~reporting.

2135

PART ~~II –~~ II—OTHER INFORMATION

Item 1. Legal Proceedings

Former Officers

On ~~March 27, 2019, Thomas A. Cellucci, et al. v. DarkPulse, Inc. et al.~~September 10, 2021, Stephen Goodman, Mark Banash, and David Singer (the ~~“Complaint”~~“Former Officers”) ~~was filed in the United States District Court for the Southern District of New York by certain~~, all former officers and employees of the ~~Company’s former executive officers, one also being a former director, and a non-employee shareholder (collectively, the “Plaintiffs”),~~Company, commenced suit against the Company ~~its sole officer~~in Arizona Superior Court, Maricopa County. The complaint alleges the Company breached the rights of the Former Officers in connection with Series D preferred stock issued to the Former Officers. The Company intends to defend itself against the allegations asserted in the Former Officers’ complaint. if the case progresses the Company will file countersuits against all plaintiffs.

More Capital, LLC

On June 29, 2021, More Capital, LLC (“More”) commenced suit against the Company, et al., in the 4th Judicial District (Hennepin County District Court) (Minnesota), alleging the Company breached the terms and ~~director,~~conditions of a convertible promissory note and others, claiming that the Plaintiffs brought the action to protect their individual rights as minority shareholders, as improperly-ousted officers (other than the non-employee shareholder), and as an improperly-ousted director, seeking equitable relief, damages, recovery of unpaid salaries and other relief. It is the Company's position that the Complaint represents a frivolous harassment lawsuit,accompanying securities purchase agreement More and the Company ~~has~~entered into on August 20, 2018.

On July 20, 2021, the Company filed a motion to dismiss ~~all~~More’s complaint, arguing that the claims ~~made in~~asserted against the ~~Complaint and~~Company fail to state a claim upon which relief can be granted.

The Company intends to ~~otherwise~~ defend itself ~~vigorously~~against the allegations asserted in ~~this matter.~~More’s complaint and interpose the defenses provided under the Exchange Act, including but not limited to asserting that More is an unregistered dealer acting in violation of Section 15(a) of the Exchange Act and, pursuant to Section 29(b) of the Exchange Act, the Company interposing its right to rescind the unlawful securities contracts in their entirety and, furthermore, seek rescissionary damages for any unlawful securities transactions effected by More. The Company ~~is also considering filing counterclaims against the Plaintiffs~~contends that its arguments are brought in ~~the action.~~

~~From time to time, we may become involved~~good faith, particularly in ~~litigation relating to claims arising out~~light 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.

~~Item 1A. Risk Factors~~

~~Readers should carefully consider the risks and uncertainties described in ITEM 1A in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the~~recent SEC ~~before deciding whether to invest in shares of our common stock. See also risks discussed above under the section on “Factors That May Affect Future Results” and “Internal Controls”.~~

~~Our failure to successfully address the risks and uncertainties described in our 2019 Form 10-K would have a material adverse effect on our business, financial condition and/or results of operations,~~enforcement actions and the ~~trading price~~SEC’s ongoing investigation against More, among other parties, for violations of ~~our common stock may decline~~federal securities laws, including violations of Section 15(a) of the Exchange Act. See U.S. Securities and ~~investors may lose all or part of their investment. We cannot assure you that we will successfully address these risks or other unknown risks that may affect our business.~~Exchange Commission v. Carebourn Capital, LP et al, Case No. 1:20-cv-07162 (N.D. Ill.).

~~As an enterprise engaged in the development of new technology, our business is inherently risky. Our common shares are considered speculative during the development of our new business operations.~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~During~~As a result of the ~~three months ended~~First Closing, the Second Closing, and the Third Closing, pursuant to a Finder’s Fee Agreement, on September 30, ~~2020,~~2021, we ~~had no unregistered sales~~issued to J.H. Darbie & Co., Inc. (“J.H. Darbie”), an aggregate of ~~equity securities.~~3,194,081 shares of common stock.

~~Item 3. Defaults~~J.H. Darbie consented to the imposition of a restrictive legend upon ~~Senior~~the shares. J.H. Darbie did not enter into the transaction us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting. J.H. Darbie was also afforded the opportunity to ask questions of management and to receive answers concerning the terms and conditions of the transaction. The securities were issued without registration under the Securities

~~Not Applicable.~~

~~Item 4. Mine Safety Disclosures~~

~~Not Applicable.~~

Act of 1933, as amended, by reason of the exemption from registration afforded by the provisions of Section 4(a)(2) thereof, and/or Rule 506(b) promulgated thereunder, as a transaction by an issuer not involving any public offering.

2236

~~Item 5. Other Information~~

~~Not Applicable.~~

Item 6:6. Exhibits

~~The following exhibits are filed as part of this report:~~

~~Exhibit~~ ~~Number~~ SEC Ref. No.	Title of Document
4.1*	6% Redeemable Note dated July 14, 2021 issued to GS Capital Partners, LLC in the principal amount of $2,000,000
~~31.1~~10.1*	~~Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~Securities Purchase Agreement dated July 14, 2021 with GS Capital Partners, LLC
10.2*	Consulting Agreement dated effective July 22, 2021 with Rick Gibson
~~32.1~~10.3*	~~Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~Engagement Agreement and Terms and Conditions dated August 3, 2021 with Energy & Industrial Advisory Partners, LLC
10.4*	Letter of Intent dated June 8, 2021 with Remote Intelligence, Limited Liability Company
~~101.INS~~10.5*	Letter of Intent dated June 8, 2021 with Wildlife Specialists, LLC
10.6*	Share Purchase Agreement dated August 9, 2021with Optilan Guernsey Limited and Optilan Holdco 2 Limited
10.7*	Subscription Agreement August 9, 2021 with Optilan HoldCo 3 Limited
10.8*	Letter of Intent dated effective August 18, 2021 with TJM Electronics West, Inc.
10.9*	Membership Interest Purchase Agreement dated August 30, 2021 with Remote Intelligence, Limited Liability Company
10.10*	Membership Interest Purchase Agreement dated August 30, 2021 with Wildlife Specialists, LLC
10.11*	Letter of Intent dated June 25, 2021 with TerraData Unmanned, PLLC
10.12*	Amendment No. 1 to Letter of Intent with TerraData Unmanned, PLLC dated effective August 24, 2021
10.13*	Amendment No. 2 to Letter of Intent with TerraData Unmanned, PLLC dated effective September 3, 2021
10.14*	Amendment to Letter of Intent with TJM Electronics West, Inc. dated effective August 31, 2021
10.15*	Stock Purchase Agreement dated September 8, 2021 with TJM Electronics West, Inc.
10.16*	Research Agreement dated September 21, 2021 with the Arizona Board of Regents
31.1*	Rule 13a-14(a) Certification by Principal Executive and Financial Officer
32.1**	Section 1350 Certification of Principal Executive and Financial Officer
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.SCH~~101.CAL*	Inline XBRL ~~Schema Document~~

~~101.CAL~~	~~XBRL~~Taxonomy Extension Calculation Linkbase Document
101.DEF*
~~101.DEF~~	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
~~101.LAB~~	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
~~101.PRE~~	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (formatted in iXBRL, and included in exhibit 101).

~~__________________________~~

*Filed with this Report.

**Furnished with this Report.

2337

SIGNATURES

~~In accordance with~~Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	~~DARKPULSE, INC.~~DarkPulse, Inc.


~~Dated: November 16, 2020~~	By ~~/s/ Dennis M. O’Leary~~
Date: November 15, 2021	By	/s/ Dennis M. O’Leary
		Dennis O’Leary, Chairman, Chief Executive Officer, ~~and~~President, Chief Financial Officer
		(Principal Executive Officer and Principal
		Financial ~~and Accounting~~ Officer)

2438

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019

REVENUES	$	–		$	–		$	–		$	–

OPERATING EXPENSES:
General and administrative expenses		34,782			40,453			120,866			144,965
Payroll and compensation		–			–			187			168,945
Legal expenses		–			48,868			48,297			96,962
Amortization of patents		12,757			12,757			38,271			38,271
Debt transaction expenses		–			–			–			24,900
TOTAL OPERATING EXPENSES		47,539			102,078			207,621			474,043

OPERATING LOSS		(47,539	)		(102,078	)		(207,621	)		(474,043	)

OTHER INCOME (EXPENSE):
Interest expense		(37,318	)		(50,649	)		(97,842	)		(399,895	)
Loss on convertible notes		(1,313	)		(47,266	)		(39,414	)		(351,662	)
Gain on the forgiveness of debt		–			–			1,000			–
Gain(loss) on change in fair market values of derivative liabilities		(87,852	)		221,879			(44,684	)		566,127
TOTAL OTHER INCOME (EXPENSE)		(126,483	)		123,964			(180,940	)		(185,430	)

NET INCOME (LOSS)		(174,022	)		21,886			(388,561	)		(659,473	)
Net loss attributable to noncontrolling interests in variable interest entity and subsidiary		–			–			–			–
Net loss attributable to Company stockholders	$	(174,022	)	$	21,886		$	(388,561	)	$	(659,473	)

GAIN (LOSS) PER SHARE:
Basic and Diluted	$	(0.00	)	$	0.00		$	(0.00	)	$	(0.00	)

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and Diluted		2,355,108,904			518,604,087			1,754,933,152			252,457,517