Dalrada Technology Group, Inc 10-K for FY2022

Dalrada Technology Group, Inc. (DHTI)

10-K 2022-11-01 For: 2022-06-30

Added on April 06, 2026

About this 10-K

Dalrada Technology Group, Inc filed this 10-K on November 1, 2022, covering the fiscal year ended June 30, 2022 (FY2022).

Headline figures

Fiscal year ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $19.27M; up 465.6% from $3.41M a year earlier
Net loss: $14.1M; compared with net income of $91.43K a year earlier
Diluted EPS: -$0.20; compared with $0.00 a year earlier

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Wyoming	38-3713274
(state or other jurisdiction of incorporation or organization)	(I.R.S. Employer ID. No.)

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.005 par value per share		DFCO		None

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
Emerging growth company ☐

PART I

Item 1.	Description of Business	1
Item 1A.	Risk Factors	3
Item 1B.	Unresolved Staff Comments	3
Item 2.	Description of Property	4
Item 3.	Legal Proceedings	4
Item 4.	Mine Safety Disclosures	4

PART II

Item 5.	Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities	5
Item 6.	Selected Financial Data	7
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	7
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 8.	Financial Statements and Supplementary Data	18
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	19
Item 9A.	Controls and Procedures	19
Item 9B.	Other Information	20

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	21
Item 11.	Executive Compensation	27
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	30
Item 13.	Certain Relationships, Related Transactions and Director Independence	30
Item 14.	Principal Accountant Fees and Services	33
Item 15.	Exhibits and Financial Statement Schedules	33
	Signatures	34

		Square
		Footage		Lease
Location	Type	(approximate)		Expiration
Escondido, California	Corporate Headquarters		16,137		2025
San Diego, California	Office, Medical Suite		56,561		2028
Chula Vista, California	Office, Medical Suite		3,200		2027
Poway, California	Medical Suite		56,510		2024
Florence, Alabama	Pharmacy		1,433		2024
Brownsville, Texas	Warehouse		10,000		2023
Livingston, Scotland	Warehouse		3,900		2025
Bengaluru, India	Office		5,800		2026

Period	High		Low
Fiscal 2022
First Quarter ended September 30, 2021	$	0.3590	$	0.0100
Second Quarter ended December 31, 2021	$	0.9200	$	0.2890
Third Quarter ended March 31, 2022	$	0.9190	$	0.2650
Fourth Quarter ended June 30, 2022	$	0.7200	$	0.0300

Fiscal 2021
First Quarter ended September 30, 2020	$	0.1000	$	0.6000
Second Quarter ended December 31, 2020	$	0.3000	$	0.2300
Third Quarter ended March 31, 2021	$	0.5100	$	0.3300
Fourth Quarter ended June 30, 2021	$	0.5100	$	0.2300

	Year Ended June 30, 2022
	Dalrada Health		Dalrada Energy		Dalrada Precision Manufacturing			Dalrada Technologies		Corporate			Consolidated
Revenues	$	13,617,639	$	1,261,774	$	2,123,437		$	2,239,763	$	25,000		$	19,267,613
Income (Loss) from Operations		2,225,304		967,639		(2,834,342	)		30,177		(10,824,022	)		(10,435,244	)

		Year Ended June 30, 2021
		Dalrada Health			Dalrada Energy		Dalrada Precision Manufacturing			Dalrada Technologies			Corporate			Consolidated
Revenues	$	1,739,389		$	–	$	481,313		$	1,185,982		$	–		$	3,406,684
Income (Loss) from Operations		(1,327,125	)		–		(2,024,154	)		(276,385	)		(4,942,487	)		(8,570,151	)

	·	Lighting (LED Enhancement)
	·	HVAC Upgrades
	·	Building Management
	·	Power Factor Correction Technology
	·	Air Handling / Thermal Equalization
	·	Likido® High Efficiency Heat Pumps
	·	Advanced Water Conservation Technology
	·	Solar
	·	Metaverse

	·	Employee compensation and benefits increased by $3,193,462, or 165% from the prior year and is a result of the rapid expansion of the Company as well as adding several key members to our management team that have significant operating experience. Several employees are shared resources across the four business segments and are included in the corporate segment.

	·	Legal and professional fees increased by $946,428, or 105% from the prior year and is a result of the Company’s acquisitions and continued vertical growth within each segment.

	·	Sales and marketing costs decreased by $167,343, or 37% from the prior year as a result of paid media, content creation expenses and other marketing expenses being recognized across each segment. Marketing costs are geared towards customer acquisition and retention and building brand awareness.

	·	Other general and administrative costs for general corporate expenses, including information technology, rent, travel, and insurance increased by $146,161, or 22% from the prior year and is a result of the Company’s rapid expansion.

	·	Employee compensation and benefits increased by $343,873, or 85% from the prior year and is a result of the joint venture with Pala Diagnostics, the expansion of Empower Genomics and Solas as well as the acquisition of Watson.

	·	Legal and Professional Fees increased by $900,811, or 197% from the prior year and is a result of clinical studies related to the CerVIA kit, consulting related to diagnostics and acquisitions for Dalrada Health. The increase in legal fees was a result of the lawsuit with Vivera Pharmaceuticals.

	·	Sales and marketing costs increased by $109,592, or 90% from the prior year as a result of paid media, content creation expenses, events and other marketing expenses related to Empower Genomics, Pala Diagnostics, Solas, and GlanHealth.

	·	Other general and administrative costs for general corporate expenses, including information technology, rent, travel, and insurance increased by $2,434,558, or 210% from the prior year and is a result of the joint venture with Pala Diagnostics, the expansion of Empower Genomics and Solas as well as the acquisition of Watson.

	·	Legal and Professional Fees include consultants related to the implementation of energy savings strategies for the segment.

	·	Other general and administrative costs for general corporate expenses, including travel and taxes.

	·	Employee compensation and benefits increased by $128,546, or 66% from the prior year and is a result of a larger customer base and wage inflation.

	·	Legal and Professional Fees decreased by $156,804, or 32% from the prior year.

	·	Sales and marketing costs decreased by $30,630, or 85% from the prior year.

	·	Other general and administrative costs for general corporate expenses, including information technology, rent, travel, and insurance increased by $72,954, or 48% from the prior year.

	Year Ended
	June 30,
	2022			2021
Net cash used in operating activities	$	(10,349,808	)	$	(5,583,788	)
Net cash used in investing activities		(574,040	)		(385,830	)
Net cash provided by financing activities		11,668,585			5,964,554
Net change in cash during the period, before effects of foreign currency	$	744,737		$	(5,064	)

	·	General. DFCO discloses all material related party transactions, including the nature of the relationship, the nature of the transactions, the dollar amounts of the transactions, the amounts due to or from related parties.
	·	Receivables. DFCO separately discloses any receivables from officers, employees, or affiliated entities.


	June 30,		June 30,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	772,062	$	110,285
Accounts receivable, net		6,406,555		265,812
Accounts receivable, net - related parties		41,603		69,952
Other receivables		288,655		67,328
Inventories		1,624,621		842,108
Prepaid expenses and other current assets		430,070		285,026
Total current assets		9,563,566		1,640,511
Long-term receivables		42,395		–
Long-term receivables - related parties		1,209,103		–
Property and equipment, net		1,076,412		489,902
Goodwill		4,253,424		736,456
Intangible assets, net		3,524,888		664,494
Right of use asset, net		1,665,436		532,327
Right of use asset, net - related party		1,087,256		639,415
Total assets	$	22,422,480	$	4,703,105

Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable	$	2,331,919	$	910,339
Accrued liabilities		1,799,404		641,380
Accrued payroll taxes, penalties and interest		2,055,736		1,953,024
Accounts payable and accrued liabilities – related parties		1,270,133		414,237
Deferred revenue		720,923		219,999
Notes payable, current portion		669,028		415,817
Notes payable – related parties		9,269,377		10,508,955
Convertible note payable - related party		–		1,875,000
Convertible notes payable, net of debt discount		1,495,528		–
Right of use liability		435,647		76,570
Right of use liability - related party		369,050		159,790
Total current liabilities		20,416,745		17,175,111
Long-term payables		120,534		–
Notes payable		479,001		–
Notes payable – related parties		9,538,685		–
Contingent consideration		4,870,800		–
Right of use liability		1,231,691		455,757

Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Stockholders’ Deficit	F-5
Consolidated Statements of Cash Flows	F-6
Notes to the Consolidated Financial Statements	F-8


	Preferred Stock											Common Stock	Additional								Accumulated Other			Total
	Series G			Series F			Common Stock					to be	Paid-in		Noncontrolling			Accumulated			Comprehensive			Stockholders'
	Shares	Amount		Shares	Amount		Shares		Amount			Issued	Capital		Interests			Deficit			Income (Loss)			Deficit

Balance at June 30, 2020	5,000	$	50	5,000	$	50	68,464,742		$	342,324		–	$	91,904,874	$	51,821		$	(107,429,607	)	$	(7,897	)	$	(15,138,435	)
Common stock issued to board members	–		–	–		–	4,500,000			22,500		–		707,500		–			–			–			730,000
Common stock issued pursuant to business combinations	–		–	–		–	873,920			4,370		601,825		281,774		–			–			–			887,969
Stock-based compensation	–		–	–		–								71,673		–			–			–			71,673
Net income (loss)	–		–	–		–	–			–		–		–		(90,212	)		91,433			–			1,221
Foreign currency translation	–		–	–		–	–			–		–		–		–			–			40,184			40,184
Balance at June 30, 2021	–		–	5,000		50	73,838,662			369,194		601,825		92,965,821		(38,391	)		(107,338,174	)		32,287			(13,407,388	)
Conversion of related party notes into preferred stock	10,002		100	–		–	–			–		–		6,532,106		–			–			–			6,532,206
Common stock issued pursuant to acquisitions	–		–	–		–	1,850,000			9,252		290,100		793,651		–			–			–			1,093,003
Joint ventures	–		–	–		–	250,000			1,250		–		57,310		(2,009,123	)		–			–			(1,950,563	)
Reversal of shares previously issued to directors	–		–	–		–	(6,829,478	)		(34,147	)	–		19,321		–			–			–			(14,826	)
Common stock and warrants issued in connection with convertible note	–		–	–		–	192,000			930		–		1,541,765		–			–			–			1,542,695
Common stock issued pursuant to conversion of note	–		–	–		–	373,436			1,876		–		131,788		–			–			–			133,664
Stock-based compensation	–		–	–		–	2,500,000			12,500		175,000		2,585,270		–			–			–			2,772,770
Net income (loss)	–		–	–		–	–			–		–		–		2,526,533			(14,098,316	)		–			(11,571,783	)
Foreign currency translation	–		–	–		–	–			–		–		–		–			–			(82,960	)		(82,960	)
Balance at June 30, 2022	10,002	$	100	5,000	$	50	72,174,620		$	360,855		1,066,925	$	104,627,032	$	479,019		$	(121,436,490	)	$	(50,673	)	$	(14,953,182	)

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	77,766	$	–
Cash paid for interest	$	–	$	–

Supplemental disclosure of non-cash investing and financing activities:
Conversion of related party notes and interest into preferred stock	$	6,532,206	$	–
Contribution of property and equipment into joint venture	$	111,185	$	–
Issuance of shares to joint venture partner	$	58,560	$	–
Conversion of accounts payable related parties to notes payable related parties	$	181,744	$	–
Common stock and warrants issued in connection with convertible note	$	1,542,695	$	–
Common stock issued pursuant to conversion of note, accrued interest and premium	$	133,664	$	–
Common stock issued pursuant to business combination	$	1,093,003	$	887,969
Fair value of assets acquired and liabilities assumed in acquisition	$	468,232	$	(200,696	)
Conversion of accounts payable related parties to related parties convertible notes	$	–	$	1,488,119
Outstanding balance of note payable issued for due to seller payment	$	–	$	98,000

Schedule of fair value of assets and liabilities
	Fair Value Measurements as of June 30, 2022 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Contingent consideration		–	$	4,870,800		–	$	4,870,800
	$	–	$	4,870,800	$	–	$	4,870,800

Schedule of contingent consideration liability
	Contingent
	Consideration
	Liability
Balance as of June 30, 2021	$	–
Initial recognition in connection with acquisition of DepTec		5,053,000
Change in fair value		(182,200	)
Balance as of June 30, 2022	$	4,870,800

Schedule of property and equipment, estimated useful life
		Estimated Useful Life
Computer and office equipment		3 - 5 years
Machinery and equipment		5 years
Leasehold improvements		Shorter of lease term or useful life

Schedule of disaggregated revenue
	Year Ended
	June 30,
	2022		2021
Product sales - third parties	$	2,280,403	$	1,053,720
Product sales - related party		75,324		62,607
Service revenue - third parties		15,584,154		2,020,307
Service revenue - related party		1,327,732		270,050
Total revenue	$	19,267,613	$	3,406,684

Schedule of receivables and contract liabilities
	June 30,		June 30,
	2022		2021
Accounts receivable, net	$	6,406,555	$	265,812
Accounts receivable, net - related parties		41,603		69,952
Long-term receivables		42,395		–
Long-term receivables - related parties		1,209,103		–
Deferred revenue		720,923		219,999

Schedule of cost of revenue
	Year Ended
	June 30,
	2022		2021
Product sales	$	2,547,392	$	1,331,329
Service revenue		6,213,874		1,140,637
Total cost of revenue	$	8,761,266	$	2,471,966

Schedule of anti-dilutive shares
	June 30, 2022
Convertible notes payable		2,999,148
Common stock warrants		12,025,000
Total potentially dilutive items outstanding		15,024,148

Reconciliation of common shares outstanding basic to diluted
	Year Ended
	June 30, 2021
Weighted average number of common shares outstanding - Basic		70,318,073
Potentially dilutive common stock equivalents (convertible note payable - related party and accrued interest)		58,628,294
Weighted average number of common shares outstanding - Diluted		128,946,367

Schedule of purchase price consideration
Common stock to be issued	$	175,000
Contingent consideration		5,053,000
Total purchase price consideration	$	5,228,000

Purchase price allocation
	Purchase Price
	Allocation
Cash and cash equivalents	$	301,647
Accounts receivable, net		375,357
Inventories		146,300
Prepaid expenses and other current assets		6,025
Property and equipment, net		28,437
Intangible assets		1,899,259
Goodwill		2,874,259
Accounts payable		(240,056	)
Accrued liabilities		(108,180	)
Deferred revenue		–
Notes payable		(55,048	)
Purchase price consideration	$	5,228,000

Schedule of purchase price consideration
Common stock (and to be issued)	$	918,000
Line of credit		244,395
Bank loan		467,712
Total purchase price consideration	$	1,630,107

Purchase price allocation
	Purchase Price
	Allocation
Cash and cash equivalents	$	43,617
Accounts receivable		37,905
Other receivables		3,000
Property and equipment, net		3,930
Intangible assets		693,385
Accounts payable		(32,093	)
Accrued liabilities		(38,726	)
Deferred revenue		(37,339	)
Notes payable		(233,679	)
Purchase price consideration	$	440,000

1)	The International Health Group transaction was accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”).
2)	IHG’s founder initially started the program approximately ten years ago offering a Certified Nurse’s Assistant Program (CNA), thus giving the intangible asset a minimum of a 10-year useful.
3)	Under US GAAP, the cost of intangible assets is either amortized over their respective useful/legal lives or are tested for impairment on an annual basis. Pursuant to the costs incurred over a ten-year period to develop the CNA and other curriculums, the Company has determined a minimum of a 10-year useful life is appropriate.

Purchase price allocation
	Preliminary
	Purchase Price
	Allocation
Cash and cash equivalents	$	281,164
Goodwill		593,304
Accounts payable		(17,918	)
Notes payable		(149,900	)
Purchase price consideration	$	706,650

Schedule of pro forma information
	Year Ended June 30,
	2022			2021
Revenues	$	23,723,570		$	4,389,794
Net income (loss) attributable to Dalrada	$	(14,169,496	)	$	174,239
Net income (loss) per common share - basic	$	(0.20	)	$	0.00

Schedule of inventory
	June 30,		June 30,
	2022		2021
Raw materials	$	399,706	$	172,227
Finished goods		1,224,915		669,881
Inventory, Net	$	1,624,621	$	842,108

Schedule of property and equipment
	June 30,			June 30,
	2022			2021
Machinery and equipment	$	740,147		$	223,141
Leasehold improvements		314,642			323,669
Computer and office equipment		518,017			186,549
Property, Plant and Equipment, Gross		1,572,806			733,359
Less: Accumulated depreciation		(496,394	)		(243,457	)
Property, Plant and Equipment, Net	$	1,076,412		$	489,902