DarkPulse, Inc 10-K for FY2022

DarkPulse, Inc. (DPLS)

10-K 2023-06-23 For: 2022-12-31

Added on April 08, 2026

About this 10-K

DarkPulse, Inc filed this 10-K on June 23, 2023, covering the fiscal year ended December 31, 2022 (FY2022).

Headline figures

Fiscal year ended December 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $9.1M; up 16.9% from $7.78M a year earlier
Net loss: $35.28M; compared with a net loss of $4.69M a year earlier
Diluted EPS: -$0.01; compared with $0.00 a year earlier

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

815 Walker Street, Suite 1155, Houston, TX		77002
(Address of Principal Executive Offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

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

PART I		1

ITEM 1.	BUSINESS	1
ITEM 1A.	RISK FACTORS	10
ITEM 1B.	UNRESOLVED STAFF COMMENTS	32
ITEM 2.	PROPERTIES	32
ITEM 3.	LEGAL PROCEEDINGS	33
ITEM 4.	MINE SAFETY DISCLOSURES	35

PART II		36

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	37
ITEM 6.	[RESERVED]	37
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	37
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	46
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	46
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	46
ITEM 9A.	CONTROLS AND PROCEDURES	46
ITEM 9B.	OTHER INFORMATION	48
ITEM 9C.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	48

PART III		49

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	49
ITEM 11.	EXECUTIVE COMPENSATION	51
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	52
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	53
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	53
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	54
ITEM 16.	FORM 10-K SUMMARY	57

SIGNATURES		58

	·	The unprecedented impact of COVID-19 pandemic on our business, customers, employees, subcontractors, consultants, service providers, stockholders, investors and other stakeholders;

	·	the impact of conflict between the Russian Federation and Ukraine on our operations;

	·	geo--political events, such as the crisis in Ukraine, government responses to such events and the related impact on the economy both nationally and internationally;

	·	Our ability to raise sufficient capital and continue to fund operating expenses;

	·	Our ability to get our technology to work in accordance with our technical specifications;

	·	Our ability to attract customers to our products once they are developed;

	·	Our ability to generate sales of our products once they are developed;

	·	Our ability to attract and retain the necessary personnel with the expertise needed to ensure that we can operate the Company effectively;

	·	Actions or inactions of third-party contractors and vendors;

	·	Our ability to successfully patent and protect our intellectual property; and

	·	General economic conditions.

	·	Real-time Reporting: Higher data acquisition speeds allowing for structural monitoring of dynamic systems;

	·	Cost to Customer: Significantly lower acquisition and operating costs;

	·	Precision: A greater magnitude of precision and spatial resolution than other systems currently available;

	·	Applications: Wider range of capabilities than other systems currently available;

	·	Power Consumption: Lower power consumption than existing systems allowing for off-grid installations;

	·	Integration: Capable of integrating with existing systems; and

	·	Central station monitoring/cloud based GUI.

	·	Buildings and Skyscrapers;

	·	Bridges, Tunnels and Dams; and

	·	Roads and Railway tracks.

	·	Fire Alarm and Environment control;

	·	Low cost and maintenance;

	·	Long life span; and

	·	Ability to withstand harsh working environment.

	·	National Border Protection; and

	·	Protection of Military and other sensitive installations.

	·	Consulting (as stand-alone or presales);

	·	Post sales deployment and Support; and

	·	Managed services (monitoring, etc.).

	·	Monitoring of composite structures in aircraft;

	·	Dynamic stress monitoring of runways;

	·	Dynamic ship hull stress monitoring, especially with a view to double-hull oil tankers;

	·	Smart grid and power conservation applications based on cooling and/or heat proximity – for instance, computer rooms, cell towers for heat soak;

	·	Monitor low temperatures as part of control systems;

	·	Monitoring of temperatures in extreme refrigeration environments;

	·	Avalanche early warning systems; and

	·	Sea defense monitoring.

	·	Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired companies, particularly companies with large and widespread operations and/or complex products;

	·	Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions;

	·	Potential difficulties in completing projects associated with in-process research and development intangibles;

	·	Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;

	·	Initial dependence on unfamiliar supply chains;

	·	Insufficient revenue to offset increased expenses associated with acquisitions; and

	·	The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans.

	·	Issue common stock that would dilute our current shareholders’ percentage ownership;

	·	Use a substantial portion of our cash resources or incur debt;

	·	Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition;

	·	Assume liabilities;

	·	Record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges;

	·	Incur amortization expenses related to certain intangible assets;

	·	Incur tax expenses related to the effect of acquisitions on our intercompany research and development cost sharing arrangement and legal structure;

	·	Incur large and immediate write-offs and restructuring and other related expenses; and

	·	Become subject to intellectual property or other litigation.

	·	managing geographically separated organizations, systems and facilities;

	·	integrating personnel with diverse business backgrounds and organizational cultures;

	·	complying with foreign regulatory requirements;

	·	fluctuations in exchange rates;

	·	enforcement and protection of intellectual property in some foreign countries;

	·	difficulty entering new foreign markets due to, among other things, customer acceptance and business knowledge of these new markets; and

	·	general economic and political conditions.

	·	Competing products;

	·	Ineffective distribution and marketing;

	·	Lack of sufficient cooperation from our partners; and

	·	Demonstrations of the products not aligning with or meeting customer needs.

	·	the growth of our customer base;

	·	our ability to acquire customers at a lower cost, and

	·	our ability to increase our overall value to each of our customers while they use our products and services.

	·	harm our reputation and brand;

	·	result in our systems or services being unavailable and interrupt our operations;

	·	result in improper disclosure of data and violations of applicable privacy and other laws;

	·	result in significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory and financial exposure;

	·	cause us to incur significant remediation costs;

	·	lead to theft or irretrievable loss of our or our customers’ assets;

	·	reduce customer confidence in, or decreased use of, our products and services;

	·	divert the attention of management from the operation of our business;

	·	result in significant compensation or contractual penalties from us to our customers or third parties as a result of losses to them or claims by them; and

	·	adversely affect our business and operating results.

	·	Designing and developing products using advanced technologies in intelligence and homeland security applications that are intended to operate in high demand, high risk situations; and

	·	Designing and developing products to collect, distribute and analyze various types of information.

	·	Maintain and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;

	·	Prepare and distribute periodic reports in compliance with our obligations under federal securities laws;

	·	Institute a more comprehensive compliance function, including with respect to corporate governance; and

	·	Involve, to a greater degree, our outside legal counsel and accountants in the above activities.

	·	a change in the volume of our customers use of our products and services and generally;

	·	planned and unplanned increases in marketing, sales and other operating expenses that we may incur to grow and expand our customer base and operations, and to remain competitive;

	·	the success, or lack of success, in new marketing approaches we have recently undertaken or plan to undertake, which have not been previously or fully tested;

	·	the continued market acceptance of our products and services in a highly competitive environment;

	·	system disruptions, outages and other performance problems or interruptions on our products and technology, or breaches of data or system security, including ransomware or other major cyber-attacks, which, if extended or severe, may harm our credibility and reputation in the market;

	·	our failure to provide adequate customer service;

	·	our ability to successfully, and in a timely manner, continue development, improvement and feature-enhancement of our products and services, including our intellectual property, data analytics, proprietary technology and customer support functions;

	·	the timing and success of new product and service introductions, and new product and service features or enhancements, by us and our subsidiaries, or our competitors, or other changes in the competitive landscape of the markets in which we operate;

	·	the success of our expansion into new markets, products and services, or ones in which we are in the early stages;

	·	changes in the adoption and use of our technologies and the public perception of them;

	·	changes in the legislative or regulatory environment, scope or focus of regulatory investigations and inquiries, or interpretations of regulatory requirements, or outright prohibition of certain activities;

	·	disputes with our customers, adverse litigation and regulatory judgments, enforcement actions, settlements or other related costs and the reputational impact and public perception of such occurrences, including in emerging industries, or emerging components of industries;

	·	the timing and amount of non-cash expenses, such as stock-based compensation and asset impairment;

	·	changes in accounting standards, policies, guidance, interpretations or principles; and

	·	general economic conditions in either domestic or international markets, including the impact of the ongoing COVID-19 pandemic.

	·	The impact of conflict between the Russian Federation and Ukraine on our operations;

	·	Geo-political events, such as the crisis in Ukraine, government responses to such events and the related impact on the economy both nationally and internationally;

	·	Changes in our industry;

	·	Competitive pricing pressures;

	·	Our ability to obtain working capital financing;

	·	Additions or departures of key personnel;

	·	Sales of our common stock;

	·	Our ability to execute our business plan;

	·	Operating results that fall below expectations;

	·	Loss of any strategic relationship;

	·	Regulatory developments; and

	·	Economic and other external factors.

	·	substantial payments to satisfy judgments, fines, or penalties;

	·	substantial outside counsel legal fees and costs;

	·	additional compliance and licensure requirements;

	·	loss or non-renewal of existing licenses or authorizations, or prohibition from or delays in obtaining additional licenses or authorizations, required for our business;

	·	loss of productivity and high demands on employee time;

	·	civil or criminal sanctions or consent decrees;

	·	termination of certain employees, including members of our management team;

	·	barring of certain employees from participating in our business in whole or in part;

	·	orders that restrict our business or prevent us from offering certain products or services;

	·	changes to our business model and practices;

	·	delays to planned transactions, product launches or improvements; and

	·	damage to our brand and reputation.

2022	High		Low
First Quarter	$	0.0890	$	0.0252
Second Quarter	$	0.0589	$	0.0190
Third Quarter	$	0.0455	$	0.0189
Fourth Quarter	$	0.0230	$	0.0078

2021	High		Low
First Quarter	$	0.0510	$	0.0007
Second Quarter	$	0.0969	$	0.0106
Third Quarter	$	0.2020	$	0.0653
Fourth Quarter	$	0.1400	$	0.0511

Date of Put	Number of Shares Sold		Total Proceeds, Net of Discounts		Effective Price per Share		Net Proceeds
10/14/2022		35,628,020		500,000	$	0.014034		463,975
11/7/2022		22,022,709		326,235	$	0.014814		302,373
11/18/2022		39,699,793		325,000	$	0.008186		301,225
12/2/2022		42,148,416		325,000	$	0.007711		301,225
12/20/2022		78,705,534		540,000	$	0.006861		501,175
12/30/2022		63,338,702		400,000	$	0.006315		370,975

	·	promote adoption if our patented technology through agency and distribution agreements;

	·	cross-selling existing customer with products from other subsidiaries;

	·	provide a wide array of diverse services, including enhanced or additional services that may become available in the future due to, among other things, advances in technology or improvements in our infrastructure;

	·	pursue acquisitions of additional assets, in each case if available at attractive prices; and

	·	market our products and services to new customers.

	Years Ended December 31,
	2022		2021
Optilan	$	7,514,687	$	7,232,210
Wildlife		842,811		306,548
TJM		560,406		174,266
Remote Intelligence		140,490		24,816
TerraData		41,861		45,500
	$	9,100,255	$	7,783,340

	·	The small size of our company limits our ability to achieve the desired level of separation of duties to achieve effective internal controls over financial reporting. We do not have a separate CEO and CFO, to review and oversee our financial policies and procedures, which does achieve a degree of separation. However, until such time as we are able to hire a controller, we do not believe we meet the full requirement for separation.

	·	We do not have an audit committee.

	·	We have not achieved the desired level of documentation of our internal controls and procedures. This documentation will be strengthened through utilizing a third-party consulting firm to assist management with its internal control documentation and further help to limit the possibility of any lapse in controls occurring.

	·	We have not achieved the desired level of corporate governance to ensure that our accounting for all of our contractual and other agreements is in accordance with all of the relevant terms and conditions.

	·	Pertain to the maintenance of records in reasonable detail accurately that fairly reflect the transactions and dispositions of our assets;

	·	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and

	·	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Director's Name	Age	Position
Dennis O’Leary	60	Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, Secretary & Treasurer

Dr. Anthony Brown	49	Director

Craig Atkin	40	Director and Chief Commercial Officer of Optilan

Jason Keith	49	Chief Executive Officer of Optilan

Name and Principal Position	Year Ended Dec 31,	Salary		All Other Compensation		Total
Dennis O’Leary	2022	$	285,000	$	–	$	285,000
Chairman/CEO and Director	2021	$	60,000	$	60,000	$	60,000

Bill Bayliss	2022	$	250,000	$	19,000	$	269,000
CEO, Optilan⁽²⁾	2021	$	343,918	$	68,782	$	412,700

Jason Keith	2022	$	186,000	$	62,700	$	248,700
CEO, Optilan⁽²⁾	2021	$	212,350	$	14,813	$	227,163

	⁽¹⁾	On June 24, 2022, Mr. O’Leary was awarded 100 shares of Series A Preferred Stock. Since the shares have no voluntary conversion feature, they are deemed to have no monetary value.

	⁽²⁾	In April 2022, Mr. Bayliss was removed as CEO and Mr. Keith was appointed as CEO in May 2022.

Name and Position	Shares of Common Stock Owned	Shares of Series D Preferred Stock Owned⁽¹⁾	Amount and Nature of Beneficial Ownership⁽²⁾	Percentage of Beneficial Ownership
Dennis O’Leary, CEO and Director	–	67,647	135,294	*
Dr. Anthony Brown, Director	–	5,882	11,764	*
Craig Atkin, Director	–	–	–	–
Bill Bayliss, CEO, Optilan	–	–	–	–
Total named executive officers, executive officers, and directors (four persons)	–	73,529	147,058	*

	⁽¹⁾	Each share of Series D Preferred Stock is convertible, at the option of the holder, into two shares of our Common Stock.

	⁽²⁾	Under Rule 13d-3 of the Exchange Act, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the above table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on the date of this prospectus.

Service	2022		2021
Audit Fees	$	286,641	$	179,750
Audit-Related Fees		–		–
Total	$	286,641	$	179,750