What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-15 compared with 2023-09-22 · 109 added, 109 removed, 404 unchanged (35% of the section changed)

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to address global infrastructure and critical environmental resource challenges.

offers a full suite of engineering and environmental solutions that provide safety and security infrastructure projects.

The sensing and

monitoring capabilities offered by DarkPulse 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 dark-pulse based BOTDA 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 eight 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 and movement of personnel and 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.

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

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 dark-pulse based BOTDA 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 eight 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 and movement of personnel

and 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 Subsidiaries

Our subsidiaries consist of DarkPulse UK Ltd,, a company headquartered

in, United Kingdom whose focus is in engineering, telecommunications, energy, rail, critical network infrastructure, pipeline integrity

systems, renewables and security;

Remote Intelligence, Limited Liability Company, a company headquartered in Pennsylvania who provides

unmanned aerial drone and unmanned ground crawler (UGC) services to a variety of clients from industrial mapping and ecosystem services,

to search and rescue, to pipeline security;

Wildlife Specialists, Limited Liability Company, a company headquartered in Pennsylvania who

provides clients with comprehensive wildlife and environmental assessment, planning, and monitoring services;

TerraData Unmanned, PLLC,

a company headquartered in Florida who custom manufactures NDAA compliant drones and unmanned ground crawlers to meet the needs of its

Our subsidiaries consist of DarkPulse UK Ltd,,

a company headquartered in, United Kingdom whose focus is in engineering, telecommunications, energy, rail, critical network infrastructure,

pipeline integrity systems, renewables and security;

Remote Intelligence, Limited Liability Company, a company headquartered in Pennsylvania

who provides unmanned aerial drone and unmanned ground crawler (UGC) services to a variety of clients from industrial mapping and ecosystem

services, to search and rescue, to pipeline security;

Wildlife Specialists, Limited Liability Company, a company headquartered in Pennsylvania

who provides clients with comprehensive wildlife and environmental assessment, planning, and monitoring services;

TerraData Unmanned,

PLLC, a company headquartered in Florida who custom manufactures NDAA compliant drones and unmanned ground crawlers to meet the needs

of its customers;

and DarkPulse Electronics Manufacturing Inc., a company headquartered in Arizona who is a U.S.

manufacturer of advanced electronics,

cables and sub-assemblies specializing in advanced package and complex CCA and hardware.

manufacturer of advanced

electronics, cables and sub-assemblies specializing in advanced package and complex CCA and hardware.

Change in Ownership in Previously Consolidated Subsidiary Results

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assets as of June 30, 2023.

Quarter Ended June 30 Accounting Analysis

Quarter Ended September 30 Accounting Analysis

Optilan (UK) Limited became subject to the control

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Effective Price per Share

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.

Concern Uncertainty

As shown in the accompanying

financial statements, we generated net losses of $18,917,360 and $9,569,843 during the six months ended June 30, 2023

and 2022, respectively, and net cash used in operating activities of $2,483,389 and $12,565,057, respectively.

30, 2023, the Company’s current liabilities exceeded its current assets by $18,582,414 and has an accumulated deficit of $64,662,001.

As of June 30, 2023, the Company had $48,573 of cash.

Lastly, the Optilan Liquidation no longer raises serious concerns about the viability

of the Optilan (UK) Limited entities.

Optilan (UK) Limited and its subsidiaries have been deconsolidated and are no longer under the control

of DarkPulse, Inc.

financial statements, we generated net losses of $19,915,940 and $18,375,506 during the nine months ended September 30, 2023 and 2022,

respectively, and net cash used in operating activities of $4,066,096 and $19,456,701, respectively.

As of September 30, 2023, the Company’s

current liabilities exceeded its current assets by $18,527,365 and has an accumulated deficit of $65,649,298.

As of September 30,

2023, the Company had $64,892 of cash.

Lastly, the Optilan Liquidation no longer raises serious concerns about the viability of the Optilan

(UK) Limited entities.

Optilan (UK) Limited and its subsidiaries have been deconsolidated and are no longer under the control of DarkPulse,

will require additional funding to finance the growth of our operations and achieve our strategic objectives.

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revenues, including part of framework contracts that will be recognized during future reporting periods.

the three and six months ended June 30, 2023, total revenues were $ 412,769 and $1,950,602 compared

to $ 4,435,043 and $6,435,376 for the three and six months ended June 30, 202.

The decreases

were primarily due to the Opitlan (UK) liquidation and lower revenues achieved by Wildlife and Remote given capital and resources restraints.

the three and nine months ended September 30, 2023, total revenues were $ 82,071 and $2,032,673 compared

to $ 1,431,104 and $7,884,480 for the three and nine months ended September 30, 2022.

decreases were primarily due to the Optilan (UK) liquidation and lower revenues achieved by Wildlife and Remote given capital and resources

Cost of Revenues and Gross Margin

For the three and six months ended June 30, 2023,

cost of revenues was $1,184,848 and $2,411,640 compared to $3,965,910 and $6,314,477 for the six months ended June 30, 2022.

was attributable to the Optilan (UK) Limited liquidation and lower revenues from Remote Intelligence and Wildlife Specilaists.

Gross profit (loss) for the six months ended June

30, 2023 was ($461,038) compared to $138,889 for the six months ended June 30, 2022.

it was realized that certain fixed price quoted contracts, with design and execution issues, prolonged the completion of the projects.

For the three and nine months ended September

30, 2023, cost of revenues was $3,005 and $2,414,645 compared to $5,804,875 and $12,119,352 for the nine months ended September 30, 2022.

The decrease was attributable to the Optilan (UK) Limited liquidation and lower revenues from Remote Intelligence and Wildlife Specialists.

Gross profit (loss) for the nine months ended

September 30, 2023 was ($381,972) compared to ($4,234,872) for the nine months ended September 30,

During 2022, it was realized that certain fixed price quoted contracts, with design and execution issues, prolonged the completion

of the projects.

This resulted in significant excess costs related to labor, subcontractor, and material costs.

The Company has adequately reserved for

these costs through completion of the projects in the third quarter of 2023.

Unfortunately, there was very little foresight into the magnitude

The Company has adequately

reserved for these costs through completion of the projects in the third quarter of 2023.

Unfortunately, there was very little foresight

into the magnitude of the loss.

The Company believes that this is not a recurring issue with Optilan and/or its business model.

The Company has undertaken

internal procedures during its bid process to assure that such practices will not occur in the future.

has undertaken internal procedures during its bid process to assure that such practices will not occur in the future.

Operating Expenses

Selling, general and administrative expenses for

three and six months ended June 30, 2023 decreased by $486,896 and $567,243, respectively.

The decrease primarily consisted of decrease

in advertising costs, insurance and information technology expenses.

Salaries, wages and payroll

taxes for three and six months ended June 30, 2023 decreased by $797,276 and $1,222,136, respectively.

three and nine months ended September 30, 2023 decreased by $1,211,822 and $1,779,060, respectively.

The decrease primarily consisted

of reduced headcount at each subsidiary.

As of June 30, 2023,

the Company recorded a bad debt provision of $2,422,457 pertaining to the Optilan UK Liquidation.

Professional fees for the three months ended June

30, 2023 decreased by $1,224,909 for the three months ended June 30, 2022 as Optilan operations ceased.

Professional fees increased by

$187,686 for the six months ended June 30, 2023 due to the issuance of common stock per the settlement of a litigation matter.

During the three months

ended June 30, 2023, the Company recorded a gain on forgiveness of debt of $106,794.

of decrease in advertising costs, insurance and information technology expenses.

Salaries, wages and payroll

taxes for three and nine months ended September 30, 2023 decreased by $1,506,908 and $2,729,044, respectively.

The decrease primarily

consisted of reduced headcount at each subsidiary.

Furthermore, the Company reduced accrued payroll which it was determined was no longer

As of September 30, 2023,

the Company recorded a bad debt provision of $2,433,963, primarily pertaining to the Optilan UK Liquidation.

Professional fees for the three months ended September

30, 2023 decreased by $1,511,499 for the three months ended September 30, 2022 and Professional fees for the nine months ended September

30, 2023 decreased by $1,323,813 for the nine months ended September 30, 2022, as Optilan operations ceased.

During the three and

nine months ended September 30, 2023, the Company recorded a gain on forgiveness of debt of $0 and $106,794.

As a result of the Optilan Liquidation as described

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The Company has one reporting unit which was evaluated in the impairment test noted above.

a result of the impairment, the Company had a carrying value of $0 pertaining to goodwill and intangible assets as of June 30, 2023.

Depreciation and amortization

for three months ended June 30, 2023 and 2022 was $220,749 and $7,405, respectively.

a result of the impairment, the Company had a carrying value of $0 pertaining to goodwill and intangible assets as of September 30, 2023.

Depreciation and amortization for three months

ended September 30, 2023 and 2022 was $44,502 and $597,970, respectively.

Other Income (Expense)

For the three months ended June 30, 2023, we had

other expenses of $(1,617,692) compared to other expenses of $(688,121) for the three months ended June 30, 2022.

The increase in other

expenses was primarily due to loss on deconsolidation in 2023.

For the six months ended June 30, 2023, we had

other expenses of $(1,810,882) compared to other expenses of $(1,025,164) for the six months ended June 30, 2022.

The decrease in other

expenses was primarily due to loss on deconsolidation in 2023.

For the three months ended September 30, 2023,

we had other expenses of $(521,352) compared to other income of $896,585 for the three months ended September 30, 2022.

The increase in

other expenses was primarily due to interest expense and foreign currency exchange rate variance in 2023.

For the nine months ended September 30, 2023,

we had other expenses of $(2,332,234) compared to other expenses of $(128,578) for the nine months ended September 30, 2022.

in other expenses was primarily due to loss on deconsolidation in 2023.

As a result of the above, we reported a net loss

of $4,118,096 and $4,185,572 for the three months ended June 30, 2023 and 2022, respectively.

of $998,576 and $8,805,668 for the three months ended September 30, 2023 and 2022, respectively.

As a result of the above, we reported a net loss

of $18,917,360 and $9,569,843 for the six months ended June 30, 2023 and 2022, respectively.

of $19,915,940 and $18,375,506 for the nine months ended September 30, 2023 and 2022, respectively.

Liquidity and Capital Resources

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development and commercialization of our proprietary fiber optic sensing devices, and for operating expenses.

During the six months ended

June 30, 2023, we had $2,625,650 in cash proceeds from our equity financings compared to $12,415,875 in 2022.

of June 30, 2023, we had cash of $ 48,573 compared to $2,060,332 as of December 31, 2022.

During the nine months ended

September 30, 2023, we had $3,090,717 in cash proceeds from our equity financings compared to $23,794,275 in 2022.

of September 30, 2023, we had cash of $ 64,892 compared to $2,060,332 as of December 31, 2022.

We currently do not have sufficient cash to fund our operations for the next 12 months and we will require working capital to complete

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of convertible notes or obtained through the issuance of our restricted common stock.

As of June 30, 2023, our current liabilities exceeded

our current assets by $ 18,582,412 .

As of September 30, 2023, our current liabilities

exceeded our current assets by $ 18,527,365 .

Several of our significant operating subsidiaries

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Cash Flows From Operating Activities

During the six months ended June 30, 2023, net

cash used by operating activities was $2,483,389 resulting from our net loss of $18,917,360 partially offset by non-cash charges

of $13,479,314 primarily driven by impairment charges, bad debt expense and the issuance of common stock for a legal settlement.

we had cash received by our operating assets and liabilities of $2,954,660 primarily driven by decreases in accounts receivable and contract

assets and increases in accounts payable.

During the six months

ended June 30, 2022, net cash used by operating activities was $12,565,057, resulting from our net loss of $9,569,843, partially offset

by non-cash gains of $319,410.

In 2022, we had cash used in our operating assets and liabilities of $3,314,624 primarily due to increases

in accounts receivable and contract assets partially offset by increases in accounts payable and contract liabilities.

During the nine months ended September 30, 2023,

net cash used by operating activities was $4,066,096 resulting from our net loss of $19,915,940 partially offset by non-cash charges of

$13,322,329 primarily driven by impairment charges, bad debt expense and the issuance of common stock for a legal settlement.

we had cash received by our operating assets and liabilities of $2,527,515 primarily driven by decreases in accounts receivable

and contract assets and increases in accounts payable.

During the nine months

ended September 30, 2022, net cash used by operating activities was $19,456,701, resulting from our net loss of $18,375,506, partially

offset by non-cash charges of $797,166.

In 2022, we had cash used in our operating assets and liabilities of $1,878,361 primarily due

to increases in accounts receivable and contract assets partially offset by increases in accounts payable and contract liabilities.

Cash Flows From Investing

During the six months

ended June 30, 2023, we had net cash used in investing activities of $1,154,848, including $419,737 in notes and $519,637 in advances

During the nine months

ended September 30, 2023, we had net cash used in investing activities of $1,409,128, including $563,317 in notes and $630,337 in advances

to related party, as well as our joint venture investment of $113,124 and purchase of property and equipment of $102,350.

During the three months

ended June 30, 2022, we had net cash used in investing activities of $503,409 due to $64,980 in deposits and purchase of property and

equipment of $438,429.

During the nine months

ended September 30, 2022, we had net cash used in investing activities of $594,310 due to $64,980 in deposits and purchase of property

and equipment of $529,330.

Cash Flows From Financing Activities

During the six months

ended June 30, 2023, net cash provided by financing activities was $2,598,603 which was primarily comprised of proceeds from the sale

of common stock of $2,625,650, less net repayments of loans of $27,047.

During the six months ended June 30, 2022, net

cash provided by financing activities was $12,415,875, comprised of proceeds from the sale of common stock from offering of $12,415,875.

During the nine months

ended September 30, 2023, net cash provided by financing activities was $3,090,717 which was primarily comprised of proceeds from the

sale of common stock of $3,067,764 and proceeds from the issuance of convertible notes $50,000, less net repayments of loans of $27,047.

During the nine months ended September 30, 2022,

net cash provided by financing activities was $23,794,275, comprised of proceeds from the sale of common stock from offering of $23,794,275.

Factors That May Affect Future Results

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis