What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-15 compared with 2023-11-15 · 322 added, 293 removed, 220 unchanged (74% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

This Management’s Discussion and Analysis

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United States.

Use of Estimates

The preparation of the Company’s financial

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Long-Lived Assets and Goodwill

accounts for long-lived assets in accordance with the provisions of ASC 360-10-35, Property, Plant and Equipment, Impairment or

Disposal of Long-lived Assets.

This accounting standard requires that long-lived assets be reviewed for impairment whenever events

or changes in circumstances indicate that the carrying amount may not be recoverable.

Recoverability of assets to be held and used is

measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which

the carrying amount of the asset exceeds the fair value of the asset.

Indefinite-lived

intangible assets established in connection with business combinations consist of the tradename.

The impairment test for identifiable

indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value.

If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other .

Goodwill represents

the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed.

ASC 350 requires

that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances

indicate that the fair value of an asset has decreased below its carrying value.

This guidance simplifies the accounting for goodwill

impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation.

The quantitative

impairment test calculates any goodwill impairment as the difference between the carrying amount of a reporting unit and its fair value,

but not to exceed the carrying amount of goodwill.

It is our practice, at a minimum, to perform a qualitative or quantitative goodwill

impairment test in the fourth quarter every year.

The Company accounts for long-lived assets in

accordance with the provisions of ASC 360-10-35, Property, Plant and Equipment, Impairment or Disposal of Long-lived Assets.

accounting standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that

the carrying amount may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount

of an asset to future undiscounted net cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its

estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair

value of the asset.

Indefinite-lived intangible assets established

in connection with business combinations consist of the tradename.

The impairment test for identifiable indefinite-lived intangible assets

consists of a comparison of the estimated fair value of the intangible asset with its carrying value.

If the carrying value exceeds its

fair value, an impairment loss is recognized in an amount equal to that excess.

The Company accounts for goodwill and intangible

assets in accordance with ASC 350, Intangibles – Goodwill and Other .

Goodwill represents the excess of the purchase

price of an entity over the estimated fair value of the assets acquired and liabilities assumed.

ASC 350 requires that goodwill and other

intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the

fair value of an asset has decreased below its carrying value.

This guidance simplifies the accounting for goodwill impairment by removing

Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation.

The quantitative impairment test calculates

any goodwill impairment as the difference between the carrying amount of a reporting unit and its fair value, but not to exceed the carrying

amount of goodwill.

It is our practice, at a minimum, to perform a qualitative or quantitative goodwill impairment test in the fourth

quarter every year.

The Company has one reporting unit it evaluates during its impairment test.

In determining

the fair value of the reporting unit, management estimated the price that would be received to sell the reporting unit as a whole in an

orderly transaction between market participants at the measurement date.

This includes reviewing market comparables such as revenue multipliers

and assigning certain assets and liabilities to the reporting units, such as the respective working capital deficits of each entity and

debt obligations that would need to be assumed by a market participant buyer in an orderly transaction.

The Company calculated the carrying

amounts of the reporting unit by utilizing the entities’ assets and liabilities at December 31, 2022, including the carrying value

of the identifiable intangible assets and goodwill assigned to the respective reporting unit.

recorded impairment expense of intangibles and goodwill of $12,222,598 upon its annual impairment test during the year ended December

Refer to Note 1 for impairment records in 2023 upon the Optilan UK Liquidation.

The Company’s

revenues are generated primarily from the sale of our services, which consist primarily of advanced technology solutions for integrated

communications and security systems, as well as habitat management.

The Company’s sales of products are primarily generated from

our TJM subsidiaries.

Sales of products and services are separate from one another.

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 recognize service revenues as the performance obligations

are met, which is generally as milestones are satisfied over time.

We generally recognize product revenues at the time of shipment, provided

that all other revenue recognition criteria have been met.

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:

In determining the fair value of the reporting

unit, management estimated the price that would be received to sell the reporting unit as a whole in an orderly transaction between market

participants at the measurement date.

This includes reviewing market comparables such as revenue multipliers and assigning certain assets

and liabilities to the reporting units, such as the respective working capital deficits of each entity and debt obligations that would

need to be assumed by a market participant buyer in an orderly transaction.

The Company calculated the carrying amounts of the reporting

unit by utilizing the entities’ assets and liabilities at December 31, 2023, including the carrying value of the identifiable intangible

assets and goodwill assigned to the respective reporting unit.

Refer to Note 1 for impairment records in 2023

upon the Optilan UK Liquidation.

Revenue Recognition

The Company’s revenues are generated primarily

from the sale of our services, which consist primarily of advanced technology solutions for integrated communications and security systems,

as well as habitat management.

The Company’s sales of products are primarily generated from our TJM subsidiaries.

Sales of products

and services are separate from one another.

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 recognize service revenues as the performance obligations are met, which

is generally as milestones are satisfied over time.

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;

(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

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.

considers each individual sale of service contract to be its own performance obligation.

Services in the contract are highly interdependent

and interrelated, and the successful completion of each milestone is necessary for the overall success of the contract.

Therefore, each

milestone is not separately identifiable from other promises in the contract, and not distinct and ultimately not individual performance

records revenue over time using the output measure as it is the most faithful depiction of an entity’s performance because it directly

measures the value of the goods and services transferred to the customer.

The Company utilizes the Right to Invoice for these contracts,

as the pricing structure is based on various milestones that are specified in the contract.

These milestones include Construction Phase

Plan, Start of the construction phase, installation phase, site surveys, fiber splicing, recoveries, and closeouts.

There are specified

payments associated with these milestones in the contract, and the value allocated is commensurate with work done.

In the event that there

are advances such as upfront retainers and not based on the value, those are recorded as contract liabilities.

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

When a transaction involves more than one product or service, revenue is allocated to each deliverable based on its relative fair

otherwise, revenue is recognized as products are delivered or as services are provided over the term of the customer contract.

(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

The Company considers each individual sale of

service contract to be its own performance obligation.

Services in the contract are highly interdependent and interrelated, and the successful

completion of each milestone is necessary for the overall success of the contract.

Therefore, each milestone is not separately identifiable

from other promises in the contract, and not distinct and ultimately not individual performance obligations.

The Company records revenue over time using the

output measure as it is the most faithful depiction of an entity’s performance because it directly measures the value of the goods

and services transferred to the customer.

The Company utilizes the Right to Invoice for these contracts, as the pricing structure is based

on various milestones that are specified in the contract.

These milestones include Construction Phase Plan, Start of the construction

phase, installation phase, site surveys, fiber splicing, recoveries, and closeouts.

There are specified payments associated with these

milestones in the contract, and the value allocated is commensurate with work done.

In the event that there are advances such as upfront

retainers and not based on the value, those are recorded as contract liabilities.

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

(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.

Derivative Financial Instruments

The Company evaluates the embedded conversion

feature within its convertible debt instruments under ASC 815-15 and ASC 815-40 to determine if the conversion feature meets the definition

of a liability and, if so, whether to bifurcate the conversion feature and account for it as a separate derivative liability.

For derivative

financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is

then re-valued at each reporting date, with changes in the fair value reported in the statements of operations.

For stock-based derivative

financial instruments, the Company uses a lattice model, in accordance with ASC 815-15 , Derivative and Hedging, to value the

derivative instruments at inception and on subsequent valuation dates.

The classification of derivative instruments, including whether

such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.

Derivative instrument

liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument

could be required within 12 months after the balance sheet date.

Business Overview

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successful completion of our BOTDA system.

Headquartered in Houston, DarkPulse is a globally-based

technology company with presence through its subsidiaries in the United Kingdom, India, Dubai, Abu Dhabi, Turkey, Azerbaijan, United States

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, oil and gas pipeline leak detection, physical security services, telecommunications

and satellite communications services, artificial intelligence-based camera systems, railway monitoring services, drone and rover systems,

and Big Data as a Service (“ BDaaS ”).

The Company is focused on expanding services through acquisitions and partnerships

to address global infrastructure and critical environmental resource challenges.

Headquartered in Houston, Texas, DarkPulse is

a globally-based technology company with presence through its subsidiaries in the United Kingdom, India, Dubai, Abu Dhabi, Turkey, Azerbaijan,

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, oil and gas pipeline leak detection, physical security services,

telecommunications and satellite communications services, artificial intelligence-based camera systems, railway monitoring services, drone

and rover systems, and Big Data as a Service (“ BDaaS ”).

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

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of its customers;

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

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

manufacturer of advanced

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Recent Events

Liquidation/winding

up of Optilan (UK) Limited

Liquidation/winding up of Optilan (UK) Limited

On May 3, 2023, Eversheds Sutherland (International)

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Office to review the prospect of recovering the assets of Optilan (UK) Limited for the benefit of creditors.

The interview is scheduled

The interview was scheduled

for July 18, 2023.

On July 18, 2023, the interview was held between

the Official Receiver’s Office (“OR”) and the CEO at time of dissolution.

The OR office requested a list of assets,

bank account information and amounts along with any contracts held by Optilan (UK) Limited to begin the liquidation process.

On August 9, 2023, Evelyn Partners was appointed Joint Liquidator.

There are no new claims against Optilan (UK) Limited

and Evelyn Partners continue to liquidate the company’s assets.

The Company is an Unsecured creditor of Optilan

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effects it will have on the Company’s continued operations and ability to meet future obligations.

On August 9, 2023, Evelyn Partners was appointed Joint Liquidator.

Quarter Ended March 31 Accounting Analysis

Three-Months Ended March 31, 2024 Accounting

The Company performed an analysis of the trade

receivables related to Optilan (UK) Limited and determined that an additional $2,422,457 may not be collectible pursuant to the Optilan

receivables related to Optilan (UK) Limited and determined that an additional $2,422,457 may not be collectible pursuant to Optilan Liquidation.

The Company recorded a bad debt provision for this amount.

As a result of the Optilan Liquidation, management

As a result of Optilan Liquidation as described in Note 1, management

determined that certain events and circumstances occurred that indicated that the carrying amount of the Company’s reporting unit

may not be recoverable as of March 31, 2023.

The qualitative assessment was primarily due to the customer contracts held by Optilan (UK)

Limited at March 31, 2023 and the associated revenue projections by the UK subsidiary that is subject to the potential winding up.

such, the Company compared the fair value of the reporting unit to the carrying amounts and recorded an impairment loss of $6,925,137

pertaining to impairment and goodwill in the consolidated statements of operations.

The Company recorded impairment of the indefinite-lived

intangible asset of $356,260, and impairment of goodwill of $6,568,877.

The Company has one reporting unit which was evaluated in the

impairment test noted above.

As a result of the impairment, the Company had a carrying value of $0 pertaining to goodwill and intangible

assets as of June 30, 2023.

Quarter Ended September 30 Accounting Analysis

may not be recoverable.

The qualitative assessment was primarily due to the customer contracts held by Optilan (UK) Limited and the associated

revenue projections by the UK subsidiary that is subject to the potential winding up.

As such, the Company compared the fair value of

the reporting unit to the carrying amounts and recorded an impairment loss of $ 2,037,670 pertaining to impairment and goodwill in

the consolidated statements of operations.

The Company recorded impairment of the indefinite-lived intangible asset of $356,260, and impairment

of goodwill of $ 1,681,410.

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

As a result of

the impairment, the Company had a carrying value of $0 pertaining to goodwill and intangible assets as of March 31, 2024.

Optilan (UK) Limited became subject to the control

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against receivables that have been deemed uncollectible.

2022 we entered an Equity Financing Agreement (the “ 2022 EFA ”) and Registration Rights Agreement (the “ RRA ”)

with GHS, pursuant to which GHS agreed to purchase up to $70,000,000 in shares of our Common Stock, from time to time over the course

of 24 months after effectiveness of a registration statement on Form S-1 of the underlying shares of Common Stock.

provides that we shall (i) use our best efforts to file with the SEC a registration statement within 45 days of the date of the GHS Registration

Rights Agreement;

and (ii) have the registration statement declared effective by the SEC within 30 days after the date the GHS registration

statement is filed with the SEC, but in no event more than 90 days after the registration statement is filed.

On May 27, 2022 we entered an Equity Financing

Agreement (the “ 2022 EFA ”) and Registration Rights Agreement (the “ RRA ”) with GHS, pursuant to which

GHS agreed to purchase up to $70,000,000 in shares of our Common Stock, from time to time over the course of 24 months after effectiveness

of a registration statement on Form S-1 of the underlying shares of Common Stock.

The RRA provides that we shall (i) use our best

efforts to file with the SEC a registration statement within 45 days of the date of the GHS Registration Rights Agreement;

and (ii) have

the registration statement declared effective by the SEC within 30 days after the date the GHS registration statement is filed with the

SEC, but in no event more than 90 days after the registration statement is filed.

Below is a table of all puts made by the Company

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Agreement, which was superseded by the Amended Equity Financing Agreement dated June 13, 2023, which was then superseded by the Second

Amended Equity Financing Agreement dated July 10, 2023 (the “ 2023 EFA ”) and Registration Rights Agreement (the “ 2023

RRA ”) with GHS, pursuant to which GHS agreed to purchase up to $30,000,000 in shares of our Common Stock, from time to time

over the course of 12 months after effectiveness of a registration statement on Form S-1 of the underlying shares of Common Stock.

The 2023 RRA provides that we shall (i) use our

best efforts to file with the SEC a registration statement within 15 days of the date of the GHS Registration Rights Agreement;

have the registration statement declared effective by the SEC within 30 days after the date the GHS registration statement is filed with

the SEC, but in no event more than 90 days after the registration statement is filed.

Amended Equity Financing Agreement dated July 10, 2023, as amended (the “ EFA ”), and Registration Rights Agreement (the

“ Registration Rights Agreement ”) with GHS, pursuant to which GHS agreed to purchase up to $30,000,000 in shares of

our Common Stock, from time to time over the course of 24 months after effectiveness of a registration statement on Form S-1 of the underlying

shares of Common Stock.

The Registration Rights Agreement provides that

we shall (i) use our best efforts to file with the SEC a registration statement within 15 days of the date of the Registration Rights

and (ii) have the registration statement declared effective by the SEC within 30 days after the date the registration statement

is filed with the SEC, but in no event more than 90 days after the registration statement is filed.

Below is a table of all puts made by the Company

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Effective Price per Share

Concern Uncertainty

As shown in the accompanying

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.

These factors, as relative

to capital raising activities, create substantial doubt as to our ability to continue as a going concern.

We are seeking to raise additional

capital and are targeting strategic partners in an effort to accelerate the sales and marketing of our products and begin generating revenues.

Our ability to continue as a going concern is dependent upon the success of future capital offerings or alternative financing arrangements,

expansion of our operations and generating sales.

The accompanying financial statements do not include any adjustments that might be necessary

should 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;

Prior to the sales being made, GHS agreed to purchase

the shares without an effective registration statement in place, and, as such, the shares were restricted.

Going Concern Uncertainty

As shown in the accompanying financial statements,

we generated net losses of $536,398 and $14,799,264 for the three-months ended March 31, 2024 and 2023, respectively, and net cash used

in operating activities of $91,687 and $2,323,783, respectively.

As of March 31, 2024, the Company’s current liabilities exceeded

its current assets by $18,532,908 and has an accumulated deficit of $67,909,611.

As of March 31, 2024, the Company had $990 of cash.

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.

We will require additional funding to finance

the growth of our operations and achieve our strategic objectives.

These factors, as relative to capital raising activities, create substantial

doubt as to our ability to continue as a going concern.

We are seeking to raise additional capital and are targeting strategic partners

in an effort to accelerate the sales and marketing of our products and begin generating revenues.

Our ability to continue as a going concern

is dependent upon the success of future capital offerings or alternative financing arrangements, expansion of our operations and generating

The accompanying financial statements do not include any adjustments that might be necessary should 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, management cannot make any assurances that such financing will be secured.

Currency Risk

the Company is a net receiver of currencies other than the U.S.

Accordingly, changes in exchange rates, and in particular a strengthening

dollar, will negatively affect the Company’s net sales and gross margins as expressed in U.S.

There is a risk

that the Company will have to adjust local currency product pricing due to competitive pressures when there has been significant volatility

in foreign currency exchange rates.

of Operations

Company’s revenues are generated primarily from the sale of our services, which consist primarily of advanced technology solutions

for integrated communications and security systems, as well as habitat management.

The Company’s sales of products are primarily

generated from our TJM subsidiaries.

The Company’s

future revenues will be derived from the following, among other things.

Foreign Currency Risk

In general, the Company is a net receiver of currencies

other than the U.S.

Accordingly, changes in exchange rates, and in particular a strengthening of the U.S.

dollar, will negatively

affect the Company’s net sales and gross margins as expressed in U.S.

There is a risk that the Company will have to adjust

local currency product pricing due to competitive pressures when there has been significant volatility in foreign currency exchange rates.

Results of Operations

For the Three-months Ended March 31, 2024 and

Since 2021, we have recognized revenue derived

from the acquisitions of our subsidiaries consummated during the three months ended March 31, 2024 through present.

The Company’s revenues are generated primarily

from the sale of our services, which consist primarily of advanced technology solutions for integrated communications and security systems,

as well as habitat management.

The Company’s sales of products are primarily generated from our TJM subsidiaries.

The Company’s future revenues will be derived

from the following, among other things.

· 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;

· 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;

· market our products and services to new customers.

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, the Company also maintains multiple contracts for future material

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

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

While 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, the Company also maintains multiple contracts for future material revenues, including part of framework contracts

that will be recognized during future reporting periods.

For the three-months ended March 31, 2024, total

revenues were $10,850 compared to $1,537,833 for the three-months ended March 31, 2023, a decrease of $1,526,983.

The decrease was primarily

due to no revenus achieved by Wildlife, Optilan and TJM Electronics West, Inc given capital and resources restraints.

The breakdown of

revenues by entity for the three-months ended March 31, 2024 and 2023 is as follows:

Three Months Ended

Cost of Revenues and Gross Margin

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 of the loss.

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

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

For the three-months ended March 31, 2024, cost

of revenues was $199 compared to $1,226,792 for the three-months ended March 31, 2023, a decrease of $1,226,593.

The decrease was attributable

to lower revenues from Wildlife, Optilan and TJM Electronics West, Inc.

Gross (loss) / profit for the three-months ended

March 31, 2024 was $10,651 with a gross (loss) profit of 98% compared to $311,041 for the three-months ended March 31, 2023 with a 20%

gross margin.

Operating Expenses

Selling, general and administrative expenses for

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

three-months ended March 31, 2024 decreased by $856,722 to $157,111 from $1,013,833 for the three-months ended March 31, 2023.

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

Salaries, wages and payroll taxes for three-months

ended March 31, 2024 decreased to $211,877 from $1,547,208 for the three-months ended March 31, 2023.

The decrease primarily consisted

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

in Note 1, management determined that certain events and circumstances occurred that indicated that the carrying amount of the Company’s

reporting unit may not be recoverable.

The qualitative assessment was primarily due to the customer contracts held by Optilan (UK) Limited

and the associated revenue projections by the UK subsidiary that is subject to the potential winding up.

As such, the Company compared

the fair value of the reporting unit to the carrying amounts and recorded an impairment loss of $6,925,137 pertaining to impairment and

goodwill in the consolidated statements of operations.

The Company recorded impairment of the indefinite-lived intangible asset of $356,260,

and impairment of goodwill of $6,568,877.

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 September 30, 2023.

of reduced headcount at each subsidiary.

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

Professional fees for the three-months ended March

31, 2024 decreased to $157,371 from $2,950,698 for the three-months ended March 31, 2023 due to decrease in revenue.

Depreciation and amortization for three-months

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

ended March 31, 2024 decreased to $19,288 from $231,234 for the three-months ended March 31, 2023.

This decrease is primarily due to the

sale of some subsidiary property, plant and equipment.

During the three-months ended March 31, 2024 and

2023, the Company recorded $0 and $6,809,166, respectively, in impairment on the Company’s goodwill and intangible assets

Other Income (Expense)

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

For the three-months ended March 31, 2024, we

had other expense of ($1,402) compared to other expense of ($193,190) during three months ended March 31, 2023.

The decrease is due to

decrease in interest expense.

Net Loss from Continuing Operations

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

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

of continuing operations of $536,398 and $14,799,264 for the three-months ended March 31, 2024 and 2023, 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 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

development, testing and marketing of our products and to pay for ongoing operating expenses.

We anticipate adding consultants for technology

development and the corresponding operations of the Company, but this will not occur prior to obtaining additional capital.

is currently in the process of looking for additional investors.

Currently, loans from banks or other lending sources for lines of credit

or similar short-term borrowings are not available to us.

We have been able to raise working capital to fund operations through the issuances

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

As of September 30, 2023, our current liabilities

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

During the three-months

ended March 31, 2024, we had $40,580 in cash proceeds from our equity financings compared to $2,087,801 in 2023.

As of March 31, 2024, we had cash of $990 compared

to $11,912 as of March 31, 2023.

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

working capital to complete development, testing and marketing of our products and to pay for ongoing operating expenses.

We anticipate

adding consultants for technology development and the corresponding operations of the Company, but this will not occur prior to obtaining

additional capital.

Management is currently in the process of looking for additional investors.

Currently, loans from banks or other lending

sources for lines of credit or similar short-term borrowings are not available to us.

We have been able to raise working capital to fund

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

As of March 31,

2024, our current liabilities exceeded our current assets by $18,532,909.

Several of our significant operating subsidiaries

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Cash Flows from Operating Activities

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 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 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.

During the three-months ended March 31, 2024,

net cash used in operating activities was $91,687 resulting from our net loss of $536,398, partially offset by non-cash charges of $ 30,795

primarily driven by our bad debt expense and issuance of common stock for legal settlement.

In 2023, we had cash used in operating activities

of $2,323,783 resulting from our net loss of $14,799,264, partially offset by non-cash charges of $11,491,421 primarily driven by impairment

charges, bad debt expense and the issuance of common stock for a legal settlement.

Cash Flows from Investing Activities

During the three-months ended March 31, 2024,

we had net cash used in investing activities of $ 59,817.

During the three-months ended March 31, 2023,

we had net cash used in investing activities of $817,749, including $167,894 in notes and $449,110 in advances to GSD, as well as our

joint venture investment of $98,125 and purchase of property and equipment of $102,350.

Cash Flows from Financing Activities

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.

During the three-months ended March 31, 2024,

net cash provided by financing activities was $ 140,580 which was primarily comprised of proceeds from the issuance of common stock of

During the three months ended March 31, 2023,

net cash provided by financing activities was $2,061,762 which was primarily comprised of proceeds from the sale of common stock of $2,087,801,

less net repayments of loans of $26,039.

Factors That May Affect Future Results

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Recent Accounting Pronouncements

In April 2019, the FASB issued ASU 2019-04, Codification

Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging , and Topic 825, Financial

Instruments, which amends and clarifies several provisions of Topic 326.

In May 2019, the FASB issued ASU 2019-05, Financial Instruments-Credit

Losses (Topic 326):

Targeted Transition Relief , which amends Topic 326 to allow the fair value option to be elected for certain financial

instruments upon adoption.

ASU 2019-10 extended the effective date of ASU 2016-13 until December 15, 2022.

The Company adopted this new

guidance, including the subsequent updates to Topic 326, on January 1, 2023 and the adoption did not have a material impact on the Company’s

condensed consolidated financial statements and related disclosures.

In November 2021, the FASB issued ASU No.

Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , issued

by the Financial Accounting Standards Board.

This ASU requires entities to recognize and measure contract assets and contract liabilities

acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606).

The update will

generally result in the recognition of contract assets and contract liabilities at amounts consistent with those recorded by the acquiree

immediately before the acquisition date rather than at fair value.

The Company expects that there would be no material impact on the Company’s

condensed consolidated financial statements upon the adoption of this ASU.

In August 2020, the FASB issued ASU 2020-06, which

simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for convertible

debt with a cash conversion feature and convertible instruments with a beneficial conversion feature.

As a result, entities will not separately

present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless

certain other conditions are met.

The elimination of these models will reduce reported interest expense and increase reported net income

for entities that have issued a convertible instrument that is within the scope of ASU 2020-06.

ASU 2020-06 is applicable for fiscal years

beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020.

adopted ASU 2020-06 on January 1, 2022 and the adoption of this ASU did not have a material impact on the Company’s consolidated

financial statements and related disclosures.

Quantitative and Qualitative Disclosures

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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