What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-12-12 compared with 2023-08-31 · 487 added, 368 removed, 87 unchanged (91% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations

This Management’s

Discussion and Analysis of Financial Condition and Results of Operations contain certain forward-looking statements.

Historical results

may not indicate future performance.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

This Management’s Discussion and Analysis

of Financial Condition and Results of Operations contain certain forward-looking statements.

Historical results may not indicate future

Our forward-looking statements reflect our current views about future events;

are based on assumptions

and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated

by these statements.

Factors that may cause differences between actual results and those contemplated by forward-looking statements include,

but are not limited to, those discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended

December 31, 2022.

We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that

might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements.

we cannot guarantee future results, events, levels of activity, performance, or achievements

are based on assumptions and are subject to

known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements.

Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited

to, those discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023.

We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any

facts, events, or circumstances after the date hereof that may bear upon forward-looking statements.

Furthermore, we cannot guarantee

future results, events, levels of activity, performance, or achievements

Critical Accounting Policies

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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

In the three months ended March 31, 2023, the Company evaluated changes in circumstances as a result of the Optilan Liquidation

which indicated that the carrying amount of Optilan’s long-lived assets may not be recoverable.

As such, the Company recorded impairment

expense of intangibles of $356,260 and goodwill of $6,452,906.

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

DarkPulse, Inc., a Delaware corporation (the “ Company ”

or “ DarkPulse ”), is a technology and research and development company focused on the manufacture, sale, installation,

and monitoring of laser sensing systems based on its patented BOTDA dark-pulse sensor technology.

The Company develops, markets, and distributes

a full suite of engineering, monitoring, installation and security management solutions for critical infrastructure/key resources to both

industries and governments.

Coupled with our patented BOTDA technology, DarkPulse provides its customers a comprehensive data stream of

critical metrics for assessing the health and security of their infrastructure.

Our systems provide rapid, precise analysis and responsive

activities predetermined by the end-user customer.

The Company’s activities since inception have consisted of developing various

solutions, obtaining patents and trademarks related to its technology, raising capital, acquisition of companies deemed to expand global

operations and/or capabilities, creating key partnerships to expand our suite of products and services.

Our activities have evolved to

a sales-focused mission since the successful completion of our BOTDA system in December 2020.

Headquartered in 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 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.

or “ DarkPulse ”), is a technology focused on the manufacture, sale, installation, and monitoring of laser sensing systems

based on its patented BOTDA dark-pulse sensor technology.

The Company develops, markets, and distributes a full suite of engineering,

monitoring, installation and security management solutions for critical infrastructure/key resources to both industries and governments.

Coupled with our patented BOTDA technology, DarkPulse provides its customers a comprehensive data stream of critical metrics for assessing

the health and security of their infrastructure.

Our systems provide rapid, precise analysis and responsive activities predetermined by

the end- user customer.

The Company’s activities since inception have consisted of developing various solutions, obtaining patents

and trademarks related to its technology, raising capital, acquisition of companies deemed to expand global operations and/or capabilities,

creating key partnerships to expand our suite of products and services.

Our activities have evolved to a sales-focused mission since the

successful completion of our BOTDA system.

Headquartered in Houston, Texas, DarkPulse is

a globally-based technology company with presence through its subsidiaries in the, 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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The sensing and monitoring capabilities offered by DarkPulse

and our subsidiary companies operate in the air, land, sea.

Our patented technology provides rapid, precise analysis to protect and safeguard

oil and gas pipelines above or below ground, physical security countermeasures, mining operations, and other critical infrastructure/key

resources subject to vulnerability or risk.

Our patented brillouin scattering distributed fiber sensing system is best in class.

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.

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.

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 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, Optilan, a company

headquartered in Coventry, United Kingdom whose focus is in 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;

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;

Optilan India, PVT located in Kilpauk, Chennai India and Optilan Communication &

Security Systems, Ltd located in Ankara, Turkey provide project engineering & design, system provisioning and contract bid services

globally and throughout Europe;

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

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of its customers;

and TJM Electronics West, Inc., a company headquartered in Arizona who is a U.S.

manufacturer and tester of advanced

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

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

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

Change in Ownership in Previously Consolidated Subsidiary Results

in Deconsolidation in the Current Period

On June 28, 2023, the county court at Portsmouth,

England made a winding up order raised by a (non-related party) creditor against the Company's subsidiary Optilan (UK) Limited.

The subsidiary

on that date ceased conducting further business and the director’s powers terminated.

The consolidation of subsidiaries owned by

Optilan (UK) Limited was no longer under its control as defined by ASC 810 (Consolidation).

This compulsory liquidation resulted in a

combined “Loss on Deconsolidation” of Optilan (UK) Limited and its subsidiaries in the amount of $1,642,795.

The subsidiaries of Optilan (UK) Limited are solvent

and continue to operate.

The Company will retain no measurable residual value nor direct or indirect investment in Optilan, its subsidiaries

or its assets.

The Company will have no continuing involvement with Optilan (UK) Limited, including its subsidiaries, and will not be

owned or controlled by any related party of the Company.

Recent Events

Liquidation/winding

up of Optilan (UK) Limited

2023, Eversheds Sutherland (International) LLP, a creditor of Optilan (UK) Limited, filed a petition to wind up (“Winding up Petition”)

Optilan (UK) Limited, a wholly owned subsidiary of the Company’s Subsidiary, Optilan HoldCo 3 Limited, and the matter was due to

be heard in the Portsmouth Combined Court Centre on June 28, 2023.

28, 2023, the High Court of Justice in the United Kingdom issued a winding-up order for the liquidation and winding up of the affairs

of Optilan (UK) Limited (“Optilan Liquidation”).

In conjunction with the order, the court appointed the Offical Receiver’s

Office (“OR”) to take the appointment as liquidator of Optilan (UK) Limited and take control of Optilan (UK) Limited’s

3, 2023, Optilan (UK) Limited received a letter from The Insolvency Service, an executive agency sponsored by the Department for Business

and Trade located in the U.K.

Pursuant to the letter of The Insolvency Services, the Company was required to provide information relating

to Optilan (UK) Limited to the Official Receiver’s Office (a government body of Plymouth, the United Kingdom) and attend an interview

with staff of the Official Receiver’s Office to review the prospect of recovering the assets of Optilan (UK) Limited for the benefit

of creditors.

The interview is scheduled for July 18, 2023.

confirming a plan of reorganization, arrangement or liquidation has been entered as of this filing.

The Company is an Unsecured creditor

of Optilan (UK) Limited and is at risk of losing any repayment of obligations due from Optilan (UK) Limited because there are several

intercompany relationships between the Company and Optilan (UK) Limited, the financial impact of any future claims and liabilities may

not be known for several months.

The Company has approximately $19.4 million intercompany payables due from Optilan (UK), which will increase

the Company liabilities for any obligations not repaid.

The Company expects the remaining assets held by Optilan (UK) Limited to be fully

impaired and reported as discontinued operations during the second quarter of 2023 as a result of the winding-up order for liquidation.

At the time of this filing the Company is still evaluating the full effects of the winding-up order for liquidation and the material adverse

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

evaluated the events and circumstances of Optilan (UK) Limited liquidation and determined that conditions existed as of March 31, 2023

to indicate that the carrying value of the Company’s goodwill and intangible assets may not be recoverable.

Refer to Notes 2 and

7 for further detail on the impairment analysis.

The Company expects the remaining assets held by Optilan (UK) Limited to be fully impaired

during the second or third quarter of 2023 as a result of the winding-up order for liquidation.

Lasty, the Company performed an analysis of the

trade receivables related to Optilan (UK) Limited and determined that an additional $2,364,977 may not be collectible pursuant to the

Optilan Liquidation.

As of March 31, 2023, the Company recorded a bad debt provision for this amount.

(UK) Limited has the following assets as of March 31, 2023, including in the accompanying unaudited condensed consolidated balance sheet

are as follows:

Contract assets

Property and equipment, net

Operating lease right-of-use assets

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.

a table of all puts made by the Company under the 2022 EFA during 2023:

Number of Common Shares Issued

Total Proceeds, Net of Discounts

Effective Price per Share

17, 2023, we entered into a Stock Purchase Agreement with an investor for the purchase of 11,441,647 shares of Common Stock in exchange

for $100,000.

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

in the accompanying financial statements, we generated net losses of $14,799,264 and $5,384,270 during the three months ended March 31,

2023 and 2022, respectively, and net cash used in operating activities of $2,323,783 and $6,288,501, respectively.

As of March 31, 2023,

our current liabilities exceeded its current assets by $ 15,955,423 and has an accumulated deficit of $60,574,902.

As of March 31, 2023,

we had $545,970 of cash.

Lastly, the Optilan Liquidation raises serious concerns about the viability of the Optilan (UK) Limited entity

and related operations of the Optilan subsidiaries.

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;

Liquidation/winding up of Optilan (UK) Limited

On May 3, 2023, Eversheds Sutherland (International)

LLP, a creditor of Optilan (UK) Limited, filed a petition to wind up (the “ Winding up Petition ”) Optilan (UK) Limited,

a wholly owned subsidiary of the Company’s Subsidiary, Optilan HoldCo 3 Limited, and the matter was due to be heard in the Portsmouth

Combined Court Centre on June 28, 2023.

On June 28, 2023, the High Court of Justice in

the United Kingdom issued a winding-up order for the liquidation and winding up of the affairs of Optilan (UK) Limited (the “ Optilan

Liquidation ”).

In conjunction with the order, the court appointed the Offical Receiver’s Office (the “ OR ”)

to take the appointment as liquidator of Optilan (UK) Limited and take control of Optilan (UK) Limited’s assets.

At the same time the court appointed the OR to

take the appointment as liquidator of Optilan (UK) Limited.

The OR has taken control of Optilan (UK) Limited’s assets.

ORs Office has initiated contact with Optilan but we still wait to receive details of the individual who will be taking the role of OR.

On July 3, 2023, Optilan (UK) Limited received

a letter from The Insolvency Service, an executive agency sponsored by the Department for Business and Trade located in the U.K.

to the letter of The Insolvency Services, the Company was required to provide information relating to Optilan (UK) Limited to the Official

Receiver’s Office (a government body of Plymouth, the United Kingdom) and attend an interview with staff of the Official Receiver’s

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

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

(UK) Limited and is at risk of losing any repayment of obligations due from Optilan (UK) Limited because there are several intercompany

relationships between the Company and Optilan (UK) Limited, the financial impact of any future claims and liabilities may not be known

for several months.

The Company has approximately $19.4 million intercompany payables due from Optilan (UK), which will increase the Company

liabilities for any obligations not repaid.

The remaining assets held by Optilan (UK) Limited were fully impaired in 2023 as a result

of the winding-up order for liquidation.

Nine-Months Ended September 30, 2024 Accounting Ana ly sis

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 Optilan Liquidation.

The Company recorded a bad debt provision for this amount.

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.

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 September 30,

Optilan (UK) Limited became subject to the control

of a government and was appointed an administrator.

In this situation, when the parent ceases to have a financial interest in a subsidiary

and does not retain an investment in that subsidiary, the parent should deconsolidate the subsidiary and recognize a gain or loss on deconsolidation

in accordance with ASC 810-10-40-5.

In addition, ASC 810-10-40-3A states when a parent

deconsolidates a subsidiary or derecognizes a group of assets, the parent no longer controls the subsidiary's assets and liabilities or

the group of assets.

The parent therefore shall derecognize the assets, liabilities, and equity components related to that subsidiary

or group of assets.

The equity components will include any noncontrolling interest as well as amounts previously recognized in accumulated

other comprehensive income.

If the subsidiary or group of assets being deconsolidated or derecognized is a foreign entity (or represents

the complete or substantially complete liquidation of the foreign entity in which it resides), then the amount of accumulated other comprehensive

income that is reclassified and included in the calculation of gain or loss shall include any foreign currency translation adjustment

related to that foreign entity.

Upon the liquidation, on June 28, 2023, the Company

derecognized Optilan UK’s assets and liabilities and recorded a loss on consolidation of $1,624,795, which was recognized in other

income (expenses) in the consolidated statements of operations.

Included in the loss on consolidation of $1,642,795

are the gains on intercompany receivables and payables and currency translation adjustment $12,721,532 and $1,545,008 respectively, offset

by the net loss on impairment of investments of $12,623.

In addition, the allowance of $2,422,457 was recorded

against receivables that have been deemed uncollectible.

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 under the 2022 EFA

Number of Common

Shares Issued

Total Proceeds, Net of

Effective Price

On January 17, 2023, we entered into a Stock Purchase

Agreement with an investor for the purchase of 11,441,647 shares of Common Stock in exchange for $100,000.

April 28, 2023 we entered an Equity Financing 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, which was then superseded by the

Thrid Amended Equity Financing Agreement dated August 14, 2024 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 12 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 under the EFA during

Number of Common

Shares Issued

Total Proceeds, Net of

Effective Price

Below is a table of all puts made by the Company under the EFA during

Number of Common

Shares Issued

Total Proceeds, Net of

Effective Price

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 $3,540,148 and $ 19,915,940 for the nine-months ended September 30, 2024 and 2023, respectively, and net cash

provided (used) in operating activities of $29,782 $4,066,096, respectively.

As of September 30, 2024, the Company’s current

liabilities exceeded its current assets by $20,535,287 and has an accumulated deficit of $70,910,772.

As of September 30, 2024, the

Company had $165,186 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,

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

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;

3 unchanged sentences

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.

three months ended March 31, 2023, total revenues were $1,537,833 compared to $2,018,333 for the three months ended March 31, 2022, a

decrease of $480,500.

The decrease was primarily due to lower revenues achieved by Wildlife and Optilan due to decreased operations given

capital and resources restraints.

The breakdown of revenues by entity for the three months ended March 31, 2023 and 2022 is as follows:

Three Months Ended

Remote Intelligence

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 September 30, 2024,

total revenues were $30,671 compared to $82,071 for the three-months ended September 30, 2023, a decrease of $ 51,400.

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

For the nine-months ended September 30, 2024,

total revenues were $ 55,839 compared to $2,032,673 for the nine-months ended September 30, 2023, a decrease of $1,976,834.

decrease was primarily due to no revenues from Optilan as a result of the de-consolidation and TJM Electronics West, Inc given capital

and resources restraints.

Cost of Revenues and Gross Margin

For the three months ended March 31, 2023, cost of

revenues was $1,226,792 compared to $2,348,567 for the three months ended March 31, 2022, a decrease of $1,121,775.

Gross profit (loss) for the three months ended

March 31, 2023 was $311,041 with a gross margin of 20.2% compared to $(330,234) for the three months

ended March 31, 2022 with a (16.4)% gross margin.

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.

The Company has undertaken internal procedures during its bid process to assure that such practices

will not occur in the future.

In 2023, gross profit increased due to more normalized costs related to revenue as Optilan performed new,

profitable projects.

Approximately $240,000 of the gross profit was due to the fiber business which generates higher gross profits than

other projects.

For the three-months ended September 30, 2024,

cost of revenues was $ 0 compared to $3,005 for the three-months ended September 30, 2023, a decrease of $ 3,005.

The decrease was mainly

attributable to lower cost of revenues from Optilan and TJM Electronics West, Inc.

For the nine-months ended September 30, 2024,

cost of revenues was $870 compared to $2,414,645 for the nine-months ended September 30, 2023, a decrease of $2,413,775.

was mainly attributable to lower cost of revenues from TJM Electronics West, Inc and Optilan deconsolidation.

Gross (loss) profit for the three-months ended

September 30, 2024 was $30,671 with a gross (loss) profit of 100% compared to 79,066 for the three- months ended September 30, 2023 with

a 96% gross margin.

Gross (loss) profit for the nine-months ended

September 30, 2024 was $54,969 with a gross (loss) profit of 98% compared to ($381,972) for the nine- months ended September 30, 2023

with a (19%) gross margin.

Operating Expenses

Selling, general and administrative expenses for

three months ended March 31, 2023 increased by $35,625 to $1,013,833 from $978,208 for the three months ended March 31, 2022.

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

three-months ended September 30, 2024 decreased by $256,294 to $146,575 from $402,869 for the three-months ended September 30, 2023.

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

Selling, general and administrative expenses for

nine-months ended September 30, 2024 decreased by $ 1,326,365 to $474,001 from $1,800,266 for the nine-months ended September 30, 2023.

The decrease primarily consisted of decrease in consultant costs, legal, insurance and information technology expenses.

Salaries, wages and payroll taxes for three-months

ended March 31, 2023 decreased to $1,547,208 from $1,972,067 for the three months ended March 31, 2022.

ended September 30, 2024 decreased to $185,000 from $253,622 for the three-months ended September 30, 2023.

The decrease primarily consisted

of reduced headcount at each subsidiary.

The Company performed an analysis of the trade

receivables related to Optilan (UK) Limited and determined that an additional $2,364,977 may not be collectible pursuant to the Optilan

As of March 31, 2023, the Company recorded a bad debt provision for this amount.

Professional fees for the three months ended March

31, 2023 increased to $2,950,698 from $1,538,103 for the three months ended March 31, 2022.

This increase primarily consisted of $1,989,900

in non-cash expenses due to the issuance of common stock per the settlement of an litigation matter, partially offset by lower legal fees

incurred in 2023.

During the three months ended March 31, 2022,

the Company recorded a gain on forgiveness of payables of $35,750.

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 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.

As such, the Company compared the fair value of the reporting unit to the carrying amounts and recorded an impairment

loss of $6,809,166 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 $6,452,906.

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

Salaries, wages and payroll taxes for nine-months

ended September 30, 2024 decreased to $581,877 from $2,379,730 for the nine-months ended September 30, 2023.

The decrease primarily consisted

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 September

30, 2024 increased to $226,026 from ($40,235) for the three-months ended September 30, 2023.

Professional fees for the nine-months ended September

30, 2024 decreased to $406,654 from $3,166,153 for the nine-months ended September 30, 2023 due to reduced legal and auditor fees.

Depreciation and amortization for three-months

ended March 31, 2023 and 2022 was $231,234 and $228,614, respectively.

ended September 30, 2024 decreased to $31,837 from $44,502 for the three-months ended September 30, 2023.

This decrease is primarily due

to the Optilan deconsolidation and sale of some subsidiary property, plant and equipment.

Depreciation and amortization for nine-months

ended September 30, 2024 decreased to $95,709 from $496,485 for the nine-months ended September 30, 2023.

This decrease is primarily due

to the Optilan deconsolidation and sale of some subsidiary property, plant and equipment.

Bad Debt expense for the three-months ended September

20, 2024 decreased $11,506 from $11,506 for the three-months ended September 30, 2023.

Bad Debt expense for the nine-months ended September

20, 2024 decreased $2,374,146 from $2,433,963 for the nine-months ended September 30, 2023.

This was the result of the Optilan deconsolidation.

During the three-months ended September 30, 2024

and 2023, the Company recorded $0 and $115,971, respectively, in impairment on the Company’s goodwill and intangible assets

During the nine-months ended September 30, 2024

and 2023, the Company recorded $0 and $6,925,137, respectively, in impairment on the Company’s goodwill and intangible assets

Other Income (Expense)

For the three months ended March 31, 2023, we

had other expenses of ($193,189) compared to other expenses of ($372,794) for the three months ended March 31, 2022.

The decrease in other

expenses was primarily due to lower interest expense in 2023.

of the above, we reported a net loss of $14,799,264 and $5,384,270 for the three months ended March 31, 2023 and 2022, respectively.

For the three-months ended September 30, 2024,

we had other expense of 28,280 compared to other expense of ($521,353 ) during three months ended September 30, 2023.

The decrease is

due to FMV of derivatives.

For the nine-months ended September 30, 2024,

we had other expense of ($1,977,059 ) compared to other expense of ($2,332,234 ) during nine months ended September 30, 2023, mainly attributable

the termination of the SPAC.

Net Loss from Continuing Operations

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

of continuing operations of $587,043 and $998,581 for the three-months ended September 30, 2024 and 2023, respectively.

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

of continuing operations of $3,540,148 and $19,915,940 for the nine-months ended September 30, 2024 and 2023, respectively.

Liquidity and Capital Resources

1 unchanged sentence

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

During the three months

ended March 31, 2023, we had $2,087,801 in cash proceeds from our equity financings compared to $7,700,000 in 2022.

31, 2023, we had cash of $545,970 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.

Management is currently in the process of looking for additional

Currently, loans from banks or other lending sources for lines of credit or similar short-term borrowings are not available

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, 2023, our current liabilities exceeded our current assets by $15,955,423.

the Optilan Liquidation raises serious concerns about the viability of the Optilan (UK) Limited entity and related operations of the Optilan

subsidiaries.

During the three-months ended September 30, 2024,

we had $474,205 in cash proceeds from our equity financings compared to $334,115 in 2023.

During the nine-months ended September 30, 2024,

we had $ 696,205 in cash proceeds from our equity financings compared to $3,090,717 in 2023.

As of September 30, 2024, we had cash of $165,579

compared to $11,912 as of December 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 September 30, 2024, our current liabilities exceeded our current assets by $20,535,288.

Several of our significant operating subsidiaries

9 unchanged sentences

Cash Flows from Operating Activities

three months ended March 31, 2023, net cash used by operating activities was $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.

In 2023, we had cash provided by our operating assets and liabilities of $984,059 primarily driven by increases in

accounts payable and contract liabilities.

During the three months

ended March 31, 2022, net cash used by operating activities was $6,288,501, resulting from our net loss of $5,384,270, partially offset

by non-cash gains of $372,413.

In 2022, we had cash used in our operating assets and liabilities of $531,817 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,

2024, net cash used in operating activities netwas $29,782 resulting from our net loss of $3,540,148 partially offset by non-cash charges

of $1,808,120 primarily driven by our loss on equity investment resulting from the “SPAC” termination.

In 2023, we had cash

used in operating activities of $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.

Cash Flows from Investing Activities

During the three months ended March 31, 2023,

During the nine-months ended September 30, 2024, we had net cash used

in investing activities of $ 120,248.

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 GSD, as well as our

joint venture investment of $113,124 and purchase of property and equipment of $102,350.

During the three months ended March 31, 2022,

we had net cash used in investing activities of $64,980 due to deposits.

Cash Flows from Financing Activities

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.

During the three months ended March 31, 2022,

net cash provided by financing activities was $7,700,000, comprised of proceeds from the sale of common stock from offering of $7,700,000.

During the nine-months ended September 30, 2024,

net cash provided by financing activities was $1,623,081 of which $1,043,131 was comprised of proceeds from the issuance of common stock.

During the nine-months ended September 30, 2023,

net cash provided by financing activities was $3,090,717 which was comprised of proceeds from convertible notes of $50,000 and the sale

of common stock of $3,067,764, less repayments of loans $27,047.

Factors That May Affect Future Results

19 unchanged sentences

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.

Quantitative and Qualitative Disclosures

About Market Risk

As a smaller reporting company, the Company has

elected not to provide the disclosure required by this item.

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 About Market Risk

As a smaller reporting company, the Company has elected not to provide

the disclosure required by this item.

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/A

Item 2. Management’s Discussion and Analysis