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Item 1A. Risk Factors

2026-04-14 compared with 2025-04-14 · 61 added, 145 removed, 1038 unchanged (17% of the section changed)

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If we default on the Secured Debenture, the secured holder could take possession of our assets, including our patents and other intellectual property.

Several of the convertible notes issued by us are in litigation with uncertain outcomes.

Our stockholders have limited voting power compared to the holder of our Series A Preferred Stock.

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Any significant disruption in our technology could adversely impact our brand and reputation and our business, operating results, and financial condition.

Certain large customers provide a significant share of our revenue and the termination of such agreements or reduction in business with such customers could harm our business.

If we were to lose or were unable to renew these and other client contracts at favorable terms, our results of operations and financial condition may be adversely affected.

There is no assurance that we will achieve profitability or that our revenue and business models will be successful.

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Risks Related to Our Business

Our former wholly owned subsidiary, Optilan

(UK) Limited, is in liquidation.

As an unsecured creditor, we are at risk of losing significant repayment obligations due from Optilan

(UK) Limited.

On May 3, 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.

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 (“ Optilan

Liquidation ”).

In conjunction with the order, the court appointed the Official Receiver’s Office (“ 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 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 as of the date hereof

against Optilan (UK) Limited and Evelyn Partners continues to liquidate the company’s assets.

We are an unsecured creditor of Optilan (UK) Limited

and are 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.

We have approximately $19.4 million intercompany payables due from Optilan (UK), which will increase our liabilities for any obligations

We expect the remaining assets held by Optilan (UK) Limited to be fully impaired and reported as Loss on Deconsolidation during

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

We are still evaluating the full effects of the winding-up

order for liquidation and the material adverse effects it will have on our continued operations and ability to meet future obligations.

In the event we lose the repayment obligations of Optilan (UK) Limited, our financial condition could be materially adversely affected.

Due to the failure of GSD to consummate

a business combination with DarkPulse by February 9, 2024, GSD will be forced to liquidate, which may make the shares of GSD owned by

DarkPulse worthless and DarkPulse may be unable to recoup any expenses spent on acquiring securities of GSD and loans to GSD.

On January 23, 2024,

the BCA was terminated by mutual consent of the parties thereto.

Although, as the Sponsor of GSD, the Company still owns all the issued

and outstanding shares of Class B Common Stock of GSD, all legal rights the Company had under the BCA have been terminated.

had until February 9, 2024 to consummate a business combination.

Due the fact that GSD did not consummate a business combination by February

9, 2024, there will be a mandatory liquidation and subsequent dissolution.

or about April 17,2024 GSD has redeemed the remaining public shares and has been liquidated and dissolved.

The Company may be subject

to claims of creditors based on the type and nature of claims stemming from this transaction, however any such prospective claims at this

point in time are speculative at best.

GSD is a blank check

company with limited resources.

Since there are limits on use of the Trust Funds for GSD’s working capital in connection with a

business combination, GSD must rely on DarkPulse, its Sponsor, management or outside sources to pay for the various expenses associated

with completing a business combination.

For this purpose, DarkPulse has advanced to GSD non-interest-bearing working capital loans.

of January 23, 2024, GSD had issued to DarkPulse non-interest bearing non-convertible promissory notes for working capital loans in the

principal amount of $679,582.

In addition, on October 12, 2022, DarkPulse paid Gladstone Sponsor, LLC (GSD’s original sponsor) $1,500,000

for 2,623,120 shares of Class B Common and 4,298,496 Private Placement Warrants issued by GSD to Gladstone Sponsor, LLC in order to become

GSD’s Sponsor.

DarkPulse has also expended an additional estimated $1,142,241 to third-party service providers in connection with

the attempted business combination with GSD.

Together, DarkPulse expended an estimated aggregate of $3,321,823 in connection with the

attempted business combination with GSD.

All funds loaned to GSD

by DarkPulse can only be repaid only from funds held outside of GSD’s Trust Account and GSD does not have material funds held outside

of its Trust Account.

Due to the fact that GSD failed to complete a business combination by February 9, 2024, it will now be forced to

DarkPulse, as the Sponsor of GSD and owner of an aggregate of 2,623,120 shares of Class B Common Stock and 4,298,496 GSD Private

Placement Warrants, each of which is exercisable to purchase one share of Class A Common Stock of GSD, will not be able to participate

in the liquidation as a holder of Class B Common Stock of GSD due to DarkPulse having agreed to waive its rights to any liquidation distributions,

which means the shares of Class B Common Stock of GSD owned by DarkPulse are worthless.

As a result of GSD’s liquidation, DarkPulse’s

investment in GSD will be worthless and DarkPulse will be unable to recoup its expenses.

Our former wholly owned subsidiary, Optilan (UK) Limited, is

in liquidation.

As an unsecured creditor, we are at risk of losing significant repayment obligations due from Optilan (UK) Limited.

On June 28, 2023, the High Court of Justice in the United Kingdom issued

a winding-up order for the liquidation of Optilan (UK) Limited.

Evelyn Partners LLP continues to liquidate the company's assets as of

the date of this filing.

The Company is an unsecured creditor of Optilan (UK) Limited with approximately

$19.4 million in intercompany payables due from Optilan (UK), which have been fully impaired.

There are no new claims against Optilan

(UK) Limited as of the date hereof.

However, the liquidation is ongoing and the financial impact of any future claims or recoveries remains

In the event we are unable to recover any portion of the obligations owed by Optilan (UK) Limited, or additional claims or

liabilities arise in connection with the liquidation, our financial condition could be materially adversely affected.

We may be adversely affected by natural

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of which could have an adverse effect on our future operating results.

Escalating global tensions, including the

conflict between Russia and Ukraine, could negatively impact us.

The ongoing conflict between Russia and Ukraine

could led to disruption, instability and volatility in global markets and industries that could negatively impact our operations.

government and other governments in jurisdictions in which we operate have imposed severe sanctions and export controls against Russia

and Russian interests and threatened additional sanctions and controls.

The impact of these measures, as well as potential responses to

them by Russia, is currently unknown and they could adversely affect our business, partners or customers.

If we default on the Secured Debenture, the secured holder could

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were to occur, investors would likely lose all of their investment.

Several of the convertible notes issued

by us are in litigation with uncertain outcomes.

We have issued several convertible notes which

are currently the subject of litigation (See “ Legal Proceedings ”).

The outcomes of each of these matters is uncertain

and we may be required to both expend large sums of resources on both defending against and pursuing our causes of action in each of these

In addition, there is no certainty that any outcome will be in favor of us and we may be required to pay settlements or judgments

the amounts of which may be material to us.

In the event that we do not achieve favorable outcomes to each of the outstanding legal proceedings

with convertible note holders, it could have a material adverse effect on us and our operations may fail.

Our future growth depends significantly

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including any caused by cyberattacks, may harm our reputation and our business, operating results, and financial condition.

We may incur significant liability as a

result of ongoing disputes.

We are a party to multiple legal disputes the

resolutions of which may adversely affect our business and results of operations.

We may be subject to various other legal proceedings,

arbitrations, and regulatory investigation matters as further described in “ Legal Proceedings ”.

If any of these matters

are resolved unfavorably to us, our business and results of operations may be adversely affected.

We have a limited operating history in an

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On August 14, 2024, we entered into the EFA 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 (the “ Contract Period ”) after effectiveness of a registration statement on Form S-1 of the underlying shares

of Common Stock.

The EFA grants us the right, from time to time at

our sole discretion (subject to certain conditions) during the Contract Period (as defined in the EFA), to direct GHS to purchase shares

GHS, as amended, 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 30 months (the “ Contract Period ”) after effectiveness of a registration statement on Form S-1 of the underlying

shares of Common Stock.

The EFA grants us the right, from time to time

at our sole discretion (subject to certain conditions) during the Contract Period (as defined in the EFA), to direct GHS to purchase shares

of Common Stock on any business day (a “ Put ”), provided that at least five Trading Days (as defined in the EFA) have

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ownership limitation while never holding more than 4.99% of our outstanding shares.

From August 2021 until April 14,

2025, GHS has purchased and sold 3,903,802,753 and 3,748,743,031 shares of our Common Stock, respectively.

From August 2021 until April 13, 2026, GHS has purchased

and sold 57,441,968 and 57,441,968 shares of our Common Stock, respectively.

Due to these limitations, we may be unable to

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Our independent registered public accounting firm

report on our audited financial statements for the years ended December 31, 2024 and 2023 indicates that there are a number of factors

that raise substantial risks about our ability to continue as a going concern.

Such factors identified in the report are our accumulated

deficit since inception, our failure to attain profitable operations, the excess of liabilities over assets, and our dependence upon obtaining

adequate additional financing to pay our liabilities.

If we are not able to continue as a going concern, investors could lose their investments.

reports (from two separate independent registered public accounting firms) on our audited financial statements for the years ended December

31, 2025 and 2024, each indicate that there are a number of factors that raise substantial risks about our ability to continue as a going

Such factors identified in the report are our accumulated deficit since inception, our failure to attain profitable operations,

the excess of liabilities over assets, and our dependence upon obtaining adequate additional financing to pay our liabilities.

not able to continue as a going concern, investors could lose their investments.

There is no assurance that we will achieve

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have an adverse effect on pour business, operating results and financial condition.

We may be unable to submit a Purchase Order

to our contract manufacturer on the anticipated timeline, which could materially delay the commercialization of our patented BOTDA technology.

We currently expect to submit a Purchase Order

to Sanmina Corp, our contract manufacturer, during Q2 2026 for the full manufacturing of our patented BOTDA sensor system hardware.

this expectation is subject to significant uncertainty, including the availability of sufficient working capital, the completion of final

engineering specifications, and other operational and market conditions.

We previously anticipated submitting this Purchase Order in an

earlier period, and the timeline has been extended.

There can be no assurance that we will submit the Purchase Order on the anticipated

timeline, or at all.

A further delay or failure to submit the Purchase Order would materially delay our ability to manufacture and sell

our patented BOTDA technology, which would have a material adverse effect on our business, financial condition, and results of operations.

We may be affected by fluctuations in currency

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

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

general economic conditions in either domestic or international markets, including the impact of pandemics.

Our operating results may fall below the expectations

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shares of common stock and 2,000,000 shares of “blank check” preferred stock.

In the future, we may issue our authorized but

previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders.

In the future, we may issue our authorized

but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders.

additional shares of our common stock or other securities that are convertible into or exercisable for our common stock in connection

with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business

The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of the

common stock.

We will need to raise additional capital in the near future to meet our working capital needs, and there can be no assurance

that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with these

capital raising efforts, including at a price (or exercise or conversion prices) below the price an investor paid for stock.

The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of

the common stock.

We will need to raise additional capital in the near future to meet our working capital needs, and there can be no

assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction

with these capital raising efforts, including at a price (or exercise or conversion prices) below the price an investor paid for stock.

Because the SEC imposes additional sales

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the following:

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

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

Geo-political events, such

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

Changes in our industry;

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entered into a Settlement Agreement pursuant to which the Company entered into a confession of judgment in favor of GS Capital in the

amount of $2,673,423.19 (the “ Balance ”).

Upon approval of the court on August 19, 2024, the Company will issue to GS

Capital free-trading and unrestricted shares of Common Stock pursuant to drawdown requests in the amounts determined by GS Capital, subject

to a 4.99% beneficial ownership limitation.

The shares will be issued a price per share equal to the average of the three lowest VWAPs

for the five prior trading days.

GS Capital will be allowed to sell, the greater of (1) in one week, no more than 1% of the total outstanding

shares of the Company on a non-cumulative basis at the “ask” price, and (2) 15% of the daily trading volume of the Common

Stock on any single trading day.

amount of $2,673,423 which has been reduced to $1,950,123 (the “ Balance ”).

After approval of the court on August 19,

2024, the Company will issue to GS Capital free-trading and unrestricted shares of Common Stock pursuant to drawdown requests in the amounts

determined by GS Capital, subject to a 4.99% beneficial ownership limitation.

The shares will be issued a price per share equal to the

average of the three lowest VWAPs for the five prior trading days.

GS Capital will be allowed to sell, the greater of (1) in one week,

no more than 1% of the total outstanding shares of the Company on a non-cumulative basis at the “ask” price, and (2) 15% of

the daily trading volume of the Common Stock on any single trading day.

Each drawdown will reduce the Balance.

The Company is required to reserve 2,500,000,000 shares of Common

The Company is required

to reserve 2,500,000,000 shares of Common Stock.

On August 19, 2024, the Eighth Judicial District

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issuances for the full amount of the Settlement Agreement are realized.

As of April 14, 2025, 450,000,000 shares have been issued pursuant

to the Settlement Agreement.

Based on the three lowest VWAP’s of our Common Stock for the five prior trading days on April 14, 2025,

we would have to issue approximately 272,896,666 shares of Common Stock to satisfy our remaining obligations.

Based on the estimated VWAP of our Common Stock on April 10, 2026,

we would have to issue approximately 196,982,121 shares of Common Stock to satisfy our obligations.

Risks Related to Government Regulation

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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-K

Item 1A. Risk Factors