What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-04-14 compared with 2025-04-14 · 260 added, 362 removed, 223 unchanged (74% of the section changed)

70 unchanged sentences

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:

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 were primarily generated from our TJM subsidiaries

are now generated from the Company’s subsidiary Optilan India Pvt Ltd.

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

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

We generally recognize product revenues at the time of shipment, provided that all other revenue recognition criteria have

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 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.

(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

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 satisfied.

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.

40 unchanged sentences

Business Overview

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

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 New York, 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

environmental solutions that provide safety and security infrastructure projects.

The sensing and monitoring capabilities offered by DarkPulse

operate in the air, land, sea.

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

above or below ground, physical security countermeasures, mining operations, and other critical infrastructure/key resources subject to

vulnerability or risk.

Our patented dark-pulse based BOTDA distributed fiber sensing system is best in class.

The Company is able to monitor

areas in around critical infrastructure buried or above ground including pipelines 100km or more in length and/ or localized pipes as

small as eight CM DIA, detecting internal anomalies before catastrophic failure.

We are developing an intelligent rock bolt to prevent

causalities and fatalities in mining operations and include a real time sensor system that can detect the location and movement of personnel

and equipment throughout a mining operation.

We monitor airflow, air quality, temperature, seismic events, etc.

Our sensors cover extended

areas, protecting an area from intrusion by detecting events at any location along the sensing cable.

Working safely every day is our

first core value and employees at DarkPulse and our subsidiary companies are recognized experts in their fields, providing comprehensive

services for all our clients' needs.

DarkPulse, Inc., a Delaware

corporation (the “ Company ” 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 Arizona,

DarkPulse is a globally-based technology company with presence through its subsidiaries in the United States, Canada, India and Turkey

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 environmental solutions that provide safety and security infrastructure projects.

The sensing and monitoring

capabilities offered by DarkPulse operate in the air, land,and sea.

We believe 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.

We are 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 diameter, DIA, detecting internal anomalies before catastrophic failure.

We are developing an intelligent rock bolt to prevent causalities and fatalities in mining operations and include a real time sensor

system that can detect the location and movement of personnel and equipment throughout a mining operation.

We monitor airflow, air quality,

temperature, seismic events, etc.

Our sensors cover extended areas, protecting an area from intrusion by detecting events at any location

along the sensing cable.

Working safely every day is our first core value and employees at DarkPulse and our subsidiary companies are

recognized experts in their fields, providing comprehensive services for all our clients' needs.

Our Subsidiaries

Our subsidiaries consist of:

DarkPulse UK Ltd,,

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

pipeline integrity systems, renewables and security;

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.

TerraData Unmanned, PLLC, a company headquartered in Florida who custom manufactures NDAA compliant drones

and unmanned ground crawlers to meet the needs of its customers;

Our subsidiaries consist

DarkPulse UK Ltd,, a company headquartered in, United Kingdom, DarkPulse Technologies FZCO located in UAE whose focus is in engineering,

telecommunications, energy, rail, critical network infrastructure, pipeline integrity systems, renewables and security;

Optilan India,

located in Kilpauk, Chennai India and Optilan Communication & Security Systems, Ltd located in Ankara, Turkey which provides

project engineering & design, system provisioning and contract bid services globally and throughout Europe.

TerraData Unmanned, PLLC,

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

Current Operations

As a result of the liquidation of Optilan, our

current operations now include:

DarkPulse, Inc., based in New York City, New York;

Terradata Unmanned PLLC, based in Florida;

Pvt Ltd Navi-Mumbai and Optilan Communications & Security Systems Ltd, based in Ankara Turkey.

Remote Intelligence, LLC and Wildlife

Specialists, LLC are no longer providing services as a result of redundant service offerings that are now being offered by TerraData Unmanned.

DarkPulse Manufacturing Inc.

(formerly TJM Electronics West, Inc.) is no longer providing products or services as a result of those products

and services now being contracted through Sanmina Corp.

We have recently completed development activities

3 dark-pulse BOTDA system and are pending a Purchase Order issuance to our contract manufacturer Sanmina Corp (NASDAQ:

for full manufacturing of our patented BOTDA sensor system hardware.

Once we have obtained funding, we will be submitting a Purchase Order

to Sanmina Corp.

We are currently in discussions with a lender who may fund the Purchase Order.

We also may rely on proceeds of this offering

to fund the Purchase Order.

Depending on the level of funding we receive, we estimate the initial Purchase Order will be for 10 to 30

We base our claims related to the technologies capabilities from both experimental data obtained during the creation of the patent

as well as real world POC deployments beginning in 2009 with most recent deployment in 2021.

There are also papers submitted and published

via IEEE and available online.

The system components include:

Patented hardware containing various electronic components and lasers.

software utilized to collect analog data and convert that data to digital data.

A user interface utilizing proprietary software as well

as Unity game engine for the VR capability component of the User Interface.

Deployment of the system begins with engineering design based

on Scope requirements and installation environment.

Our current operations

DarkPulse, Inc., based in Scottsdale, Arizona;

DarkPulse Technologies FZCO, Dubai UAE;Terradata Unmanned PLLC, based in

Optilan India Pvt Ltd based in Navi-Mumbai and Optilan Communications & Security Systems Ltd, based in Ankara Turkey.

Intelligence, LLC and Wildlife Specialists, LLC are no longer providing services as a result of redundant service offerings that are

now being offered by TerraData Unmanned.

DarkPulse Electronics Manufacturing Inc.

(formerly TJM Electronics West, Inc.) is no longer

providing products or services as a result of those products and services now being contracted through Sanmina Corp (NASDAQ:SANM).

We have recently completed

development activities of our Gen.

3 dark-pulse BOTDA system and are pending a Purchase Order issuance to our contract manufacturer Sanmina

Corp for full manufacturing of our patented BOTDA sensor system hardware.

We currently expect to submit a Purchase Order to Sanmina Corp

during Q2 2026, subject to the availability of sufficient working capital, completion of final engineering specifications, and other

The Company previously anticipated submitting this Purchase Order in an earlier period;

however, the timeline has been extended

as a result of ongoing working capital constraints and engineering specification requirements.

There can be no assurance that we will

submit such Purchase Order on the anticipated timeline, or at all.

This expectation constitutes a forward-looking statement subject to

the cautionary factors described herein.

The Company's ability to submit a Purchase Order to Sanmina Corp is directly dependent on its

ability to secure additional working capital.

As of December 31, 2025, the Company had $62,786 in cash and current liabilities exceeded

current assets by $19,637,276.

See " Liquidity and Capital Resources " and " Note 3 – Liquidity and Going Concern "

for additional discussion of the Company's liquidity position.

We base our claims related to the technologies capabilities from both

experimental data obtained during the creation of the patent as well as real world POC deployments beginning in 2009 with most recent

deployment in 2021.

There are also papers submitted and published via IEEE and available online.

The system components include patented

hardware containing various electronic components and lasers, proprietary software utilized to collect analog data and convert that data

to digital data, and a user interface utilizing proprietary software as well as Unity game engine for the VR capability component of

the User Interface.

Deployment of the system begins with engineering design based on Scope requirements and installation environment.

Fiber optic cable is then installed into the medium to be monitored.

The system is

then provisioned remotely by optical engineers.

Our business model, as it relates to hardware

sales, is “Just in Time” and maintaining a very low inventory.

Projects require several weeks of installation, design, and

engineering followed by the installation of fiber optic cables.

The average time required to build hardware units is less than the time

needed for the engineering and fiber installation process.

To date, we have yet to sell our patented BOTDA dark-pulse sensor system and

we have built two units for demonstration of the system to potential customers.

We are now able to sell our patented technology and related

The system is then provisioned remotely by optical engineers.

Our business model,

as it relates to hardware sales, is “Just in Time” and maintaining a very low inventory.

Projects require several weeks of

installation, design, and engineering followed by the installation of fiber optic cables.

The average time required to build hardware

units is less than the time needed for the engineering and fiber installation process.

To date, we have yet to sell our patented BOTDA

dark-pulse sensor system and we have built two units for demonstration of the system to potential customers.

We are now able to sell

our patented technology and related services.

We currently have no commitments to buy our units.

Our agreement with the University of New Brunswick

requires a royalty of 2% beginning April 24, 2018;

however, no royalties have been paid to the University of New Brunswick as the period

for royalties has expired prior to any sales of the patented technology.

The Company has no further requirement to pay royalties.

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

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.

Twelve-Months Ended December 31, 2024 Accounting Analysis

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

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

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 Discounts

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.

Our agreement with the

University of New Brunswick requires a royalty of 2% beginning April 24, 2018;

however, no royalties have been paid to the University

of New Brunswick as the period for royalties has expired prior to any sales of the patented technology.

We have no further requirement

to pay royalties.

On 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

Amended Equity Financing Agreement dated July 10, 2023, which was then superseded by the Third Amended Equity Financing Agreement dated

August 14, 2024 as amended (the “ EFA ”), and Registration Rights Agreement (the “ Registration Rights Agreement ”)

5 unchanged sentences

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 2023:

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

Number of Common

Shares Issued

Total Proceeds, Net of Discounts

Total Proceeds, Net of

Effective Price

*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.

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

the year ended December 31, 2025:

Number of Common

2 unchanged sentences

Effective Price

*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.

per Share ($)

Net Proceeds ($)

Going Concern Uncertainty

As shown in the accompanying consolidated financial

statements, we generated net losses of $ 3,893,859 and $21,723,043 during the years ended December 31, 2024 and 2023, respectively, and

net cash used in operating activities of $(1,514,351) and $(5,653,215), respectively.

As of December 31, 2024, the Company’s current

liabilities exceeded its current assets by $17,160,706 and has an accumulated deficit of $71,259,677 .

As of December 31, 2024, the Company

had $86,531 of cash.

Lastly, the Optilan Liquidation no longer raises serious concerns about the viability of the Optilan (UK) Limited

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;

As shown in the accompanying

consolidated financial statements, we generated net losses of $2,925,582 and $3,893,859 during the years ended December 31, 2025 and 2024,

respectively, and net cash used in operating activities of $(66,483) and $(1,514,351), respectively.

As of December 31, 2025, the

Company’s current liabilities exceeded its current assets by $19,721,196 and has an accumulated deficit of $74,226,493.

As of December 31, 2025, the Company had $62,786 of cash.

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 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;

however, management cannot make any assurances that such financing will be secured.

Foreign Currency Risk

Foreign Currency

In general, the Company is a net receiver of currencies

7 unchanged sentences

For the Years Ended December 31, 2025 and 2024

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 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.

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.

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.

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 year ended December 31, 2025, total revenues

were $126,836 compared to $2,020,971 for the year ended December 31, 2023, a decrease of $1,894,135.

The decrease was primarily due to

the Optilan liquidation and no revenue being generated by Wildlife, Remote and TJM Electronics West, Inc given capital and resources restraints.

The breakdown of revenues by entity for the years ended December 31, 2024 and 2023 is as follows:

were $308,492 compared to $126,836 for the year ended December 31, 2024, an increase of $181,656.

The increase was primarily due revenues

generated from Optilan India and TerraData Unmanned PLC.

The breakdown of revenues by entity for the years ended December 31, 2025 and

2024 is as follows:

Remote Intelligence

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For the year ended December 31, 2025, cost of

revenues was $2,266 compared to $2,446,756 for the year ended December 31, 2023, a decrease of $2,444,490.

The decrease was attributable

to the Optilan liquidation and no revenues being generated from Remote Intelligence, Wildlife Specialists, and TJM Electronics West, Inc.

revenues was $98,901 compared to $2,266 for the year ended December 31, 2024, an increase of $96,635.

The increase was attributable to

Optilan India revenues.

Gross (loss) profit for the year ended December

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Operating Expenses

Selling, general and administrative expenses for year

ended December 31, 2024 decreased by $1,562,273, or 77%, to $471,588 from $2,033,8612 for the year ended December 31, 2023.

primarily consisted of decreases in contractors, insurance and information technology expenses of operations that have been shuttered.

Selling, general and administrative expenses for

year ended December 31, 2025 increased by $408,132, or 87%, to $879,720 from $471,588 for the year ended December 31, 2024.

primarily consisted of increases in research and development and consultant fees.

Salaries, wages and payroll taxes for year ended

December 31, 2024 decreased by $1,805,595, or 69%, to $824,630 from $2,630,225 for the year ended December 31, 2023.

The decrease primarily

consisted of reduced headcount at each subsidiary.

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

December 31, 2025 increased by $73,289, or 9%, to $897,919 from $824,630 for the year ended December 31, 2024.

The increase primarily

consisted of a full year of payroll for Optilan India.

Professional fees for the year ended December

31, 2024 decreased by $2,592,916, or 83%, to $516,756 from $3,109,717 for the year ended December 31, 2023 due to decreased audit and

legal fees in 2023.

31, 2025 decreased by $275,056, or 53%, to $241,700 from $516,756 for the year ended December 31, 2024 due to decreased legal and professional

fees in 2025.

Depreciation and amortization for year ended December

31, 2025 decreased by $43,291, or 34%, to $85,198 from $128,489 for the year ended December 31, 2024.

This decrease is primarily due

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

This decrease is primarily due to

the sale of some subsidiary property, plant and equipment.

During the years ended December 31, 2025 and 2024,

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the Company recorded $741,380 and $59,817, respectively, in bad debt expense.

During the years ended December 31, 2025 and 2024,

the Company recorded a gain on partial extinguishment of debt of ($222,092) and $0 respectively.

Other Income (Expense)

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expense of ($481,829) compared to other expense of ($2,017,149) in 2024.

The increase is due to loss on equity investment of $1,500,000,

offset by the loss on deconsolidation of ($1,642,146) and a $1,484,799 gain on forgiveness of debt.

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

$3,893,859 and $21,723,043 for the years ended December 31, 2024 and 2023, respectively.

The decrease is primarily due to loss on equity investment of

$1,500,000, lower interest expense of $492,302 , offset by the increased expense in the change in fair market value of derivatives ($347,303)

and loss on disposal of assets of ($110,573).

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

of $2,925,582 and $3,893,859 for the years ended December 31, 2025 and 2024, respectively.

Liquidity and Capital Resources

We require working capital to fund the continued development

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

We require working capital to fund the continued

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

During the year ended December

31, 2025, we had $1,174,296 in cash proceeds from our equity financings compared to $3,946,075 in 2024.

As of December 31, 2024, we had cash of $86,531compared

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.

As of December 31, 2025, we had cash of $62,786

compared to $86,531 as of December 31, 2024.

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 December

31, 2024, our current liabilities exceeded our current assets by $17,160,706.

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 December 31, 2025, our current liabilities exceeded our current assets by $19,721,196.

Several of our significant operating subsidiaries

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used in operating activities was $66,483 resulting from our net loss of $2,925,582, partially offset by non-cash charges of $995,716

primarily driven by change in fair market of derivatives, bad debt expense, gain on partial extinguishment of debt, gain on forgiveness

of debt and loss on disposal of asset.

During the year ended December 31, 2024, net cash

used in operating activities was $1,514,351 resulting from our net loss of $3,893,859, partially offset by non-cash charges of $1,634,681

primarily driven by our loss on equity investment offset by Impairment of goodwill and issuance of common stock for legal settlement.

During the year ended December 31, 2023, net cash used in operating activities was $5,653,214 resulting from our net loss of $21,723,043,

partially offset by non-cash charges of $15,517,077 primarily driven by our bad debt expense and goodwill impairment.

Cash Flows from Investing Activities

During the year ended December 31, 2025, we had

net cash used in investing activities of $92,979, including writeoff of related party receivables of $59,817, and purchase of property

and equipment of $33,162.

net cash used in investing activities of $0.

During the year ended December 31, 2024, we had

net cash used in investing activities of $215,475, including a joint venture investment of $113,125, and purchase of property and equipment

net cash used in investing activities of $92,979, including write-off of related party receivables of $59,817, and purchase of property

and equipment of $33,162.

Cash Flows from Financing Activities

During the year ended December 31, 2024, net cash

provided by financing activities was $2,079,643 which was primarily comprised of proceeds from the sale of common stock of $3,946,075

During the year ended December 31, 2025, net

cash provided by financing activities was $946,741 which was primarily comprised of proceeds from the sale of common stock of $1,174,296

and proceeds from convertible notes of $160,000 less net repayments of loans of $387,555.

During the year ended December 31, 2023, net cash

provided by financing activities was $3,632,387 which was primarily comprised of proceeds from the sale of common stock of $3,502,272

During the year ended December 31, 2024, net

cash provided by financing activities was $2,079,643 which was primarily comprised of proceeds from the sale of common stock of $3,946,075

and proceeds from convertible notes of $0 less net repayments of loans of $1,866,432.

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Recent Accounting Pronouncements

In November 2024 the FASB issued ASU 2024-03 Income Statement —

Reporting Comprehensive Income (Subtopic 2220-40) which intends to improve the disclosures about a public business entity’s expenses

and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee

compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and

research and development).

In November 2024 the FASB issued ASU 2024-04 Debt with Conversion and

Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments to improve and clarify the requirements for determining

whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

In March 2024 the FASB issued ASU 2024-01, Compensation – Stock

Compensation Topic (718) contains amendments by adding an illustrative example to demonstrate how an entity should apply the scope guidance

in paragraph 718- 10-15-3 to determine whether profits interest and similar awards improve the understandability of paragraph 718-10-15-3

apply to all entities that enter into share-based payment transactions.

In March 2024 the FASB issued ASU 2024-02 Codification Improvements

which contains amendments to the Codification that remove references to various FASB Concepts Statements.

The Board has a standing project

on its agenda to address suggestions received from stakeholders on the Accounting Standards Codification and other incremental improvements

to generally accepted accounting principles (GAAP).

This effort facilitates Codification updates for technical corrections such as conforming

amendments, clarifications to guidance, simplifications to wording or the structure of guidance, and other minor improvements.

The resulting

amendments are referred to as Codification improvements.

In November 2024 the FASB issued ASU 2024-03 Income

Statement — Reporting Comprehensive Income (Subtopic 2220-40) which intends to improve the disclosures about a public business entity’s

expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory,

employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A,

and research and development).

In November 2024 the FASB issued ASU 2024-04 Debt

with Conversion and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments to improve and clarify the requirements

for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

In March 2024 the FASB issued ASU 2024-01, Compensation

– Stock Compensation Topic (718) contains amendments by adding an illustrative example to demonstrate how an entity should apply

the scope guidance in paragraph 718- 10-15-3 to determine whether profits interest and similar awards improve the understandability of

paragraph 718-10-15-3 apply to all entities that enter into share-based payment transactions.

In March 2024 the FASB issued ASU 2024-02 Codification

Improvements which contains amendments to the Codification that remove references to various FASB Concepts Statements.

The Board has

a standing project on its agenda to address suggestions received from stakeholders on the Accounting Standards Codification and other

incremental improvements to generally accepted accounting principles (GAAP).

This effort facilitates Codification updates for technical

corrections such as conforming amendments, clarifications to guidance, simplifications to wording or the structure of guidance, and other

minor improvements.

The resulting amendments are referred to as Codification improvements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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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 7. Management’s Discussion and Analysis