What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-20 compared with 2025-11-13 · 162 added, 202 removed, 303 unchanged (55% of the section changed)

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

This Management’s Discussion and Analysis

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The Company calculated the carrying

amounts of the reporting unit by utilizing the entities’ assets and liabilities at September 30, 2025, including the carrying value

amounts of the reporting unit by utilizing the entities’ assets and liabilities at March 31, 2026, including the carrying value

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

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

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.

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.

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

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

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

Business Overview

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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, Canada, India and

In addition to the Company’s BOTDA systems, through a series of strategic acquisitions the Company offers the manufacture,

sale, installation, and monitoring of laser sensing systems, oil and gas pipeline leak detection, physical security services, telecommunications

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

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

The Company is focused on expanding services through acquisitions and partnerships

to address global infrastructure and critical environmental resource challenges.

Headquartered in Scottsdale,

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

Turkey, and the United Arab Emirates.

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

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Our Subsidiaries

Our subsidiaries consist

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;

Our subsidiaries consist of:

DarkPulse UK Ltd,, a company headquartered

in, United Kingdom, DarkPulse Technologies FZCO whose focus is in engineering, telecommunications, energy, rail, critical network infrastructure,

pipeline integrity systems, renewables and security;

Optilan India, PVT Ltd.

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.

DP Technologies – FZCO in Dubai UAE focusing on Science and

Technology Consultancy, Building Maintenance & Model Makers and IT Infrastructure.

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.

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 customers.

Current Operations

Our current operations

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

Terradata Unmanned PLLC, based in Florida;

Optilan India Pvt Ltd based

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

DP Technologies – FZCO located in

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 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 expect to submit a Purchase Order to Sanmina Corp during

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.

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.

We have no further requirement

to pay royalties.

As a result of the liquidation of Optilan, UK Ltd our current operations

DarkPulse, Inc., based in Scottsdale, Arizona;

DarkPulse Technologies FZCO in Dubai, UAE;

Terradata Unmanned PLLC, based

Optilan India Pvt Ltd based in 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 (NASDAQ:

We have recently completed development activities of our Gen.

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 conditions.

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.

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.

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.

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 services.

have no commitments to buy our units.

On April 28, 2023 we entered an Equity Financing

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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 ”)

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.

August 14, 2024, as further amended by Amendment No.

1 to the Third Amended Equity Financing Agreement dated July 21, 2025 (as so amended,

the "EFA"), and the Amended and Restated Registration Rights Agreement dated July 9, 2025 (the “ Registration Rights

Agreement ”), with GHS Investments LLC ("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 30 months after effectiveness of a registration statement on Form S-1 of the

underlying shares of Common Stock.

The Registration Rights Agreement provides that

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

the year ended December 31, 2025:

Number of Common

Shares Issued

Total Proceeds, Net of

Total Proceeds,

Discounts ($)

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 ($)

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

the nine months ended September 30, 2025:

the quarter ended March 31, 2026:

Number of Common

Shares Issued

Total Proceeds, Net of

Discounts ($)

Total Proceeds,

Effective Price

per Share ($)

Net Proceeds ($)

Going Concern Uncertainty

As shown in the accompanying financial statements,

we generated net losses of $(1,504,701) and $(3,540,148) for the nine-months ended September 30, 2025 and 2024, respectively, and net

cash provided (used) in operating activities of $102,869 and of $29,782, respectively.

of September 30, 2025, the Company’s current liabilities exceeded its current assets by $18,517,073 and has an accumulated deficit

of $(72,752,633).

As of September 30, 2025, the Company had $44,499 of cash.

we generated net losses of $245,958 and $270,344 for the three-months ended March 31, 2026 and 2025, respectively, and net cash (used

in) in operating activities of $(340,593) and $78,774, respectively.

As of March 31, 2026, the Company’s current liabilities exceeded

its current assets by $19,692,440 and has an accumulated deficit of $74,471,258.

As of March 31, 2026, the Company had $53,371 of cash.

The Optilan (UK) Limited liquidation is ongoing;

the Company is an unsecured creditor with approximately $19.4 million in intercompany

payables due from Optilan (UK), which have been fully impaired.

There can be no assurance that the Company will recover any portion of

these amounts.

We will require additional

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Foreign Currency

In general, the Company is a net receiver of currencies

other than the U.S.

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.

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

There is a risk that the Company

will have to adjust local currency product pricing due to competitive pressures when there has been significant volatility in foreign

currency exchange rates.

Results of Operations

For the Three-Months

Ended September 30, 2025 and 2024

Ended March 31, 2026 and 2025

The Company’s revenues

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and security systems, as well as habitat management.

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

The Company’s sales of products are primarily generated from our subsidiary

Optilan India Pvt Ltd and TerraData Unmanned, PLLC.

The Company’s future

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For the three-months

ended September 30, 2025, total revenues were $32,206 compared to $30,671 for the three-months ended September 30, 2024, an increase of

The increase was primarily due to revenues generated by Optilan India Pvt, Ltd.

The breakdown of revenues by entity for the three-months

ended September 30, 2025 and 2024 is as follows:

Three-Months Ended September 30

ended March 31, 2026, total revenues were $18,518 compared to $141,018 for the three-months ended March 31, 2025, a decrease] of $122,500.

The decrease was due to lower revenues from Optilan India.

The breakdown of revenues by entity for the three-months ended March 31, 2026

and 2025 is as follows:

Three-Months Ended March 31

Remote Intelligence

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For the three-months

ended September 30, 2025, cost of revenues was $(658) compared to $0 for the three-months ended September 30, 2024, a decrease of $658.

The decrease was attributable to a year-to-date correction.

Gross (loss) / profit

for the three-months ended September 30, 2025 was $32,864 with a gross (loss) profit of 98% compared to $30,671 for the three-months ended

September 30, 2024 with a gross (loss) profit of 100%.

ended March 31, 2026, cost of revenues was $10,771 compared to $103,917 for the three-months ended March 31, 2025, a decrease of $93,146.

The decrease was attributable to lower revenue generation from Optilan India.

Gross profit for the

three-months ended March 31, 2026 was $7,747 with a gross profit of 42% compared to $37,101 for the three-months ended March 31, 2025

with a gross profit of 26%.

Operating Expenses

Selling, general and

administrative expenses for three-months ended September 30, 2025 increased by $23,446 to $170,020 from $146,575 for the three-months

ended September 30, 2024.

Salaries, wages and payroll

taxes for three-months ended September 30, 2025 increased to $233,627 from $185,000 for the three-months ended September 30, 2024.

increase primarily consisted of increased headcount at Optilan India Pvt, Ltd.

administrative expenses for the three-months ended March 31, 2026 decreased by $17,694 to $127,131 from $144,825 for the three-months

ended March 31, 2025.

Salaries, wages and

payroll taxes for the three-months ended March 31, 2026 decreased to $226,251from $237,005 for the three-months ended March 31, 2025.

The decrease was a result of a cumulative accrual adjustment.

Professional fees for

the three-months ended September 30, 2025 decreased by $170,428 to $55,595 from $226,023 for the three-months ended September 30, 2024

due to decreased legal expenses and audit fees.

the three-months ended March 31, 2026 decreased by $16,369 to $30,904 from $47,237 for the three-months ended March 31, 2025.

is attributable to reduced legal and consulting fees

Depreciation and amortization

for three-months ended September 30, 2025 decreased to $14,641 from $31,837 for the three-months ended September 30, 2024.

This decrease

is attributable to the lease terminations at DarkPulse Inc and DarkPulse Electronics Manufacturing Inc along with fixed asset disposals.

During the three-months

ended September 30, 2025 and 2024, the Company recorded $0 and $0, respectively, in impairment on the Company’s goodwill and intangible

for the three-months ended March 31, 2026 decreased to $12,757 from $30,011 for the three-months ended March 31, 2025.

The decrease is

a result of disposition of certain assets.

Other Income (Expense)

For the three-months

ended September 30, 2025, we had other expense of $(30,265) compared to other expense of $28,280 during the three months ended September

This decrease is a result of a reduction in Interest expense and the change in FMV of derivative liabilities .

Net Loss from Continuing

As a result of the above,

we reported a net loss of continuing operations of $471,284 and $587,043 for the three-months ended September 30, 2025 and 2024, respectively.

For the Nine-Months

Ended September 30, 2025 and 2024

For the nine-months ended

September 30, 2025, total revenues were $224,137 compared to $55,839 for the nine-months ended September 30, 2024, an increase of $168,298.

The increase was primarily due to revenues generated by Optilan India Pvt, Ltd.

The breakdown of revenues by entity for the nine-months

ended September 30, 2025 and 2024 is as follows:

Nine-Months Ended September 30

Remote Intelligence

Optilan India

Cost of Revenues and

For the nine-months ended

September 30, 2025, cost of revenues was $112,530 compared to $870 for the nine-months ended September 30, 2024, an increase of $111,660.

The increase was attributable to higher revenues from Optilan India Pvt, Ltd.

Gross (loss) / profit

for the nine-months ended September 30, 2025 was $111,607 with a gross (loss) profit of 50% compared to $54,969 for the nine-months ended

September 30, 2024 with a gross (loss) profit of 98%.

Operating Expenses

Selling, general and

administrative expenses for nine-months ended September 30, 2025 increased by $130,687 to $604,688 from $474,001 for the nine-months ended

September 30, 2024.

Salaries, wages and payroll

taxes for nine-months ended September 30, 2025 increased to $706,827 from $581,877 for the nine-months ended September 30, 2024.

primarily consisted of increased headcount at Optilan India Pvt, Ltd.

Professional fees for

the nine-months ended September 30, 2025 decreased by $243,831 to $162,823 from $406,654 for the nine-months ended September 30, 2024

due to decreased legal fees and audit fees.

Depreciation and amortization

for nine-months ended September 30, 2025 decreased to $64,199 from $95,709 for the nine-months ended September 30, 2024.

This decrease

is attributable to the lease termination for DarkPulse Inc and DarkPulse Electronics Manufacturing Inc, along with disposal of fixed assets.

During the nine-months

ended September 30, 2025 and 2024, the Company recorded $0 and $0, respectively, in impairment on the Company’s goodwill and intangible

Other Income (Expense)

For the nine-months ended

September 30, 2025, we had other expense of ($77,771) compared to other expense of ($1,977,059) during the nine months ended September

This decrease is due to a reduction in the loss on equity investment, accompanied by lower interest expense.

ended March 31, 2026, we had other income of $147,572 compared to $151,669 during the three-months ended March 31, 2025.

is attributable to lower interest expense, change in fair market of derivatives and a gain on exceptional costs.

Net Loss from Continuing

As a result of the above,

we reported a net loss of continuing operations of $1,504,701 and $3,540,148 for the nine-months ended September 30, 2025 and 2024, respectively.

we reported a net loss of continuing operations of $245,958 and $270,344 for the three-months ended March 31, 2026 and 2025, respectively.

Liquidity and Capital

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to fund the continued development and commercialization of our proprietary fiber optic sensing devices, and for operating expenses.

During the three-months

ended September 30, 2025, we had $142,132 in cash proceeds from our equity financings compared to $474,205 in 2024.

During the nine-months

ended September 30, 2025, we had $979,176 in cash proceeds from our equity financings compared to $1,043,130 in 2024.

As of September 30, 2025,

we had cash of $44,499 compared to $165,186 as of September 30, 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.

the three-months ended March 31, 2026, we had $135,222 in cash proceeds from our equity financings compared to $439,370 in the three-months

ended March 31, 2025.

As of March 31, 2026,

we had cash of $53,371 compared to $107,785 as of March 31, 2025.

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.

have not raised 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, 2025, our current liabilities exceeded our current assets by $18,517,073 .

loans from banks or other lending sources for lines of credit or similar short-term borrowings are not available to us.

As of March 31,

2026, our current liabilities exceeded our current assets by $19,692,440.

Several of our significant operating subsidiaries

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Operating Activities

During the nine-months ended September 30, 2025,

net cash provided (used) in operating activities was $102,869 resulting from our net loss of $1,504,701 , partially offset by non-cash

During the three-months ended March 31, 2026,

net cash used in operating activities was $340,593 resulting from our net loss of $245,958, partially offset by non-cash charges of ($83,658).

In 2025, we had net cash provided in operating activities of $78,774 resulting from our net loss of $270,344, partially offset by non-cash

charges of $236,326 primarily driven by our gain on forgiveness of debt and termination of lease.

During the nine-months

ended September 30, 2024, net cash provided by operating activities net was $29,780 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.

Cash Flows from

Investing Activities

During the nine-months

ended September 30, 2025, we had net cash provided in investing activities of $0.

During the nine-months

ended September 30, 2024, we had net cash used in investing activities of $120,248.

During the three-months

ended March 31, 2026, we had net cash provided/(used) in investing activities of $0.

During the three-months

ended March 31, 2025, we had net cash provided in investing activities of $19,675.

Cash Flows from

Financing Activities

During the nine-months

ended September 30, 2025, net cash provided by financing activities was $700,246, which was primarily comprised of proceeds from the issuance

of common stock of $979,176, proceeds from notes payable of $50,000, offset by ($328,930) repayments of loans payable.

During the nine-months

ended September 30, 2024, net cash provided by financing activities was $1,623,080 of which $1,043,131 was comprised of proceeds from

the issuance of common stock.

During the three-months

ended March 31, 2026, net cash provided by financing activities was $111,880 which was primarily comprised of proceeds from the issuance

of common stock of $135,222 and proceeds from convertible notes $50,000, offset by repayments of loans payable.

During the three-months

ended March 31, 2025, net cash provided by financing activities was $318,481 which was primarily comprised of proceeds from the issuance

of common stock of $439,370 offset by repayments of loans payable.

Factors That May

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information based on management’s beliefs and forward-looking statements that involve a number of risks, uncertainties, and assumptions.

There can be no assurance that actual results will not differ materially from the forward-looking statements as a result of various factors,

including but not limited to, our ability to obtain the equity funding or borrowings necessary to market and launch our products, our

ability to successfully serially produce and market our products;

our success establishing and maintaining collaborative licensing and

supplier arrangements;

There can be no assurance that actual results will not differ materially

from the forward-looking statements as a result

of various factors, including but not limited to, our ability to obtain the equity funding or borrowings necessary to market and launch

our products, our ability to successfully serially produce and market our products;

our success establishing and maintaining collaborative

licensing and supplier arrangements;

the acceptance of our products by customers;

our continued ability to pay operating costs;

our ability to meet

demand for our products;

to meet demand for our products;

the amount and nature of competition from our competitors;

the effects of technological changes on products and

product demand;

the effects of technological changes on products

and product demand;

and our ability to successfully adapt to market forces and technological demands of our customers.

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The resulting amendments are referred to as Codification improvements.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures

About Market Risk

As a smaller reporting company, the Company has

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis