Financial Analysis

NOTE 4 BUSINESS ACQUISITIONS Optilan India PVT, Ltd and Optilan Communication & Security Systems, Ltd. On September 11, 2024, the Company closed a sale agreement with COLIN HARDMAN, CHRISTOPHER ALLEN AND GREGORY ANDREW PALFREY as Joint Liquidators, Optilan (UK) Limited incorporated and registered in England and Wales acting by the Joint Liquidators (Seller), purchasing the right, title and interest of shares in Optilan India, PVT located in Kilpauk, Chennai India and Optilan Communication & Security Systems, Ltd. located in Ankara, Turkey along with the applicable intellectual property rights including (1) the user interface for sensor systems, (2) The Optilan.com domain name and continued use of the @optilan.com email accounts. The Company agreed to pay $ 65,000 USD for both companies and the intellectual property rights. The Company has accounted for the purchase using the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the underlying assets and liabilities in proportion to their respective actual values as of the purchase date. The excess of the consideration transferred over the actual estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed liabilities for the actual value of the assets and liabilities recognized at the date of acquisition: Schedule of acquired assets and assumed liabilities Consideration …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 17 COMMITMENTS AND CONTINGENCIES Legal Matters Carebourn Capital, L.P. v. DarkPulse, Inc. On or about January 29, 2021, Carebourn Capital, L.P. ( Carebourn ) commenced an action against the Company in Minnesota State Court. Carebourn alleged that the Company was in breach of two convertible promissory notes sold to Carebourn on or about July 17, 2018 and July 24, 2018. Thereafter, the Company answered Carebourns complaint and asserted counterclaims under the Minnesota Securities Act. On or about November 17, 2023, the State Court ruled in the Companys favor on, among other things, its counterclaim for damages pursuant to Minnesota Securities Act and awarded the Company damages in the amount of $124,012.91, attorneys fees in the amount of $239,923.33 and costs in the amount of $23,757.24 (or a total award in the amount of $387,693.48). As of the date hereof, the final judgment remains unsatisfied by Carebourn. DarkPulse intends to continue to exercise all legal rights and remedies available to it to collect the amounts awarded should Carebourn fail to voluntarily pay the same. More Capital, LLC v. DarkPulse, Inc. et al On or about June 29, 2021, More Capital, LLC ( More ) commenced an action against the Company in Minnesota State Court. More alleged that the Company was in breach of a certain securities purchase agreement and convertible promissory note sold to More on or about August 20, 2018. Thereafter, the Company answered Mores complaint and asserted counterclaims un …

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NOTE 12 SECURED DEBENTURE DPTI issued a convertible Debenture to the University (see Note 1) in exchange for the Patents assigned to the Company, in the amount of Canadian $1,500,000, or US $1,491,923 on December 16, 2010, the date of the Debenture. On April 24, 2017 DPTI issued a replacement secured term Debenture in the same CAD 1,500,000 amount as the original Debenture. The interest rate is the Bank of Canada Prime overnight rate plus 1% per annum. The Debenture had an initial required payment of CAD 42,000 (US$33,385) due on April 24, 2018 for reimbursement to the University of its research and development costs, and this has been paid. Interest-only maintenance payments are due annually starting after April 24, 2018. Payment of the principal begins on the earlier of (a) three years following two consecutive quarters of positive earnings before interest, taxes, depreciation and amortization, (b) six years from April 24, 2017, or (c) in the event DPTI fails to raise defined capital amounts or secure defined contract amounts by April 24 in the years 2018, 2019, and 2020. The Company has raised funds in excess of the amount required for 2020, 2019 and 2018. Beginning in 2023, The principal repayment amounts will be due quarterly over a six-year period in the amount of Canadian Dollars 62,500. Based on the exchange rate between the Canadian Dollar and the U.S. Dollar on December 31, 2018, the quarterly principal repayment amounts will be US$48,447. The Debenture is secured b …

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Schedule of revenue by source Years Ended 2025 2024 Products $ 0 $ 0 Services 308,492 126,836 Total revenue $ 308,492 $ 126,836

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NOTE 8 - GOODWILL AND INTANGIBLE ASSETS Goodwill The following is a summary of activity of goodwill for the years ended December 31, 2025 and 2024: Schedule of goodwill activity Goodwill Balances at December 31, 2024 $ 23,965 Acquisition (23,965 ) Foreign exchange translation Balances at December 31, 2025 $ 0 Amortization expense was $ 0 and $ 0 for the years ended December 31, 2025 and 2024, respectively. Patents - Intrusion Detection Intellectual Property The Company relies on patent laws and restrictions on disclosure to protect its intellectual property rights. As of December 31, 2025 and 2024, the Company held three U.S. and foreign patents on its intrusion detection technology, which expire in calendar years 2027 through 2034 (depending on the payment of maintenance fees). The DPTI issued patents cover a System and Method for Brillouin Analysis, a System and Method for Resolution Enhancement of a Distributed Sensor, and a Flexible Fiber Optic Deformation System Sensor and Method. Maintenance of intellectual property rights and the protection thereof is important to our business. Any patents that may be issued may not sufficiently protect the Companys intellectual property and third parties may challenge any issued patents. Other parties may independently develop similar or competing technology or design around any patents that may be issued to the Company. The Company cannot be certain that the steps it has taken will prevent the misappropriation of its intellectual pro …

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NOTE 15 INCOME TAXES The domestic and foreign components of loss before (benefit) provision for income taxes were as follows: Schedule of provision for income taxes 2025 2024 Domestic: $ (11,676,768 ) $ (11,676,768 ) Foreign: (7,133,368 ) (7,133,368 ) Total income (loss) before income taxes $ (18,810,136 ) $ (18,810,136 ) Provision for Income Taxes Income tax expense (benefit) consisted of the following: Current: Federal $ State Foreign Total Current Deferred: Federal $ State Foreign (5,554 ) Total Deferred (5,554 ) Total Provision $ 5,554 The Company recorded no income tax expense or benefit for the year ended December 31, 2025 due to the generation of losses and the application of a full valuation allowance against deferred tax assets. Effective Tax Rate Reconciliation The reconciliation of income taxes computed at the U.S. federal statutory rate to the reported income tax provision is as follows: Schedule effective income tax reconciliation Amount % of Pretax Income Tax benefit at 21% (statutory rate) $ (3,952,229 ) -21.00 % State taxes, net of federal benefit ( ) % Foreign rate differential ( ) % Valuation allowance 3,952,229 21 % Other % Total income tax expense $ 0.0 % Deferred tax Assets and Valuation Allowance The Company has deferred tax assets primarily related to net operating loss carryforwards. Management has determined that it is more likely than not that these deferred tax assets will not be realized due to a lack of sufficient positive evidence, including cumu …

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NOTE 13 LEASES The following was included in our balance sheet as of December 31, 2025 and 2024: Schedule of operating lease December 31, Operating leases 2025 2024 Assets ROU operating lease assets $ $ 449,556 Liabilities Current portion of operating lease 80,400 Operating lease, net of current portion 447,009 Total operating lease liabilities $ $ 527,409 The weighted average remaining lease term and weighted average discount rate at December 31, 2025 and 2024 were as follows: Schedule of weighted average remaining lease term and discount rate December 31, Operating leases 2025 2024 Weighted average remaining lease term (years) 7.75 7.25 Weighted average discount rate 6.00 % 6.00 % Operating Leases On June 28, 2023, the Company recognized a gain on deconsolidation of $1,642,146 related to Optilan (UK) and its subsidiaries leases. …

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NOTE 11 DEBT Convertible Notes The Company uses the Black-Scholes Model to calculate the derivative value of its convertible debt and certain promissory notes. The valuation result generated by this pricing model is necessarily driven by the value of the underlying common stock incorporated into the model. The values of the common stock used were based on the price at the date of issue of the debt security as of December 31, 2025 and 2024. In 2023 management determined the expected volatility of 106.90 %, a risk-free rate of interest of 5.48 %, and contractual lives of the debt of three months. In 2022 management determined the expected volatility of 140.30 %, a risk-free rate of interest of 4.73 %, and contractual lives of the debt of three months. Management made the determination to use an expected life rather than contractual life for the calculations for the matured debt as of December 31, 2024 and 2023. As of December 31, 2025 and, 2024, there was $ 181,000 and $ 0 of certain promissory notes principal outstanding (with variable conversion features embedded in the notes on maturity). During the year ended December 31, 2025 and 2024, $ 0 and $ 0 of the debt discount was amortized. The summary of promissory notes are: Schedule of convertible notes 2025 2024 Principal Outstanding $ 208,150 $ 166,650 Less: unamortized debt discount (27,150 ) (45,725 ) Promissory notes, net $ 181,000 $ 120,925 During the years ended December 31, 2025 and 2024, change in fair value of the der …

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Recently Issued Accounting Pronouncements On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. The Company adopted this new guidance on January 1, 2023 and the adoption did not have a material impact on the Companys consolidated financial statements and related disclosures. Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable …

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NOTE 18 RELATED PARTY TRANSACTIONS The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include a) affiliates of the Company; b) Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The financial statements shall include disclosures of material related party transactions, other than compensation arrangement …

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NOTE 5 REVENUE The following table is a summary of the Companys timing of revenue recognition for the years ended December 31, 2025 and 2024: Schedule of timing of revenue recognition Years Ended 2025 2024 Services and products transferred at a point in time $ 57,776 $ 49,466 Services and products transferred over time 248,716 77,370 Total revenue $ 308,492 $ 126,836 The Company disaggregates revenue by source and geographic destination to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Revenue by source consisted of the following for the years ended December 31, 2025 and 2024: Schedule of revenue by source Years Ended 2025 2024 Products $ 0 $ 0 Services 308,492 126,836 Total revenue $ 308,492 $ 126,836 Revenue by geographic destination consisted of the following for the for the years ended December 31, 2025 and 2024: Schedule of revenue by geographic destination Years Ended 2025 2024 North America $ 41,003 $ United Kingdom 126,836 Rest of world 267,489 Total revenue $ 308,492 $ 126,836 Contracts Contract revenue is recognized over time using the cost-to-cost measure of progress for fixed price contracts. The cost-to-cost measure of progress best depicts the continuous transfer of control of goods or services to the customer. The contractual terms provide that the customer compensates the Company for services rendered. Contract costs include all direct materials, labor and subcontracted costs, as well as indire …

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"NOTE 2 SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements are as follows: Basis of Presentation and Principles of Consolidation The Companys consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (US GAAP). The consolidated financial statements of the Company include the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The Company evaluates its relationships with other entities to identify whether they are variable interest entities (VIE) as defined by Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 810, Consolidation (ASC 810), and to assess whether it is the primary beneficiary of such entities. If the determination is made that the Company is the primary beneficiary, then that entity is consolidated. Use of Estimates The preparation of the Companys financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include, but are …

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NOTE 14 STOCKHOLDERS EQUITY (DEFICIT) Preferred Stock In accordance with the Companys bylaws, the Company has authorized a total of 2,000,000 shares of preferred stock, par value $ 0.01 per share, for all classes. As of December 31, 2025 and 2024 respectively, there were 88,335 and 88,335 total preferred shares issued and outstanding for all classes. Common Stock In accordance with the Companys bylaws, the Company has authorized a total of 20,000,000,000 shares of common stock, par value $ 0.0001 per share. As of December 31, 2025 and 2024, there were 90,904,606 and 40,500,587 common shares issued, respectively. The below table of puts from 1/12/2023 through 4/11/2023 were made by the Company under the 2022 EFA during 2023. The put from 4/28/2023 was made under the EFA dated 4/28/2023. The puts from 6/26/2023 and 7/3/2023 were made by the Company under the Amended EFA dated June 13, 2023. The 7/10/2023 put was made by the Company under the Second Amended EFA dated July 10, 2023. Schedule of equity financing agreement Date of Put Number of Common Shares Issued Total Proceeds, Net of Discounts Effective Price per Share Net Proceeds 1/12/2023 64,130,435 $ 400,000 $ 0.006237 $ 370,975 1/17/2023* 11,441,647 100,000 $ 0.008740 100,000 1/24/2023 77,733,861 400,000 $ 0.005146 370,975 2/3/2023 61,173,706 300,000 $ 0.004904 277,975 2/17/2023 75,447,571 300,000 $ 0.003976 277,975 3/1/2023 83,113,044 324,000 $ 0.003898 300,295 3/16/2023 93,165,852 254,232 $ 0.002729 235,410 3/30/2023 65, …

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NOTE 19 SUBSEQUENT EVENTS On January 2, 2026 the Company issued 1,109,837 shares of common stock for a total consideration of 17,135.88. On January 12, 2026 the Company issued 993,358 shares of common stock for a total consideration of 19,2151.94. On January 21, 2026 the Company issued 1,081,493 shares of common stock for a total consideration of $17,518.07. On January 29, 2026 the Company issued 921,406 shares of common stock for a total consideration of $17,838.41. On February 9, 2026 the Company issued 1,172,568 shares of common stock for a total consideration of $19,136.30. On February 20, 2026, the Company issued 890,303 shares of common stock for a total consideration of 12,108.12. On March 9, 2026, the Company issued 876,614 shares of common stock for a total consideration of $10,379.10. On March 17, 2026, the Company issued 1,998,326 shares of common stock for a total consideration of $20,622.72. On April 2, 2026 the Company issues, 2,011,019 shares of common stock for a total consideration of $14,961.98. …

SubsequentEventsTextBlock · excerpt; the full note is in the filing