10-Q: DarkPulse Narrows Losses, Boosts Revenue Amidst Liquidity Concerns

Sentiment:

Quarterly Report 13 November 2025 4:51 PM

DarkPulse, Inc. reported a significant reduction in net loss and a substantial increase in revenue for the nine months ended September 30, 2025, primarily driven by recent acquisitions, despite ongoing liquidity challenges and ineffective internal controls.

Delay expectedThe company expects to submit a Purchase Order to Sanmina Corp for full manufacturing of its patented BOTDA sensor system hardware during Q2 2025, indicating that manufacturing has not yet commenced despite development completion.No sales of the patented BOTDA dark-pulse sensor system have occurred to date, suggesting a delay in commercialization and market entry for its core product.

Capital raiseThe company is seeking to raise additional capital principally through private placement offerings.It is targeting strategic partners in an effort to finalize the development of its products and begin generating revenues.An Equity Financing Agreement (EFA) with GHS is in place, under which the company received $979,176 in cash proceeds from common stock issuance during the nine months ended September 30, 2025.The EFA allows GHS to purchase up to $30,000,000 in shares of common stock over 12 months at 92% of the current market price.

Worse than expectedThe company continues to report substantial net losses and an accumulated deficit of $72,752,633, indicating ongoing financial challenges.Current liabilities ($19,566,092) significantly exceed current assets ($1,049,019) by $18,517,073, highlighting severe liquidity issues.Cash and cash equivalents decreased to $44,499, which is insufficient to fund operations for the next 12 months.The company's disclosure controls and procedures were deemed not effective, and it is not materially compliant with SOX Section 404, indicating significant internal control weaknesses.Despite revenue growth, the gross profit margin decreased from 98% to 50%, suggesting less profitable revenue streams or higher costs.The core patented BOTDA dark-pulse sensor system has not generated any sales to date, indicating a failure to commercialize its primary technology.

Summary

Net loss for the nine months ended September 30, 2025, significantly decreased to $1,504,701 from $3,540,148 in the prior year, a 57.5% improvement.
Total revenues for the nine months ended September 30, 2025, surged by 301% to $224,137 from $55,839 in the same period last year, largely due to contributions from Optilan India Pvt, Ltd.
Operating loss decreased to $1,426,930 from $1,563,089 year-over-year.
Cash and cash equivalents stood at $44,499 as of September 30, 2025, down from $86,531 at December 31, 2024.
Current liabilities exceeded current assets by $18,517,073, and the company has an accumulated deficit of $72,752,633, raising substantial doubt about its ability to continue as a going concern.
The company completed a 1:200 reverse stock split on October 13, 2025, to revise its share structure and qualify for OTCQB.
Disclosure controls and procedures were deemed not effective as of September 30, 2025, and the company is not materially compliant with SOX Section 404 due to economic constraints.

Sentiment

Score: 2

Explanation: While the company reported a significant reduction in net loss and revenue growth, these improvements are from a very low base and are overshadowed by severe liquidity issues, a substantial accumulated deficit, ineffective internal controls, and the failure to commercialize its core patented technology. The going concern warning is a major negative.

Positives

Net loss significantly reduced by 57.5% to $1,504,701 for the nine months ended September 30, 2025, compared to $3,540,148 in the prior year.
Total revenues increased by 301% to $224,137 for the nine months ended September 30, 2025, from $55,839 in the same period last year.
Operating loss decreased by $136,159 to $1,426,930 for the nine months ended September 30, 2025.
Other expenses significantly reduced by $1,899,288, primarily due to a reduction in loss on equity investment and lower interest expense.
Successful legal outcomes in Carebourn Capital and More Capital cases, with awards totaling $387,693.48 and $412,048.64, respectively, though these remain unsatisfied.
Court ordered Noteholders and their counsel to pay $70,840 to the Company in the Carebourn Capital et al v. Standard Registrar and Transfer et al case.
Development of the Gen. 3 dark-pulse BOTDA system is complete, with manufacturing pending a Purchase Order.
Royalty obligations to the University of New Brunswick have expired without any payments being required.

Negatives

Current liabilities exceeded current assets by $18,517,073 as of September 30, 2025.
Accumulated deficit reached $72,752,633 as of September 30, 2025.
Cash and cash equivalents decreased to $44,499 as of September 30, 2025, from $86,531 at December 31, 2024.
Substantial doubt exists regarding the company's ability to continue as a going concern.
Disclosure controls and procedures were not effective as of September 30, 2025.
The company is not materially compliant with Sarbanes-Oxley (SOX) Section 404 requirements due to economic constraints.
Gross profit margin decreased to 50% for the nine months ended September 30, 2025, from 98% in the prior year.
No sales of the patented BOTDA dark-pulse sensor system have occurred to date, despite development completion.
Legal awards totaling over $870,000 remain unsatisfied by the opposing parties.
Delaware Court granted FirstFire Defendants' motion to dismiss on September 30, 2025, requiring the company to file a motion for reconsideration.

Risks

Going Concern: Substantial doubt about the company's ability to continue as a going concern due to recurring net losses, accumulated deficit, and current liabilities exceeding current assets.
Liquidity: Insufficient cash to fund operations for the next 12 months, requiring additional funding through private placements or alternative financing.
Operational Dependence: Ability to continue as a going concern is dependent on successful capital offerings, financing arrangements, and expansion of operations.
Product Commercialization: Ability to obtain equity funding or borrowings necessary to market and launch products, and successfully serially produce and market them.
Market Acceptance: Acceptance of products by customers is uncertain.
Competition: The amount and nature of competition from competitors.
Technological Changes: Effects of technological changes on products and product demand.
Adaptability: Ability to successfully adapt to market forces and technological demands of customers.
Intellectual Property Protection: Patents may not sufficiently protect intellectual property, third parties may challenge patents, or independently develop similar technology. Litigation to enforce IP rights could be costly.
Undisclosed Patents: Risk of existing patents unknown to the company that its products might infringe upon.
Foreign Currency Risk: Changes in exchange rates, particularly a strengthening U.S. dollar, could negatively affect net sales and gross margins.
Internal Controls: Disclosure controls and procedures were not effective, and the company is not materially compliant with SOX Section 404 due to economic constraints, increasing financial reporting risk.
Legal Proceedings: Ongoing litigation, including the need to collect awarded damages and the appeal/reconsideration process in other cases, could incur substantial costs and divert management attention.

Future Outlook

The company requires additional funding to finance the growth of its current operations and achieve strategic objectives, actively seeking capital through private placements and strategic partners to accelerate sales and marketing of its products. Management cannot assure that such financing will be secured. The company expects to submit a Purchase Order to Sanmina Corp for full manufacturing of its patented BOTDA sensor system hardware during Q2 2025.

Management Comments

Management is actively pursuing additional sources of financing sufficient to generate enough cash flow to fund its operations for twelve months from the issuance date of these consolidated financial statements. However, management cannot make any assurances that such financing will be secured.
We remain committed to actively litigating our claims for relief against the FirstFire Defendants.
We remain committed to actively litigating our claims for relief against the Crown Bridge Defendants.
We are also actively investigating potential legal claims, including but not limited to stock fraud, market manipulation, and/or defamation, against certain Twitter accounts, websites, and social media channels.
Our activities have evolved to a sales-focused mission since the successful completion of our BOTDA system.
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.

Industry Context

DarkPulse operates in the technology-security sector, specializing in fiber optic distributed sensor technology for critical infrastructure. The company's focus on advanced solutions for border security, pipelines, oil and gas, and mine safety aligns with growing global demand for robust monitoring and security systems. The strategic acquisitions of Optilan entities and the outsourcing of manufacturing to Sanmina Corporation reflect a trend towards specialized partnerships and global expansion in the technology sector. However, the company's significant liquidity issues and lack of product sales for its core BOTDA system suggest it is struggling to capitalize on market opportunities compared to more established players in the distributed sensing or security technology space.

Comparison to Industry Standards

The company's reported revenue growth of 301% for the nine months ended September 30, 2025, while substantial, is from a very low base ($55,839 in 2024) and does not yet indicate a significant market presence compared to established players in the fiber optic sensing market like Luna Innovations or OFS Fitel, which report revenues in the hundreds of millions.
The gross profit margin of 50% for the nine months ended September 30, 2025, is a significant decrease from 98% in the prior year, suggesting potential pricing pressures or increased cost of services, which could be below industry averages for high-tech solutions where margins often exceed 60-70%.
The persistent net losses and accumulated deficit of over $72 million, coupled with current liabilities exceeding current assets by over $18 million, are far below the financial health standards of stable, publicly traded technology companies, indicating severe financial distress.
The lack of sales for the patented BOTDA dark-pulse sensor system, despite development completion and demonstration units, contrasts sharply with companies that successfully commercialize their core technologies, such as those in the IoT or industrial sensing space that quickly scale product deployment post-development.
The ineffective disclosure controls and non-compliance with SOX Section 404 due to economic constraints are significant governance deficiencies, placing the company well below the standards expected of publicly traded entities, especially compared to well-governed peers like Honeywell or Siemens, which have robust internal control frameworks.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Internal Control Deficiency	Disclosure controls and procedures were not effective as of September 30, 2025.	2025-09-30	Increases risk of material misstatement in financial reporting and non-compliance with SEC regulations.
Regulatory Non-Compliance	Not materially compliant with Sarbanes-Oxley (SOX) Section 404 requirements due to economic constraints.	2025-09-30	Indicates significant weakness in financial reporting controls and potential regulatory scrutiny.
Share Structure Change	Effected a 1:200 reverse stock split of its issued and outstanding common stock.	2025-10-13	Aimed to revise share structure and qualify for OTCQB, potentially impacting share price and investor perception.

Legal Proceedings

Carebourn Capital, L.P. v. DarkPulse, Inc.: Company won summary judgment, awarded $387,693.48, but the final judgment remains unsatisfied by Carebourn.
More Capital, LLC v. DarkPulse, Inc. et al: Company won summary judgment, awarded $412,048.64, but the final judgment remains unsatisfied by More.
Carebourn Capital et al v. Standard Registrar and Transfer et al: Court ordered Noteholders and their counsel to pay $70,840 to the Company on July 15, 2025. Final Judgment entered on September 30, 2025, but the awarded amount has not been paid.
DarkPulse, Inc. v. FirstFire Global Opportunities Fund, LLC, and Eli Fireman: Delaware Court granted FirstFire Defendants' Motion to Dismiss on September 30, 2025. The Company filed a Motion for Reconsideration on October 14, 2025, which is pending.
DarkPulse, Inc., et al v. Crown Bridge Partners, LLC, et al: The Second Circuit vacated the District Court's dismissal and remanded the case. Motions for summary judgment and/or dismissal were submitted on July 16, 2025, with no ruling yet.
The company is actively investigating potential legal claims, including stock fraud, market manipulation, and/or defamation, against certain Twitter accounts, websites, and social media channels.

Related Party Transactions

Optilan India Pvt, Ltd. entered into a directors loan agreement on January 20, 2025, to lend unsecured, non-interest bearing funds for working capital over two years, with repayment mutually agreed upon.
Remote Intelligence (RI) has an unsecured, non-interest bearing loan payable of $226,247 with its former majority shareholder (now a Company shareholder), due on demand.
Wildlife Specialists (WS) has an unsecured, non-interest bearing loan payable of $135,500 with its former majority shareholder (now a Company shareholder), due on demand.

Stakeholder Impact

Shareholders: Significant dilution risk from ongoing equity financing, potential negative impact from reverse stock split, and uncertainty due to going concern warning and ineffective internal controls. Potential positive impact from successful legal collections and future product commercialization.
Employees: Increased headcount at Optilan India Pvt, Ltd. suggests growth in that subsidiary, but overall company financial instability could pose risks.
Creditors: High current liabilities and going concern warning indicate elevated risk for creditors, especially those with unsecured loans.
Customers: Potential for enhanced service offerings through acquisitions and patented technology, but delays in BOTDA system commercialization and financial instability could impact long-term reliability.

Next Steps

Actively pursue additional sources of financing to fund operations and achieve strategic objectives.
Target strategic partners to accelerate sales and marketing of products.
Submit a Purchase Order to Sanmina Corp for full manufacturing of the Gen. 3 dark-pulse BOTDA system hardware during Q2 2025.
Continue to exercise all legal rights and remedies to collect awarded amounts in the Carebourn Capital and More Capital cases.
Await ruling on the Motion for Reconsideration in the FirstFire case.
Await ruling on motions for summary judgment/dismissal in the Crown Bridge Partners case.
Continue investigating potential legal claims for stock fraud, market manipulation, and/or defamation against certain social media accounts/websites.

Key Dates

Date	Description
2009	Beginning of real-world POC deployments for BOTDA system.
2010-12-16	DPTI issued a convertible Debenture to the University of New Brunswick for CAD 1,500,000 in exchange for patents.
2017-04-24	DPTI issued a replacement secured term Debenture for CAD 1,500,000 to the University of New Brunswick. Royalty period began.
2018-04-24	Initial required payment of CAD 42,000 for reimbursement to the University of New Brunswick due and paid. Interest-only maintenance payments due annually starting after this date.
2018-07-17	Date of certain securities purchase agreements and convertible promissory notes sold to Carebourn Capital, L.P.
2018-07-24	Date of certain securities purchase agreements and convertible promissory notes sold to Carebourn Capital, L.P.
2018-08-20	Date of a securities purchase agreement and convertible promissory note sold to More Capital, LLC.
2021-01-29	Carebourn Capital, L.P. commenced action against the Company in Minnesota State Court.
2021-06-29	More Capital, LLC commenced action against the Company in Minnesota State Court.
2021-08-31	Company answered Carebourn's complaint and interposed affirmative defenses.
2021-12-31	Company commenced action against FirstFire Global Opportunities Fund, LLC in the United States District Court for the Southern District of New York.
2022-05-05	Company amended its complaint against the FirstFire Defendants.
2022-05-20	Carebourn Capital, L.P. and More Capital, LLC commenced action against the Company and others in the United States District Court for the District of Utah.
2022-09-23	Company, Social Life Network, Inc. and Redhawk Holdings Corp. commenced action against Crown Bridge Partners, LLC in the United States District Court for the Southern District of New York.
2023-01-01	Company adopted ASU 2016-13, Financial Instruments Credit Losses (Topic 326).
2023-01-17	Court granted FirstFire Defendants' motion to dismiss the Company's operative pleading.
2023-04-21	State Court ruled in Company's favor on its motion for partial summary judgment in Carebourn Capital case.
2023-04-28	Company entered an Equity Financing Agreement, later superseded.
2023-06-13	Amended Equity Financing Agreement dated, superseding previous EFA.
2023-07-10	Second Amended Equity Financing Agreement dated, superseding previous EFA.
2023-09-03	Company answered More's complaint and interposed affirmative defenses.
2023-09-29	Court granted Crown Bridge Defendants' motion to dismiss the plaintiffs' complaint.
2023-10-23	Plaintiffs appealed the Court's decision in Crown Bridge Partners case to the Second Circuit.
2023-11-01	Noteholders moved to dismiss the action in Carebourn Capital et al v. Standard Registrar and Transfer et al.
2023-11-02	Company moved for sanctions against Noteholders and their counsel in Carebourn Capital et al v. Standard Registrar and Transfer et al.
2023-11-17	State Court ruled in Company's favor on its motion for summary judgment in Carebourn Capital case, awarding damages.
2023-12-04	Court entered order granting dismissal of Noteholders' claims with prejudice in Carebourn Capital et al v. Standard Registrar and Transfer et al.
2023-12-11	Minnesota State Court ruled in Company's favor on its motion for summary judgment in More Capital case, awarding damages.
2024-03-28	Second Circuit issued decision in FirstFire case, affirming in part, vacating in part, and remanding to District Court for District of Delaware.
2024-08-14	Third Amended Equity Financing Agreement dated, superseding previous EFA.
2024-08-19	Second Circuit issued decision in Crown Bridge Partners case, vacating District Court's dismissal and remanding.
2024-08-27	Company entered into a promissory note for $67,200.
2024-08-30	Promissory note for $67,200 was funded.
2024-09-10	Court entered order granting in part the Company's motion for sanctions in Carebourn Capital et al v. Standard Registrar and Transfer et al.
2024-09-11	Company closed sale agreement for Optilan India PVT Ltd and Optilan Communication & Security Systems, Ltd.
2024-11-06	Company entered into an Amendment to the 2023 Equity Financing Agreement with GHS.
2024-11-20	Company entered into a promissory note for $67,860.
2024-12-02	Promissory note for $67,860 was funded.
2025-01-15	SVEA Cameron Esperson filed Motion for Nonsuit without Prejudice.
2025-01-16	Dismissal accepted by the court for SVEA Cameron Esperson motion.
2025-01-20	Optilan India Pvt, Ltd. entered into a directors loan agreement.
2025-07-15	Court ordered Noteholders and their counsel to pay $70,840 to the Company in Carebourn Capital et al v. Standard Registrar and Transfer et al.
2025-07-16	Parties submitted final briefing on respective motions for summary judgment and/or dismissal in Crown Bridge Partners case.
2025-09-05	Company entered into a promissory note for $57,000.
2025-09-10	Promissory note for $57,000 was funded.
2025-09-30	End of the quarterly period covered by this report. Delaware Court granted FirstFire Defendants' Motion to Dismiss. Court entered Final Judgment in Carebourn Capital et al v. Standard Registrar and Transfer et al.
2025-10-01	Company issued 572,892 shares of common stock for $18,332.54.
2025-10-09	Company issued 576,946 shares of common stock for $18,462.28.
2025-10-13	Company effected a 1:200 reverse stock split.
2025-10-14	Company filed a Motion for Reconsideration of the Delaware Court's September 30th decision in FirstFire case.
2025-10-28	Company issued 959,040 shares of common stock for $17,569.60.
2025-11-12	Number of shares outstanding of common stock was 85,941,739.
2025-11-13	Date of filing of this Form 10-Q.

Recommendation

strong sell

Despite a reduction in net loss and revenue growth, DarkPulse, Inc. faces severe financial distress, evidenced by current liabilities exceeding current assets by over $18 million, an accumulated deficit of $72.7 million, and a going concern warning. Cash reserves are critically low at $44,499, insufficient for 12 months of operations. The company's core patented technology has yet to generate sales, and internal controls are ineffective, raising significant governance and reporting concerns. While legal victories offer potential future cash inflows, their collection is uncertain. The 1:200 reverse stock split is often a sign of a struggling stock attempting to meet listing requirements. Given the profound liquidity issues, operational delays, and control deficiencies, the investment risk is exceptionally high, making it a strong sell for any investor.

Keywords

DarkPulse, DPLS, 10-Q, Quarterly Report, Financial Results, Net Loss, Revenue Growth, Liquidity, Going Concern, SEC Filing, BOTDA Sensor Technology, Fiber Optic Sensing, Critical Infrastructure, Security Systems, Optilan, Capital Raise, Reverse Stock Split, Legal Proceedings, Corporate Governance, Internal Controls

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