Digital Locations (DLOC) Risk Analysis

The Company's common stock is quoted on the OTC Pink Market, which is a significantly more limited market than the New York Stock Exchange or NASDAQ. The trading volume may be limited by the fact that many major institutional investment funds, including mutual funds, follow a policy of not investing in OTC Pink Market stocks and certain major brokerage firms restrict their brokers from recommending OTC Pink Market stocks because they are considered speculative and volatile. The trading volume of the Company's common stock has been and may continue to be limited and sporadic. As a result, the quoted price for the Company's common stock on the OTC Pink Market may not necessarily be a reliable indicator of its fair market value. Additionally, the securities of small capitalization companies may trade less frequently and in more limited volume than those of more established companies. The market for small capitalization companies is generally volatile, with wide price fluctuations not necessarily related to the operating performance of such companies.

There is currently no established public trading market for our securities, and an active trading market in our securities may not develop, or, if developed, may not be sustained. Accordingly, investors may have a difficult time selling their shares.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: - That a broker or dealer approve a person's account for transactions in penny stocks; and   - The broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quality of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must: - Obtain financial information and investment experience objectives of the person; and   - Make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form: - Sets forth the basis on which the broker or dealer made the suitability determination; and   - That the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

We have issued several convertible promissory notes that are convertible into shares based on a discount to the market price of our common stock. Each convertible promissory note is unique and the convertible promissory notes are further summarized in Notes 3, 4 and 5 to the financial statements included with this SEC filing. Since the conversion rate results in the issuance of shares at a discounted rate, significant dilution of our common stock could occur if the lenders choose to convert the debt into common stock. A conversion of this convertible debt into Common Stock could cause our stockholders to experience additional dilution, and any such issuances may result in downward pressure on the price of our common stock. The issuance of additional shares of common stock in the future via conversion of debt will reduce the proportionate ownership and voting power of then current stockholders. On a fully-diluted basis, without factoring in the 4.99% beneficial ownership limitations, as of December 31, 2023 the existing convertible promissory notes could have been converted into 2,293,933,406 shares of common stock, an amount that would have caused a significant dilution to the issued and outstanding shares of the Company.

We have issued to various individuals stock options to purchase 904,177,778 shares of our common stock. The weighted average exercise prices for these stock options is $0.004, although the exact exercise prices vary by grant. If the option holders were to choose to exercise their stock options, a total of up to 904,177,778 would be issued, an amount that would cause significant dilution to the issued and outstanding shares of the Company.

There are 14,241 shares of Series B non-voting, convertible preferred stock, (the "Series B Preferred Stock") issued and outstanding. Each one share of Series B Preferred Stock has as a stated value of $100 per share and is convertible, at the option of the holder, into Common Stock of the Company at any time, at the election of the holder, at a rate of $0.0015 per share; provided, however, that such conversion may only occur at a time when the Company has sufficient authorized shares of common stock under its articles of incorporation to satisfy such conversion. The common stock issuable upon conversion of the Series B Preferred Stock may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company's stock in the market than there is demand for that stock. When this happens the price of the Company's stock will decrease, and any additional shares which stockholders attempt to sell in the market will only further decrease the share price. In the event of such overhang, the Series B Preferred stockholders will have an incentive to sell their common stock as quickly as possible. If the share volume of our common stock cannot absorb the discounted shares, then the value of our common stock will likely decrease. The Stock Purchase Agreement for the Series B Preferred Stock contains an issuance limitation of 4.99% of the outstanding shares of Common Stock at the time of conversion, but that limitation can be waived by the holder with sixty-one days' notice. On a fully-diluted basis, without factoring in the 4.99% limitation, the Series B Preferred Stock may be converted into 949,400,000 shares of common stock, an amount that would cause significant dilution to the issued and outstanding shares of the Company.

Our Articles of Incorporation authorize the issuance of up to 20,000,000 shares of "blank check" preferred stock, with such designation rights and preferences as may be determined from time to time by the Board of Directors. Our Board of Directors is empowered, without shareholder approval, to issue shares of preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of our common stock. In the event of such issuances, the preferred stock could be used, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company.

Our Articles of Incorporation authorize the issuance of 2,000,000,000 shares of common stock, par value $0.001 per share, of which 733,766,705 shares are issued and outstanding as of March 20, 2024. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then-existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and might have an adverse effect on any trading market for our common stock.