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Item 1A. Risk Factors

2023-06-23 compared with 2022-04-15 · 979 added, 408 removed, 90 unchanged (94% of the section changed)

Readers should carefully consider the risks and

uncertainties described below.

Our failure to successfully address the risks

and uncertainties described below would have a material adverse effect on our business, financial condition and/or results of operations,

Readers should carefully consider the risks and uncertainties

described below.

Our failure to successfully address the risks and

uncertainties described below would have a material adverse effect on our business, financial condition and/or results of operations,

and the trading price of our common stock may decline and investors may lose all or part of their investment.

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Prospective investors should consider carefully the risk factors set out below.

Summary Risk Factors

The following summarizes

certain principal factors that make an investment in our Company speculative or risky, all of which are more fully described in the “ Risk

Factors ” section herein.

This summary should be read in conjunction with the “ Risk Factors ” section and should

not be relied upon as an exhaustive summary of the material risks facing the Company.

Business interruptions, including any interruptions

resulting from COVID-19, could significantly disrupt our operations and could have a material adverse impact on us if the situation continues.

If we default on the Secured Debenture, the secured holder could take possession of our assets, including our patents and other intellectual property.

Several of the convertible notes issued by us are

in litigation with uncertain outcomes.

Our stockholders have limited voting power compared to the holder of our Series A Preferred Stock.

We have a limited operating history in an evolving and highly volatile industry, which makes it difficult to evaluate future prospects and may increase the risk that we will not be successful.

We have experienced rapid growth recently through a series of acquisitions, and if we do not effectively manage our growth and the associated demands on operational, risk management, sales and marketing, technology, compliance, and finance and accounting resources, our business may be adversely impacted.

Our growth may not be sustainable and depends on our ability to retain existing customers, attract new customers, expand product offerings, and increase revenue from both new and existing customers.

We face intense and increasing competition and, if we do not compete effectively, our competitive positioning and our operating results will be harmed.

Our operating results may fluctuate due to market forces out of our control that impact demand for our products and services.

Cyberattacks and security breaches of our systems, or those impacting customers or third parties, could adversely impact our brand and reputation and our business, operating results and financial condition.

Any significant disruption in our technology could adversely impact our brand and reputation and our business, operating results, and financial condition.

Certain large customers provide a significant share of our revenue and the termination of such agreements or reduction in business with such customers could harm our business.

If we were to lose or were unable to renew these and other client contracts at favorable terms, our results of operations and financial condition may be adversely affected.

There is no assurance that we will achieve profitability or that our revenue and business models will be successful.

We will require additional capital to support business growth, and this capital might not be available or may require stockholder approval to obtain.

You may experience dilution of your ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock.

The future development and growth of our technology and product offerings are subject to a variety of factors that are difficult to predict and evaluate and may be in the hands of third parties to a substantial extent.

If our product offerings do not grow as expected, our business, operating results, and financial condition could be adversely affected.

Our intellectual property rights are valuable, and any inability to protect them could adversely impact our business, operating results, and financial condition.

RISKS RELATED TO OUR BUSINESS

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resulting from COVID-19, could significantly disrupt our operations and could have a material adverse impact on us if the situation continues .

The ongoing coronavirus outbreak which began

in China at the beginning of 2020 has impacted various businesses throughout the world, including travel restrictions and the extended

shutdown of certain businesses in impacted geographic regions.

If the coronavirus outbreak situation should worsen, we may experience

disruptions to our business including, but not limited to equipment, to our workforce, or to our business relationships with other third

The extent to which the coronavirus impacts our

operations or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted

with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus and

the actions to contain the coronavirus or treat its impact, among others.

Any such disruptions or losses we incur could have a material

adverse effect on our financial results and our ability to conduct business as expected.

Escalating global tensions, including the

conflict between Russia and Ukraine, could negatively impact us.

The ongoing conflict between Russia and Ukraine

could lead to disruption, instability and volatility in global markets and industries that could negatively impact our operations.

government and other governments in jurisdictions in which we operate have imposed severe sanctions and export controls against

Russia and Russian interests and threatened additional sanctions and controls.

The impact of these measures, as well as potential responses

to them by Russia, is currently unknown and they could adversely affect our business, partners or customers.

If we default on the Convertible Debenture, the secured holder

could take possession of our assets, including our patents and other intellectual property.

The Convertible Debenture (Secured) issued April

24, 2017, is secured by our assets, which includes our patents and other intellectual property.

In the event that we default on the obligations

in the Debenture, the secured holder could take possession of our assets, including our patents and other intellectual property.

The ongoing coronavirus outbreak which began in China

at the beginning of 2020 has impacted various businesses throughout the world, including travel restrictions and the extended shutdown

of certain businesses in impacted geographic regions.

If the coronavirus outbreak situation should worsen, we may experience disruptions

to our business including, but not limited to equipment, to our workforce, or to our business relationships with other third parties.

The extent to which the coronavirus impacts our operations

or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence,

including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus and the actions to

contain the coronavirus or treat its impact, among others.

Any such disruptions or losses we incur could have a material adverse effect

on our financial results and our ability to conduct business as expected.

We may be adversely

affected by natural disasters, pandemics, and other catastrophic events, and by man-made problems such as war or terrorism, that could

disrupt our business operations, and our business continuity and disaster recovery plans may not adequately protect us from a serious

Natural disasters or other

catastrophic events may also cause damage or disruption to our operations, international commerce, and the global economy, and could have

an adverse effect on our business, operating results, and financial condition.

Our business operations are subject to interruption by

natural disasters, fire, power shortages, and other events beyond our control.

In addition, our global operations expose us

to risks associated with public health crises, such as pandemics and epidemics, which could harm our business and cause its operating

results to suffer.

For example, the ongoing effects of the COVID-19 pandemic and/or the precautionary measures that we have adopted have

resulted, and could continue to result, in difficulties or changes to our customer support, or create operational or other challenges,

any of which could adversely impact our business and operating results.

Further, war, acts of terrorism,

labor activism and other geopolitical unrest could cause disruptions in our business or the businesses of its partners or the economy

In the event of a natural disaster, including a major earthquake, blizzard, or hurricane, or a catastrophic event such as

a fire, power loss, or telecommunications failure, we may be unable to continue our operations and may endure system interruptions, reputational

harm, delays in development of our products and services, lengthy interruptions in service, breaches of data security, and loss of critical

data, all of which could have an adverse effect on our future operating results.

Escalating global tensions, including the conflict

between Russia and Ukraine, could negatively impact us.

The ongoing conflict between Russia and Ukraine could

led to disruption, instability and volatility in global markets and industries that could negatively impact our operations.

and other governments in jurisdictions in which we operate have imposed severe sanctions and export controls against Russia and Russian

interests and threatened additional sanctions and controls.

The impact of these measures, as well as potential responses to them by Russia,

is currently unknown and they could adversely affect our business, partners or customers.

If we default on the Secured Debenture, the secured holder could

take possession of our assets, including our patents and other intellectual property.

The Secured Debenture issued April 24, 2017, is

secured by our assets, which includes our patents and other intellectual property.

In the event that we default on the obligations in

the Debenture, the secured holder could take possession of our assets, including our patents and other intellectual property.

were to occur, investors would likely lose all of their investment.

We need to continue as a going concern if our business is to

Our independent registered public accounting firm

reports on our audited financial statements for the years ended December 31, 2021 and 2020, indicate that there are a number of factors

that raise substantial risks about our ability to continue as a going concern.

Such factors identified in the report are our accumulated

deficit since inception, our failure to attain profitable operations, the excess of liabilities over assets, and our dependence upon obtaining

adequate additional financing to pay our liabilities.

If we are not able to continue as a going concern, investors could lose their investments.

We have made and

expect to continue to make acquisitions that could disrupt our operations and harm our operating results.

Our growth depends upon

market growth, our ability to enhance our existing products, and our ability to introduce new products on a timely basis.

continue to address the need to develop new products and enhance existing products through acquisitions of other companies, product lines,

technologies, and personnel.

Several of the convertible notes issued by us

are in litigation with uncertain outcomes.

We have issued several convertible notes which are

currently the subject of litigation (See “ Legal Proceedings ”).

The outcomes of each of these matters is uncertain and

we may be required to both expend large sums of resources on both defending against and pursuing our causes of action in each of these

In addition, there is no certainty that any outcome will be in favor of us and we may be required to pay settlements or judgments

the amounts of which may be material to us.

In the event that we do not achieve favorable outcomes to each of the outstanding legal proceedings

with convertible note holders, it could have a material adverse effect on us and our operations may fail.

Our future growth depends

significantly on our marketing efforts, and if our marketing efforts are not successful, our business and results of operations will be

We have dedicated some, and

intend to significantly increase, resources to marketing efforts.

Our ability to attract and retain customers depends in large part on

the success of these marketing efforts and the success of the marketing channels we use to promote our products and services.

Our marketing

channels include, but are not limited to, social media, traditional media such as the press, online affiliations, search engine optimization,

search engine marketing, and offline partnerships.

While our goal remains to

increase the strength, recognition and trust in our brand by increasing our customer base and expanding our products and services, if

any of our current marketing channels becomes less effective, if we are unable to continue to use any of these channels, if the cost of

using these channels was to significantly increase or if we are not successful in generating new channels, we may not be able to attract

new customers in a cost-effective manner or increase the use of our products and services.

If we are unable to recover our marketing costs

through increases in the size, value or other product selection and utilization, it could have a material adverse effect on our business,

financial condition, results of operations, cash flows and future prospects.

Our stockholders have

limited voting power compared to the holder of our Series A Preferred Stock.

Our CEO, Dennis O’Leary,

is the sole holder of our Series A Preferred Stock, will control a majority of the voting power of our Company.

For so long as Mr.

holds all of the shares of Series A Preferred Stock, he is expected to hold a majority of our outstanding voting power and he will control

the outcome of matters submitted to a stockholder vote, including the appointment of all directors of the Company.

Our management controls all corporate activities

and can approve all transactions, including mergers, without the approval of other stockholders.

Our CEO, Dennis O’Leary, owns 100 shares of

our Series A Preferred Stock that gives him the right to a majority of the voting power of the Company.

Therefore, our management effectively

controls all corporate activities and can approve transactions, including possible mergers, issuance of shares and compensation levels,

without the approval of other stockholders.

The decisions of our management may not be consistent with or in the best interests of other

stockholders.

This capital structure may have anti-takeover effects

preventing a change in control transaction that the minority owners of our Common Stock might consider in their best interest.

The ability of our management to control our

business may limit or eliminate minority stockholders’ ability to influence corporate affairs.

Our CEO, Dennis O’Leary, owns 100 shares of

Series A Preferred Stock that gives him the right to a majority of the voting power of our Company.

Because of this beneficial stock ownership,

O’Leary is in a position to continue to elect our entire board of directors, decide all matters requiring stockholder approval,

including potential mergers or business changes, and determine our policies.

The interests of our management may differ from the interests

of our minority stockholders with respect to the issuance of shares, business transactions with or sales to other companies, selection

of officers and directors and other business decisions.

Our minority stockholders have no way of overriding decisions made by our management.

This level of control may also have an adverse impact on the market value of our shares because our management may institute or undertake

transactions, policies or programs that may result in losses, may not take any steps to increase our visibility in the financial community

and/or may sell sufficient numbers of shares to significantly decrease our price per share.

We have made and expect

to continue to make acquisitions that could disrupt our operations and harm our operating results.

Our growth depends upon market

growth, our ability to enhance our existing products, and our ability to introduce new products on a timely basis.

We intend to continue

to address the need to develop new products and enhance existing products through acquisitions of other companies, product lines, technologies,

and personnel.

Acquisitions involve numerous risks, including the following:

· Difficulties

in integrating the operations, systems, technologies, products, and personnel of the acquired

companies, particularly companies with large and widespread operations and/or complex products;

of management’s attention from normal daily operations of the business and the challenges

of managing larger and more widespread operations resulting from acquisitions;

difficulties in completing projects associated with in-process research and development intangibles;

· Difficulties

in entering markets in which we have no or limited direct prior experience and where competitors

in such markets have stronger market positions;

dependence on unfamiliar supply chains;

· Insufficient

revenue to offset increased expenses associated with acquisitions;

potential loss of key employees, customers, distributors, vendors and other business partners

of the companies we acquire following and continuing after announcement of acquisition plans.

Acquisitions may also

common stock that would dilute our current shareholders’ percentage ownership;

a substantial portion of our cash resources or incur debt;

· Significantly

increase our interest expense, leverage and debt service requirements if we incur additional

debt to pay for an acquisition;

goodwill and nonamortizable intangible assets that are subject to impairment testing on a

regular basis and potential periodic impairment charges;

amortization expenses related to certain intangible assets;

tax expenses related to the effect of acquisitions on our intercompany research

and development cost sharing arrangement and legal structure;

large and immediate write-offs and restructuring and other related expenses;

subject to intellectual property or other litigation.

Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired companies, particularly companies with large and widespread operations and/or complex products;

Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions;

Potential difficulties in completing projects associated with in-process research and development intangibles;

Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;

Initial dependence on unfamiliar supply chains;

Insufficient revenue to offset increased expenses associated with acquisitions;

The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans.

Acquisitions may also cause

Issue common stock that would dilute our current shareholders’ percentage ownership;

Use a substantial portion of our cash resources or incur debt;

Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition;

Assume liabilities;

Record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges;

Incur amortization expenses related to certain intangible assets;

Incur tax expenses related to the effect of acquisitions on our intercompany research and development cost sharing arrangement and legal structure;

Incur large and immediate write-offs and restructuring and other related expenses;

Become subject to intellectual property or other litigation.

Mergers and acquisitions

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and successfully integrate acquisitions could materially harm our business and operating results.

Prior acquisitions could result in

a wide range of outcomes, from successful introduction of new products and technologies to a failure to do so.

Even when an acquired

company has already developed and marketed products, there can be no assurance that product enhancements will be made in a timely fashion

or that pre-acquisition due diligence will have identified all possible issues that might arise with respect to such products.

From time to time, we

have made acquisitions that resulted in charges in an individual quarter.

These charges may occur in any particular quarter, resulting

in variability in our quarterly earnings.

In addition, our effective tax rate for future periods is uncertain and could be impacted by

mergers and acquisitions.

Prior acquisitions could result in a

wide range of outcomes, from successful introduction of new products and technologies to a failure to do so.

Even when an acquired company

has already developed and marketed products, there can be no assurance that product enhancements will be made in a timely fashion or that

pre-acquisition due diligence will have identified all possible issues that might arise with respect to such products.

From time to time, we have

made acquisitions that resulted in charges in an individual quarter.

These charges may occur in any particular quarter, resulting in variability

in our quarterly earnings.

In addition, our effective tax rate for future periods is uncertain and could be impacted by mergers and acquisitions.

Risks related to new product development also apply to acquisitions.

Because of the unique difficulties and

uncertainties inherent in technology development, we face a risk of business failure.

Acquisitions, joint

ventures or other strategic transactions create certain risks and may adversely affect our business, financial condition or results of

Acquisitions, partnerships

and joint ventures are part of our growth strategy.

We evaluate and expect in the future to evaluate potential strategic acquisitions

of, and partnerships or joint ventures with, complementary businesses, services or technologies.

We may not be successful in identifying

acquisition, partnership and joint venture targets.

In addition, we may not be able to successfully finance or integrate any businesses,

services or technologies that we acquire or with which we form a partnership or joint venture.

We may not be able to identify

suitable acquisition candidates or complete acquisitions in the future, which could adversely affect our future growth;

or businesses

that we acquire may not perform as well as expected or may be more difficult or expensive to integrate and manage than expected, which

could adversely affect our business and results of operations.

In addition, the process of integrating these acquisitions may disrupt

our business and divert our resources.

In addition, acquisitions outside our current operating jurisdictions

often involve additional or increased risks including, for example:

managing geographically separated organizations, systems and facilities;

integrating personnel with diverse business backgrounds and organizational cultures;

complying with foreign regulatory requirements;

fluctuations in exchange rates;

enforcement and protection of intellectual property in some foreign countries;

difficulty entering new foreign markets due to, among other things, customer acceptance and business knowledge of these new markets;

general economic and political conditions.

These risks may arise for

a number of reasons:

we may not be able to find suitable businesses to acquire at affordable valuations or on other acceptable terms;

we may face competition for acquisitions from other potential acquirers;

we may need to borrow money or sell equity or debt securities

to the public to finance acquisitions and the terms of these financings may be adverse to us;

changes in accounting, tax, securities or

other regulations could increase the difficulty or cost for us to complete acquisitions;

we may incur unforeseen obligations or liabilities

in connection with acquisitions;

we may need to devote unanticipated financial and management resources to an acquired business;

not realize expected operating efficiencies or product integration benefits from an acquisition;

we could enter markets where we have

minimal prior experience;

and we may experience decreases in earnings as a result of non-cash impairment charges.

We cannot ensure that any

acquisition, partnership or joint venture we make will not have a material adverse effect on our business, financial condition and results

of operations.

Because of the unique difficulties and uncertainties

inherent in technology development, we face a risk of business failure.

Potential investors should be aware of the difficulties

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or that with which we are licensing that also extend the time and cost of product development.

If we do not obtain additional financing

or sufficient revenues, our business will fail.

Our current operating funds are less than necessary

to fulfill our operating costs and we will need to obtain additional financing in order to continue our business operations.

we are generating revenues, we are not generating net income.

We will require additional financing to execute

our business plan through raising additional capital and/or generating greater revenues.

Obtaining additional financing is subject to a

number of factors, including acceptance of our DarkPulse Technology and current financial condition as well as general market conditions.

These factors affect the timing, amount, terms

or conditions of additional financing unavailable to us.

If additional financing is not arranged, we will face the risk of going out of

Our management is currently engaged in actively pursuing multiple financing options in order to obtain the capital necessary

to execute our business plan.

The most likely source of future funds presently

available to us is through the additional sales of equity or through convertible debt instruments.

Any sales of share capital or conversion

of convertible debt will most likely result in dilution to existing shareholders.

There is no history upon which to base any assumption as to the likelihood

we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or achieve profitable

If we are unsuccessful in addressing these risks, our business will most likely fail.

Successful technical development of our

products does not guarantee successful commercialization.

Successful technical development of our products

does not guarantee successful commercialization.

We may successfully complete the technical development

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including among others the following:

· Ineffective

distribution and marketing;

of sufficient cooperation from our partners;

· Demonstrations

of the products not aligning with or meeting customer needs.

Our success in the market for the products we

develop will depend largely on our ability to prove our products’ capabilities.

Upon demonstration, our products and/or technology

may not have the capabilities they were designed to have or that we believed they would have.

Furthermore, even if we do successfully

demonstrate our products’ capabilities, potential customers may be more comfortable doing business with a larger, more established,

more proven company than us.

Competing products;

Ineffective distribution and marketing;

Lack of sufficient cooperation from our partners;

Demonstrations of the products not aligning with or meeting customer needs.

Our success in the market for the products we develop

will depend largely on our ability to prove our products’ capabilities.

Upon demonstration, our products and/or technology may not

have the capabilities they were designed to have or that we believed they would have.

Furthermore, even if we do successfully demonstrate

our products’ capabilities, potential customers may be more comfortable doing business with a larger, more established, more proven

company than us.

Moreover, competing products may prevent us from gaining wide market acceptance of our products.

revenue from new product investments may not be achieved for a number of years, if at all.

If we fail to protect our intellectual property rights, we could

lose our ability to compete in the marketplace.

Our intellectual property and proprietary rights

are important to our ability to remain competitive and for the success of our products and our business.

We rely on a combination of

patent, trademark and trade secret laws as well as confidentiality agreements and procedures, non-compete agreements and other contractual

provisions to protect our intellectual property, other proprietary rights and our brand.

We have confidentiality agreements in place

with our consultants, customers and certain business suppliers and plan to require future employees to enter into confidentiality and

non-compete agreements.

We have little protection when we must rely on trade secrets and nondisclosure agreements.

Our intellectual property

rights may be challenged, invalidated or circumvented by third parties.

We may not be able to prevent the unauthorized disclosure or

use of our technical knowledge or other trade secrets by employees or competitors.

Furthermore, our competitors may independently develop

technologies and products that are substantially equivalent or superior to our technologies and/or products, which could result in decreased

Moreover, the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of

Litigation may be necessary to enforce our intellectual property rights which could result in substantial costs to us and substantial

diversion of management attention.

If we do not adequately protect our intellectual property, our competitors could use it to enhance

their products.

Our inability to adequately protect our intellectual property rights could adversely affect our business and financial

condition, and the value of our brand and other intangible assets.

Other companies may claim that we infringe

their intellectual property, which could materially increase our costs and harm our ability to generate future revenue and profit.

We do not believe that we infringe the proprietary

rights of any third party, but claims of infringement are becoming increasingly common and third parties may assert infringement claims

It may be difficult or impossible to identify, prior to receipt of notice from a third party, the trade secrets, patent position

or other intellectual property rights of a third party, either in the United States or in foreign jurisdictions.

Any such assertion may

result in litigation or may require us to obtain a license for the intellectual property rights of third parties.

If we are required

to obtain licenses to use any third-party technology, we would have to pay royalties, which may significantly reduce any profit on our

In addition, any such litigation could be expensive and disruptive to our ability to generate revenue or enter into new market

opportunities.

If any of our products were found to infringe other parties’ proprietary rights and we are unable to come to terms

regarding a license with such parties, we may be forced to modify our products to make them non-infringing or to cease production of

such products altogether.

Significant revenue

from new product investments may not be achieved for a number of years, if at all.

If we do not effectively

manage our growth and the associated demands on our operational, risk management, sales and marketing, technology, compliance and finance

and accounting resources, our business may be adversely impacted.

We have experienced recent

significant growth through our acquisition of Optilan, and other subsidiaries.

In our recent acquisitions, including our acquisition of

Optilan, our business has become increasingly complex by expanding the services we offer.

To effectively manage and capitalize on our

growth, we must continue to expand our information technology and financial, operating, and administrative systems and controls, and continue

to manage headcount, capital, and processes efficiently.

Our continued growth could strain our existing resources, and we could experience

ongoing operating difficulties in managing our business as we expand across numerous jurisdictions, including difficulties in hiring,

training, and managing an employee base.

Failure to scale and preserve our company culture with growth could harm our future success,

including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives.

If we do not adapt

to meet these evolving challenges, or if our management team does not effectively scale with our growth, we may experience erosion to

our brand, the quality of our products and services may suffer, and our company culture may be harmed.

Moreover, the failure of our systems

and processes could undermine our ability to provide accurate, timely, and reliable reports on our financial and operating results, including

the financial statements provided herein, and could impact the effectiveness of our internal controls over financial reporting.

our systems and processes may not prevent or detect all errors, omissions, or fraud, though we have experienced no such material errors,

omissions or fraud in the past.

For example, our employees may fail to identify transaction errors or fraudulent information provided

by our customers.

Any of the foregoing operational failures could lead to noncompliance with laws, loss of operating licenses or other

authorizations, or loss of relationships that could substantially impair or even suspend company operations.

We intend to continue to

develop our technology.

Successful implementation of this strategy may require significant expenditure before any substantial associated

revenue is generated and we cannot guarantee that these increased investments will result in corresponding and offsetting revenue growth.

Our growth may not be sustainable and depends on our ability to retain existing customers, attract new customers, expand product offerings,

and increase processed volumes and revenue from both new and existing customers.

A customer’s use of

our services may decrease for a variety of reasons, including the customer’s level of satisfaction with our products and services,

the expansion of business to offer new products and services, the effectiveness of our support services, the pricing of our products and

services, the pricing, range and quality of competing products or services, the effects of global economic conditions, regulatory limitations,

trust, or perception and interest in our products and services.

Furthermore, the complexity and costs associated with switching to a competitor

may not be significant enough to prevent a customer from switching service providers, especially for larger customers.

Any failure by us to retain

existing customers, attract new customers, and increase revenue from both new and existing customers could materially and adversely affect

our business, financial condition, results of operations and prospects.

These efforts may require substantial financial expenditures,

commitments of resources, developments of our processes, and other investments and innovations.

We face intense and

increasing competition and, if we do not compete effectively, our competitive positioning and our operating results will be harmed.

We operate in a rapidly changing

and highly competitive industry, and our results of operations and future prospects depend on, among other things:

the growth of our customer base;

our ability to acquire customers at a lower cost, and

our ability to increase our overall value to each of our customers while they use our products and services.

Despite the barriers to enter

the markets we serve, we expect our competition to continue to increase.

In addition to established enterprises, we may also face competition

from early-stage companies attempting to capitalize on the same, or similar, opportunities as we are.

Some of our current and potential

competitors have longer operating histories, significantly greater financial, technical, marketing and other resources, and a larger customer

base than we do.

This allows them, among others, to potentially offer more competitive pricing or other terms or features, a broader range

of products, or a more specialized set of specific products or services, as well as respond more quickly than we can to new or emerging

technologies and changes in customer preferences.

Our existing or future competitors

may develop products or services that are similar to our products and services or that achieve greater market acceptance than our products

and services.

This could attract new customers away from our services and reduce our market share in the future.

Additionally, when new

competitors seek to enter our markets, or when existing market participants seek to increase their market share, these competitors sometimes

undercut, or otherwise exert pressure on, the pricing terms prevalent in that market, which could adversely affect our market share and/or

ability to capitalize on new market opportunities.

Cyberattacks and security

breaches of our systems, or those impacting our customers or third parties, could adversely impact our brand and reputation and our business,

operating results and financial condition.

Our business involves the

collection, storage, processing and transmission of confidential information, customer, employee, service provider and other personal

data, as well as information required to access customer assets.

Any actual or perceived security breach of our or our third-party partners

harm our reputation and brand;

result in our systems or services being unavailable and interrupt our operations;

result in improper disclosure of data and violations of applicable privacy and other laws;

result in significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory and financial exposure;

cause us to incur significant remediation costs;

lead to theft or irretrievable loss of our or our customers’ assets;

reduce customer confidence in, or decreased use of, our products and services;

divert the attention of management from the operation of our business;

result in significant compensation or contractual penalties from us to our customers or third parties as a result of losses to them or claims by them;

adversely affect our business and operating results.

Further, any actual or perceived

breach or cybersecurity attack directed at other similar institutions, whether or not we are directly impacted, could lead to a general

loss of customer confidence in the use of our technology, which could negatively impact us including the market perception of the effectiveness

of our security measures and technology infrastructure.

An increasing number

of organizations, including large businesses, technology companies and financial institutions, as well as government institutions, have

disclosed breaches of their information security systems, some of which have involved sophisticated and highly targeted attacks, including

on their websites, mobile applications, and infrastructure.

Attacks upon systems across a variety of industries are increasing in their

frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded, and organized groups

and individuals, including state actors.

The techniques used to obtain unauthorized, improper, or illegal access to systems and information

(including customers’ personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving,

may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target.

attacks may occur on our systems or those of its third-party service providers or partners.

Certain types of cyberattacks could harm us

even if our systems are left undisturbed.

For example, attacks may be designed to deceive employees and service providers into releasing

control of our systems to a hacker, while others may aim to introduce computer viruses or malware into our systems with a view to stealing

confidential or proprietary data.

Additionally, certain threats are designed to remain dormant or undetectable until launched against

a target and we may not be able to implement adequate preventative measures.

Although we do not have a

past history of material security breaches or cyberattacks, and do not believe we are a target of such breaches or attacks, we have developed

systems and processes designed to protect the data we manage, prevent data loss and other security breaches, and effectively respond to

known and potential risks.

We expect to continue to expend significant resources to bolster these protections, but there can be no assurance

that these security measures will provide absolute security or prevent breaches or attacks.

Threats can come from a variety of sources,

including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders.

Certain threat actors may be

supported by significant financial and technological resources, making them even more sophisticated and difficult to detect.

our costs and the resources it devotes to protecting against these advanced threats and their consequences may increase over time.

Although we maintain insurance

coverage that we believe is adequate for our business, it may be insufficient to protect us against all losses and costs stemming from

security breaches, cyberattacks, and other types of unlawful activity, or any resulting disruptions from such events.

Outages and disruptions

of our systems, including any caused by cyberattacks, may harm our reputation and our business, operating results, and financial condition.

We may incur significant

liability as a result of ongoing disputes.

We are a party to multiple

legal disputes the resolutions of which may adversely affect our business and results of operations.

We may be subject to various

other legal proceedings, arbitrations, and regulatory investigation matters as further described in “ Legal Proceedings ”.

If any of these matters are resolved unfavorably to us, our business and results of operations may be adversely affected.

We have a limited operating

history in an evolving and highly volatile industry, which makes it difficult to evaluate our future prospects and may increase the risk

that we will not be successful.

Because we have a limited

history operating our business at our current scale and scope, it is difficult to evaluate our current business and future prospects,

including our ability to plan for and model future growth.

For example, recently launched services require substantial resources and there

is no guarantee that such expenditures will result in profit or growth of our business.

The rapidly evolving nature of the market in which

we operate, substantial uncertainty concerning how these markets may develop, and other economic factors beyond our control, reduces our

ability to accurately forecast quarterly or annual revenue.

Failure to manage our current and future growth effectively could have an

adverse effect on our business, operating results, and financial condition.

Adverse economic conditions

may adversely affect our business.

Our performance is subject

to general economic conditions, and their impact on the industries in which we operate, as well as our customers.

The United States and

other key European and other international economies have experienced cyclical downturns from time to time in which economic activity

declined resulting in lower consumption rates, restricted credit, reduced profitability, weaknesses in financial markets, bankruptcies,

and overall uncertainty with respect to the economy.

The impact of general economic conditions on our business is highly uncertain and

dependent on a variety of factors, including market activity, global economic trends, and other events beyond our control.

developments, such as trade wars and foreign exchange limitations can also increase the severity and levels of unpredictability globally

and increase the volatility of global financial markets.

To the extent that conditions in the general economic markets materially deteriorate,

our ability to attract and retain customers may suffer.

The nature of our business involves significant

risks and uncertainties that may not be covered by insurance or indemnity.

We develop and sell products where insurance

or indemnification may not be available, including:

and developing products using advanced technologies in intelligence and homeland

security applications that are intended to operate in high demand, high risk situations;

and developing products to collect, distribute and analyze various types of information.

Certain products may raise questions with respect to issues of privacy rights, civil liberties, intellectual

property, trespass, conversion and similar concepts, which may raise new legal issues.

Indemnification to cover potential claims or liabilities

resulting from a failure of technologies developed or deployed may be available in certain circumstances but not in others.

able to maintain insurance to protect against all operational risks and uncertainties.

Substantial claims resulting from an accident,

failure of our product, or liability arising from our products in excess of any indemnity or insurance coverage (or for which indemnity

or insurance is not available or was not obtained) could harm our financial condition, cash flows, and operating results.

Any accident,

even if fully covered or insured, could negatively affect our reputation among our customers and the public, and make it more difficult

for us to compete effectively.

We develop and sell products where insurance or indemnification

may not be available, including:

Designing and developing products using advanced technologies in intelligence and homeland security applications that are intended to operate in high demand, high risk situations;

Designing and developing products to collect, distribute and analyze various types of information.

Certain products may raise questions with respect

to issues of privacy rights, civil liberties, intellectual property, trespass, conversion and similar concepts, which may raise new legal

Indemnification to cover potential claims or liabilities resulting from a failure of technologies developed or deployed may be

available in certain circumstances but not in others.

We are not able to maintain insurance to protect against all operational risks and

uncertainties.

Substantial claims resulting from an accident, failure of our product, or liability arising from our products in excess

of any indemnity or insurance coverage (or for which indemnity or insurance is not available or was not obtained) could harm our financial

condition, cash flows, and operating results.

Any accident, even if fully covered or insured, could negatively affect our reputation among

our customers and the public, and make it more difficult for us to compete effectively.

Material weaknesses in our internal control

over financial reporting may, until remedied, cause errors in our financial statements or cause our filings with the SEC to not be timely.

We believe that material weaknesses exist in

our internal control over financial reporting as of December 31, 2021, including those related to (i) our internal audit functions

and (ii) a lack of segregation of duties within accounting functions.

If our internal control over financial reporting or disclosure controls

and procedures are not effective, there may be errors in our financial statements that could require a restatement or our filings may

not be timely made with the Securities and Exchange Commission (the “ SEC ”).

We intend to implement additional corporate

governance and control measures to strengthen our control environment as we are able, but we may not achieve our desired objectives.

no control environment, no matter how well designed and operated, can prevent or detect all errors or fraud.

We may identify material

weaknesses and control deficiencies in our internal control over financial reporting in the future that may require remediation and could

lead investors losing confidence in our reported financial information, which could lead to a decline in our stock price.

Being a public company is expensive and administratively burdensome.

As a public reporting company, we are subject to the

information and reporting requirements of the Securities Act, the Exchange Act and other federal securities laws, rules and regulations

related thereto, including compliance with the Sarbanes-Oxley Act.

Complying with these laws and regulations requires the time and attention

of our Board of Directors and management team, and increases our expenses.

We estimate we will incur approximately $200,000 to $300,000

annually in connection with being a public company.

Among other things, we are required to:

Maintain and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;

Prepare and distribute periodic reports in compliance with our obligations under federal securities laws;

Institute a more comprehensive compliance function, including with respect to corporate governance;

Involve, to a greater degree, our outside legal counsel and accountants in the above activities.

The costs of preparing and filing annual and quarterly

reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders are expensive and much greater

than that of a privately-held company, and compliance with these rules and regulations may require us to hire additional financial reporting,

internal controls and other finance personnel, and will involve a material increase in regulatory, legal and accounting expenses and the

attention of management.

There can be no assurance that we will be able to comply with the applicable regulations in a timely manner,

In addition, being a public company makes it more expensive for us to obtain director and officer liability insurance.

future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage.

If we fail to establish and maintain an effective

system of internal control, we may not be able to report our financial results accurately or to prevent fraud.

Any inability to report

and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.

Effective internal control is necessary for us to

provide reliable financial reports and prevent fraud.

If we cannot provide reliable financial reports or prevent fraud, we may not be

able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with

investors may be harmed.

As a result, our small size and any current internal control deficiencies may adversely affect our financial

condition, results of operation and access to capital.

We have not performed an in-depth analysis to determine if historical un-discovered

failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.

Public company compliance may make it more difficult

to attract and retain officers and directors.

The Sarbanes-Oxley Act and new rules subsequently

implemented by the SEC have required changes in corporate governance practices of public companies.

As a public company, we expect these

new rules and regulations to increase our compliance costs in 2023 and beyond and to make certain activities more time consuming and costly.

As a public company, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director

and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially

higher costs to obtain the same or similar coverage.

As a result, it may be more difficult for us to attract and retain qualified persons

to serve on our Board of Directors or as executive officers.

Delaware law and our

Certificate of Incorporation and Bylaws will contain certain provisions, including anti-takeover provisions that limit the ability of

stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.

Our Certificate of Incorporation

and bylaws contains provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable

by our board and therefore depress the trading price of our Common Stock.

In addition, as a Delaware corporation, we will generally be

subject to provisions of Delaware law, including the DGCL.

These provisions could also make it difficult for stockholders to take certain

actions, including electing directors who are not nominated by the current members of our board or taking other corporate actions, including

effecting changes in management.

Such provisions, alone

or together, could delay or prevent hostile takeovers and changes in control or changes in our board or management.

Any provision of our Certificate

of Incorporation or bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity

for stockholders to receive a premium for their shares of our stock and could also affect the price that some investors are willing to

pay for our Common Stock.

RISKS RELATED TO OUR FINANCIAL CONDITION

If we do not obtain additional financing or

sufficient revenues, our business will fail.

Our current operating funds are less than necessary

to fulfill our operating costs and we will need to obtain additional financing in order to continue our business operations.

we are generating revenues, we are not generating net income.

We will require additional financing to execute our

business plan through raising additional capital and/or generating greater revenues.

Obtaining additional financing is subject to a

number of factors, including acceptance of our BOTDA technology and current financial condition as well as general market conditions.

These factors affect the timing, amount, terms or

conditions of additional financing unavailable to us.

If additional financing is not arranged, we will face the risk of going out of business.

Our management is currently engaged in actively pursuing multiple financing options in order to obtain the capital necessary to execute

our business plan.

The most likely source of future funds presently available

to us is through the additional sales of equity or through convertible debt instruments.

Any sales of share capital or conversion of convertible

debt will most likely result in dilution to existing shareholders.

There is no history upon which to base any assumption

as to the likelihood we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues

or achieve profitable operations.

If we are unsuccessful in addressing these risks, our business will most likely fail.

We might require additional

capital to support business growth, and this capital might not be available or may require stockholder approval to obtain.

We have funded our operations

since inception primarily through equity financings, convertible notes, and revenue generated by our products and services.

to continue to make investments in our business to respond to business challenges, including developing new products and services, enhancing

our operating infrastructure, expanding our international operations, and acquiring complementary businesses and technologies, all of

which may require us to secure additional funds.

Additional financing may

not be available on terms favorable to us, if at all.

If we incur additional debt, the debt holders may have rights senior to holders

of our common stock to make claims on our assets, and the terms of any debt could restrict our operations.

Our only existing commitment for financing is

pursuant to the Equity Financing Agreement with GHS Investments LLC but our ability to make puts is subject to certain conditions which

may limit our ability to make puts or the amount of each put.

In the event we are unable to make puts or obtain other commitments for

financing, our business will fail.

On June 5, 2023, we entered

an Amended Equity Financing Agreement (the “ EFA ”) 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 12 months (the “ Contract

The EFA grants us the right,

from time to time at our sole discretion (subject to certain conditions) during the Contract Period, to direct GHS to purchase shares

of Common Stock on any business day (a “ Put ”), provided that at least ten Trading Days (as defined in the EFA) have

passed since the most recent Put.

No Put will be made in an amount less than $10,000 or greater than $1,000,000.

In no event is the Company

entitled to make a Put or is GHS entitled to purchase that number of shares of Common Stock of the Company, which when added to the sum

of the number of shares of Common Stock beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3 of the Securities

Exchange Act 1934, as amended (the “ Exchange Act ”)), by GHS, would exceed 4.99% of the number of shares of Common Stock

outstanding on such date, as determined in accordance with Rule 13d-1(j) of the Exchange Act.

Due to these limitations,

we may be unable to make Puts sufficient to finance our business operations.

In the event we are unable to make Puts or obtain other commitments

for financing, our business will fail.

We need to continue as a going concern if our business is to succeed.

Our independent registered

public accounting firm reports on our audited financial statements for the years ended December 31, 2022 and 2021, indicate that there

are a number of factors that raise substantial risks about our ability to continue as a going concern.

Such factors identified in the

report are our accumulated deficit since inception, our failure to attain profitable operations, the excess of liabilities over assets,

and our dependence upon obtaining adequate additional financing to pay our liabilities.

If we are not able to continue as a going concern,

investors could lose their investments.

There is no assurance

that we will achieve or maintain profitability or that our revenue and business models will be successful.

Our ability to achieve and maintain profitability

is based on numerous factors, many of which are beyond our control.

We may not be able to generate sufficient revenue to maintain profitability

in the short or long-term.

Our revenue growth may slow, or our revenue may decline for a number of other reasons, including reduced demand

for our offerings, increased competition, a decrease in the growth or size of the industries in which we operate, in the usage our technologies

generally, or any failure to capitalize on growth opportunities.

We are continually refining our revenue and business

model and have shifted our focus to the development and commercialization of our products and services.

There is no assurance that these

efforts will be successful or that we will generate revenues commensurate with our efforts and expectations or become or stay profitable.

We may be forced to make significant changes to our revenue and business model to compete with our competitors’ offerings, and even

if such changes are undertaken, there is no guarantee that they will be successful or profitable.

Additionally, we will need to hire,

train, and integrate qualified personnel to meet and further such changes to our business objectives at potentially significant additional

Failure to successfully implement revenue and business models or manage related expenses could cause us to be unprofitable and

have an adverse effect on pour business, operating results and financial condition.

We may be affected

by fluctuations in currency exchange rates

We are potentially exposed

to adverse as well as beneficial movements in currency exchange rates.

An increase in the value of the dollar could increase the real

cost to our customers of our products in those markets outside the U.S.

where we sell in dollars, and a weakened dollar could increase

the cost of local operating expenses from sources outside the United States, and overseas capital expenditures.

We also conduct certain

investing and financing activities in local currencies.

Therefore, changes in exchange rates could harm our financial condition and results

of operations.

We may experience fluctuations

in our quarterly operating results.

We could experience significant

fluctuations in our quarterly operating results due to a number of factors, many of which are beyond our control.

You should not rely

on period-to-period comparisons of our operating results as an indication of our future performance.

Factors that may cause fluctuations

in our quarterly operating results include, but are not limited to, the following:

a change in the volume of our customers use of our products and services and generally;

planned and unplanned increases in marketing, sales and other operating expenses that we may incur to grow and expand our customer base and operations, and to remain competitive;

the success, or lack of success, in new marketing approaches we have recently undertaken or plan to undertake, which have not been previously or fully tested;

the continued market acceptance of our products and services in a highly competitive environment;

system disruptions, outages and other performance problems or interruptions on our products and technology, or breaches of data or system security, including ransomware or other major cyber-attacks, which, if extended or severe, may harm our credibility and reputation in the market;

our failure to provide adequate customer service;

our ability to successfully, and in a timely manner, continue development, improvement and feature-enhancement of our products and services, including our intellectual property, data analytics, proprietary technology and customer support functions;

the timing and success of new product and service introductions, and new product and service features or enhancements, by us and our subsidiaries, or our competitors, or other changes in the competitive landscape of the markets in which we operate;

the success of our expansion into new markets, products and services, or ones in which we are in the early stages;

changes in the adoption and use of our technologies and the public perception of them;

changes in the legislative or regulatory environment, scope or focus of regulatory investigations and inquiries, or interpretations of regulatory requirements, or outright prohibition of certain activities;

disputes with our customers, adverse litigation and regulatory judgments, enforcement actions, settlements or other related costs and the reputational impact and public perception of such occurrences, including in emerging industries, or emerging components of industries;

the timing and amount of non-cash expenses, such as stock-based compensation and asset impairment;

changes in accounting standards, policies, guidance, interpretations or principles;

general economic conditions in either domestic or international markets, including the impact of the ongoing COVID-19 pandemic.

Our operating results may

fall below the expectations of market analysts and investors in some future periods, which could cause the market price of our Common

Stock to decline substantially.

Changes in U.S.

foreign tax laws, as well as the application of such laws, could adversely impact our financial position and operating results.

We are subject to complex

income and non-income tax laws and regulations in the United States and a variety of foreign jurisdictions.

Both the United States and

foreign jurisdictions may revise corporate income tax and other non-income tax laws which could impact the amount of tax due in such jurisdiction.

Our determination of our

corporate income tax liability is subject to review and may be challenged by applicable U.S.

and foreign tax authorities.

outcome of such challenge could harm our operating results and financial condition.

The determination of our worldwide provision for income

taxes and other tax liabilities requires significant judgment and, in the ordinary course of business, there are many transactions and

calculations where the ultimate tax determination is complex and uncertain.

Moreover, as a multinational business, we have subsidiaries

that engage in many intercompany transactions in a variety of tax jurisdictions where the ultimate tax determination is complex and uncertain.

Our existing corporate structure and intercompany arrangements have been implemented in a manner we believe is in compliance with current

prevailing tax laws.

Furthermore, as we operate in multiple taxing jurisdictions, the application of tax laws can be subject to diverging

and sometimes conflicting interpretations by tax authorities of these jurisdictions.

It is not uncommon for taxing authorities in different

countries to have conflicting views with respect to, among other things, the characterization and source of income or other tax items,

the manner in which the arm’s-length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual

The taxing authorities of the jurisdictions in which we operate may challenge our tax treatment of certain items or the methodologies

we use for valuing developed technology or intercompany arrangements, which could impact our worldwide effective tax rate and harm our

financial position and operating results.

We are also subject to non-income

taxes, such as payroll, sales, use, value-added, net worth, property, and goods and services taxes in the United States and various foreign

jurisdictions.

A change in the tax law could impact tax positions which could result in an increased exposure related to such tax liabilities.

Such changes could have an adverse effect on our operating results and financial condition.

In addition, under Section 382 of the Internal Revenue

Code of 1986, as amended (the “ Code ”), a corporation that undergoes an “ownership change” (as defined under

Sections 382 and 383 of the Code and applicable Treasury Regulations) is subject to limitations on its ability to utilize its pre-change

NOLs and certain other tax attributes to offset post-change taxable income or taxes.

We have not performed a study

to determine whether its NOLs are currently subject to Section 382 limitations.

DarkPulse may also experience a future ownership change

under Section 382 of the Code that could affect our ability to utilize its NOLs to offset our income.

If our estimates or

judgment relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected.

The preparation of financial

statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated

financial statements and accompanying notes.

We base our estimates on historical experience and on various other assumptions that we believe

to be reasonable under the circumstances, as provided in the section titled “ Management’s Discussion and Analysis of Financial

Condition and Results of Operations ”.

The results of these estimates form the basis for making judgments about the carrying

values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources.

estimates and judgments involve the identification of performance obligations in revenue recognition, evaluation of tax positions, inter-company

transactions, and the valuation of stock-based awards and the fiat reserves we hold, among others.

Our operating results may be adversely

affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results

to fall below the expectations of analysts and investors, resulting in a decline in the trading price of our Common Stock.

Business metrics and

other estimates are subject to inherent challenges in measurement, and our business, operating results, and financial condition could

be adversely affected by real or perceived inaccuracies in those metrics.

We regularly review business

metrics and other measures to evaluate growth trends, measure our performance, and makes strategic decisions.

These metrics are calculated

using internal company data and have not been validated by an independent third party.

While these numbers are based on what we currently

believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in such measurements.

fail to maintain an effective analytics platform, our calculations may be inaccurate, and we may not be able to identify those inaccuracies.

We are subject to changes

in financial reporting standards or policies, including as a result of choices made by us, which could materially adversely affect our

reported results of operations and financial condition and may have a corresponding material adverse impact on capital ratios.

Our consolidated financial

statements are prepared in accordance with GAAP, which are periodically revised or expanded.

Accordingly, from time to time we are required

to adopt new or revised accounting standards issued by recognized bodies.

It is possible that future accounting standards and financial

reporting standards or policies, including as a result of choices made by us, which we are required to adopt, could change the current

accounting treatment that applies to our consolidated financial statements and that such changes could have a material adverse effect

on our reported results of operations and financial condition, and may have a corresponding material adverse effect on capital ratios.

RISKS RELATED TO OUR EMPLOYEES

AND OTHER SERVICE PROVIDERS

We are heavily reliant on Dennis O’Leary,

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operations and would be difficult to replace.

We currently do not have an employment agreement with Mr.

O’Leary, thus we cannot

be certain that he will desire to continue with us for the necessary time it will to complete the product development and initial sales

channel development.

Although we have an employment agreement with Mr.

O’Leary, we cannot be certain that

he will desire to continue with us for the necessary time it will to complete the product development and initial sales channel development.

The departure or loss of Mr.

O’Leary, or the inability to hire and retain a qualified replacement, could negatively

impact our ability to manage our business.

If we are unable to recruit and retain

key management, technical and sales personnel, our business would be negatively affected.

For our business to be successful, we need to

attract and retain highly qualified technical, management and sales personnel.

The failure to recruit additional key personnel when needed

with specific qualifications and on acceptable terms or to retain good relationships with our partners might impede our ability to continue

O’Leary, or the inability to hire and retain a qualified replacement, could negatively impact our ability

to manage our business.

If we are unable to recruit and retain key management,

technical and sales personnel, our business would be negatively affected.

For our business to be successful, we need to attract

and retain highly qualified technical, management and sales personnel.

The failure to recruit additional key personnel when needed with

specific qualifications and on acceptable terms or to retain good relationships with our partners might impede our ability to continue

to develop, commercialize and sell our products.

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labor, recruiting and training costs in order to attract and retain such employees.

We face competition for qualified personnel from

other companies with significantly more resources available to them and thus may not be able to attract the level of personnel needed

for our business to succeed.

Material weaknesses in our internal control

over financial reporting may, until remedied, cause errors in our financial statements or cause our filings with the SEC to not be timely.

We believe that material weaknesses exist

in our internal control over financial reporting as of December 31, 2021, including those related to (i) our internal audit functions

and (ii) a lack of segregation of duties within accounting functions.

If our internal control over financial reporting or disclosure

controls and procedures are not effective, there may be errors in our financial statements that could require a restatement or our filings

may not be timely made with the Securities and Exchange Commission (the “ SEC ”).

We intend to implement additional

corporate governance and control measures to strengthen our control environment as we are able, but we may not achieve our desired objectives.

Moreover, no control environment, no matter how well designed and operated, can prevent or detect all errors or fraud.

We may identify

material weaknesses and control deficiencies in our internal control over financial reporting in the future that may require remediation

and could lead investors losing confidence in our reported financial information, which could lead to a decline in our stock price.

Risks Related to Our Organization and Our Common

We face competition for qualified personnel from other

companies with significantly more resources available to them and thus may not be able to attract the level of personnel needed for our

business to succeed.

In the event of employee

or service provider misconduct or error, our business may be adversely impacted.

Employee or service provider

misconduct or error could subject us to legal liability, financial losses, and regulatory sanctions, and could seriously harm our reputation

and negatively affect our business.

Such misconduct could include engaging in improper or unauthorized transactions or activities, misappropriation

of customer funds, and misappropriation of information, failing to supervise other employees or service providers, or improperly using

confidential information.

Employee or service provider

errors could expose us to the risk of material losses even if the errors are detected.

Although we have implemented processes and procedures

and provide trainings to our employees and service providers to reduce the likelihood of misconduct and error, these efforts may not be

Moreover, the risk of employee or service provider error or misconduct may be even greater for novel products and services.

This can lead to high risk

of confusion among employees and service providers, particularly in a fast growth company like ours, with respect to compliance obligations

particularly including confidentiality, data access, and conflicts.

It is not always possible to deter misconduct and the precautions

we take to prevent and detect this activity may not be effective in all cases.

If we were found not to have met our regulatory oversight

and compliance and other obligations, we could be subject to regulatory sanctions, financial penalties and restrictions on our activities

for failure to properly identify, monitor and respond to potentially problematic activity, which could seriously damage our reputation.

Our employees, contractors, and agents could also commit errors that subject us to financial claims for negligence, as well as regulatory

actions, or result in financial liability.

Further, allegations by regulatory or criminal authorities of improper transactions could affect

our brand and reputation.

RISKS RELATED TO OUR COMMON STOCK

You may experience dilution of your ownership

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shares of common stock and 2,000,000 shares of “blank check” preferred stock.

In the future, we may issue our authorized

but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders.

In the future, we may issue our authorized but

previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders.

additional shares of our common stock or other securities that are convertible into or exercisable for our common stock in connection

with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business

The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of

the common stock.

We will need to raise additional capital in the near future to meet our working capital needs, and there can be no

assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction

with these capital raising efforts, including at a price (or exercise or conversion prices) below the price an investor paid for stock.

Because the SEC imposes additional sales

practice requirements on brokers who deal in our shares that are penny stocks, some brokers may be unwilling to trade them.

that investors may have difficulty reselling their shares and may cause the price of the shares to decline.

The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of the

common stock.

We will need to raise additional capital in the near future to meet our working capital needs, and there can be no assurance

that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with these

capital raising efforts, including at a price (or exercise or conversion prices) below the price an investor paid for stock.

Because the SEC imposes additional sales practice

requirements on brokers who deal in our shares that are penny stocks, some brokers may be unwilling to trade them.

This means that investors

may have difficulty reselling their shares and may cause the price of the shares to decline.

Our shares qualify as penny stocks and are covered

by Section 15(g) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), which imposes additional

sales practice requirements on broker/dealers who sell our securities in this offering or in the aftermarket.

In particular, prior to

selling a penny stock, broker/dealers must give the prospective customer a risk disclosure document that:

contains a description of the

nature and level of risk in the market for penny stocks in both public offerings and secondary trading;

contains a description of the

broker/dealers’ duties to the customer and of the rights and remedies available to the customer with respect to violations of such

duties or other requirements of Federal securities laws;

contains a brief, clear, narrative description of a dealer market, including

“bid” and “ask” prices for penny stocks and the significance of the spread between the bid and ask prices;

the toll free telephone number for inquiries on disciplinary actions established pursuant to section 15(A)(i);

defines significant terms

used in the disclosure document or in the conduct of trading in penny stocks;

and contains such other information, and is in such form

(including language, type size, and format), as the SEC requires by rule or regulation.

Further, for sales of our securities, the broker/dealer

must make a special suitability determination and receive from you a written agreement before making a sale to you.

Because of the imposition

of the foregoing additional sales practices, it is possible that brokers will not want to make a market in our shares.

This could prevent

reselling of shares and may cause the price of the shares to decline.

We do not expect to declare or pay any

We have not declared or paid any dividends on

our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future.

by Section 15(g) of the Exchange Act, which imposes additional sales practice requirements on broker/dealers who sell our securities in

this offering or in the aftermarket.

In particular, prior to selling a penny stock, broker/dealers must give the prospective customer

a risk disclosure document that:

contains a description of the nature and level of risk in the market for penny stocks in both public

offerings and secondary trading;

contains a description of the broker/dealers’ duties to the customer and of the rights and remedies

available to the customer with respect to violations of such duties or other requirements of Federal securities laws;

contains a brief,

clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and the significance

of the spread between the bid and ask prices;

contains the toll free telephone number for inquiries on disciplinary actions established

pursuant to section 15(A)(i);

defines significant terms used in the disclosure document or in the conduct of trading in penny stocks;

and contains such other information, and is in such form (including language, type size, and format), as the SEC requires by rule or regulation.

Further, for sales of our securities, the broker/dealer must make a special suitability determination and receive from you a written agreement

before making a sale to you.

Because of the imposition of the foregoing additional sales practices, it is possible that brokers will not

want to make a market in our shares.

This could prevent reselling of shares and may cause the price of the shares to decline.

We do not expect to declare or pay any dividends.

We have not declared or paid any dividends on our

common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future.

Volatility of Stock Price.

Our common shares are currently publicly traded

on the OTC Markets under the symbol “DPLS.” In the future, the trading price of our common shares may be subject to wide

fluctuations.

Trading prices of the common shares may fluctuate in response to a number of factors, many of which will be beyond our

In addition, the stock market in general, and the market for technology companies in particular, has experienced extreme

price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies.

and industry factors may adversely affect the market price of the common shares, regardless of our operating performance.

Readers should

carefully consider the risks and uncertainties described below before deciding whether to invest in shares of our common stock.

Our failure to successfully address the risks

and uncertainties described below would have a material adverse effect on our business, financial condition and/or results of operations,

Our common shares are currently publicly traded on

the OTC Markets under the symbol “DPLS.” In the future, the trading price of our common shares may be subject to wide fluctuations.

Trading prices of the common shares may fluctuate in response to a number of factors, many of which will be beyond our control.

the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations

that have often been unrelated or disproportionate to the operating performance of such companies.

Market and industry factors may adversely

affect the market price of the common shares, regardless of our operating performance.

Readers should carefully consider the risks and

uncertainties described below before deciding whether to invest in shares of our common stock.

Our failure to successfully address the risks and

uncertainties described below would have a material adverse effect on our business, financial condition and/or results of operations,

and the trading price of our common stock may decline and investors may lose all or part of their investment.

1 unchanged sentence

we will successfully address these risks or other unknown risks that may affect our business.

As an enterprise engaged in the development of

new technology, our business is inherently risky.

As an enterprise engaged in the development of new

technology, our business is inherently risky.

Our common shares are considered speculative during the development of our new business

2 unchanged sentences

has fluctuated significantly.

Being a public company is expensive and administratively burdensome.

As a public reporting company, we are subject

to the information and reporting requirements of the Securities Act, the Exchange Act and other federal securities laws, rules and regulations

related thereto, including compliance with the Sarbanes-Oxley Act.

Complying with these laws and regulations requires the time and attention

of our Board of Directors and management team, and increases our expenses.

We estimate we will incur approximately $200,000 to $300,000

annually in connection with being a public company.

Among other things, we are required to:

and evaluate a system of internal controls over financial reporting in compliance with the

requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations

of the SEC and the Public Company Accounting Oversight Board;

and distribute periodic reports in compliance with our obligations under federal securities

a more comprehensive compliance function, including with respect to corporate governance;

to a greater degree, our outside legal counsel and accountants in the above activities.

The costs of preparing and filing annual and

quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders are expensive and

much greater than that of a privately-held company, and compliance with these rules and regulations may require us to hire additional

financial reporting, internal controls and other finance personnel, and will involve a material increase in regulatory, legal and accounting

expenses and the attention of management.

There can be no assurance that we will be able to comply with the applicable regulations in

a timely manner, if at all.

In addition, being a public company makes it more expensive for us to obtain director and officer liability

In the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage.

If we fail to establish and maintain an

effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud.

Any inability

to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our

common stock.

Effective internal control is necessary for us

to provide reliable financial reports and prevent fraud.

If we cannot provide reliable financial reports or prevent fraud, we may not

be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation

with investors may be harmed.

As a result, our small size and any current internal control deficiencies may adversely affect our financial

condition, results of operation and access to capital.

We have not performed an in-depth analysis to determine if historical un-discovered

failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.

Public company compliance may make it more

difficult to attract and retain officers and directors.

The Sarbanes-Oxley Act and new rules subsequently

implemented by the SEC have required changes in corporate governance practices of public companies.

As a public company, we expect these

new rules and regulations to increase our compliance costs in 2022 and beyond and to make certain activities more time consuming and

As a public company, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain

director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially

higher costs to obtain the same or similar coverage.

As a result, it may be more difficult for us to attract and retain qualified persons

to serve on our Board of Directors or as executive officers.

You could lose all of your investment.

An investment in our securities is speculative

and involves a high degree of risk.

Potential investors should be aware that the value of an investment in the Company may go down as

An investment in our securities is speculative and

involves a high degree of risk.

Potential investors should be aware that the value of an investment in the Company may go down as well

In addition, there can be no certainty that the market value of an investment in the Company will fully reflect its underlying

You could lose your entire investment.

The ability of our Board of Directors to

issue additional stock may prevent or make more difficult certain transactions, including a sale or merger of the Company.

Our Board of Directors is authorized to issue

up to 2,000,000 shares of preferred stock with powers, rights and preferences designated by it.

Shares of voting or convertible preferred

stock could be issued, or rights to purchase such shares could be issued, to create voting impediments or to frustrate persons seeking

to effect a takeover or otherwise gain control of the Company.

The ability of the Board of Directors to issue such additional shares

of preferred stock, with rights and preferences it deems advisable, could discourage an attempt by a party to acquire control of the

Company by tender offer or other means.

Such issuances could therefore deprive stockholders of benefits that could result from

such an attempt, such as the realization of a premium over the market price for their shares in a tender offer or the temporary increase

in market price that such an attempt could cause.

Moreover, the issuance of such additional shares of preferred stock to persons

friendly to the Board of Directors could make it more difficult to remove incumbent officers and directors from office even if such change

were to be favorable to stockholders generally.

Our stock may be traded infrequently and

in low volumes, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell your shares.

Until our common stock is listed on a national

securities exchange such as the New York Stock Exchange or the Nasdaq, we expect our common stock to remain eligible for quotation on

the OTC Markets, or on another over-the-counter quotation system.

In those venues, however, the shares of our common stock may trade

infrequently and in low volumes, meaning that the number of persons interested in purchasing our common shares at or near bid prices

at any given time may be relatively small or non-existent.

An investor may find it difficult to obtain accurate quotations as to the

market value of our common stock or to sell his or her shares at or near bid prices or at all.

In addition, if we fail to meet the criteria

set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other

than established customers and accredited investors.

Consequently, such regulations may deter broker-dealers from recommending or selling

our common stock, which may further affect the liquidity of our common stock.

This would also make it more difficult for us to raise

There currently is no active public market

for our common stock and there can be no assurance that an active public market will ever develop.

The ability of our Board of Directors to issue

additional stock may prevent or make more difficult certain transactions, including a sale or merger of the Company.

Our Board of Directors is authorized to issue up to

2,000,000 shares of preferred stock with powers, rights and preferences designated by it.

Shares of voting or convertible preferred stock

could be issued, or rights to purchase such shares could be issued, to create voting impediments or to frustrate persons seeking to effect

a takeover or otherwise gain control of the Company.

The ability of the Board of Directors to issue such additional shares of preferred

stock, with rights and preferences it deems advisable, could discourage an attempt by a party to acquire control of the Company by tender

offer or other means.

Such issuances could therefore deprive stockholders of benefits that could result from such an attempt, such

as the realization of a premium over the market price for their shares in a tender offer or the temporary increase in market price that

such an attempt could cause.

Moreover, the issuance of such additional shares of preferred stock to persons friendly to the Board

of Directors could make it more difficult to remove incumbent officers and directors from office even if such change were to be favorable

to stockholders generally.

Our stock may be traded infrequently and in

low volumes, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell your shares.

Until our common stock is listed on a national securities

exchange such as the New York Stock Exchange or the Nasdaq, we expect our common stock to remain eligible for quotation on the OTC Markets,

or on another over-the-counter quotation system.

In those venues, however, the shares of our common stock may trade infrequently and in

low volumes, meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may

be relatively small or non-existent.

An investor may find it difficult to obtain accurate quotations as to the market value of our common

stock or to sell his or her shares at or near bid prices or at all.

In addition, if we fail to meet the criteria set forth in SEC regulations,

various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and

accredited investors.

Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may

further affect the liquidity of our common stock.

This would also make it more difficult for us to raise capital.

There currently is no active public market for

our common stock and there can be no assurance that an active public market will ever develop.

Failure to develop or maintain a trading

market could negatively affect the value of our common stock and make it difficult or impossible for you to sell your shares.

There is currently no active public market for

shares of our common stock and one may never develop.

There is currently no active public market for shares

of our common stock and one may never develop.

Our common stock is quoted on the OTC Markets.

The OTC Markets is a thinly traded

market and lacks the liquidity of certain other public markets with which some investors may have more experience.

We may not ever be

able to satisfy the listing requirements for our common stock to be listed on a national securities exchange, which is often a more widely-traded

The OTC Markets is a thinly traded market

and lacks the liquidity of certain other public markets with which some investors may have more experience.

We may not ever be able to

satisfy the listing requirements for our common stock to be listed on a national securities exchange, which is often a more widely-traded

and liquid market.

17 unchanged sentences

may reduce the value of an investment in the stock.

Rule 15g-9 under the Exchange Act 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:

(a) that a broker or dealer approve a person’s account for transactions

in penny stocks;

and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity

and quantity 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:

(a) obtain financial information and investment experience objectives of

the person and (b) 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 SEC relating to the penny stock market, which, in highlight

Rule 15g-9 under the Exchange Act 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:

(a) that a broker or dealer approve a person’s account for transactions in penny

and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and

quantity 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:

(a) obtain financial information and investment experience objectives of the person and (b)

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 SEC relating to the penny stock market, which, in highlight form:

(a) sets forth the basis on which the broker or dealer made the suitability determination;

and (b) confirms 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 common 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 or

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.

and (b) confirms 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 common 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 or 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.

Our stock price may be volatile.

The market price of our common stock is likely

to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including

The market price of our common stock is likely to

be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including

the following:

· The continued effects of the COVID-19 pandemic and its variants;

The impact of conflict between the Russian Federation and Ukraine on our operations;

· Geo-political events, such as the crisis in Ukraine, government responses to such events and the related impact on

the economy both nationally and internationally;

in our industry;

· Competitive

pricing pressures;

ability to obtain working capital financing;

or departures of key personnel;

of our common stock;

ability to execute our business plan;

results that fall below expectations;

of any strategic relationship;

developments;

and other external factors.

In addition, the securities markets have from

time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies.

These market fluctuations may also materially and adversely affect the market price of our common stock.

Offers or availability for sale of a substantial

number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts

of our common stock in the public market, including upon the expiration of any statutory holding period under Rule 144, or issued upon

the conversion of preferred stock or exercise of warrants, it could create a circumstance commonly referred to as an "overhang"

and in anticipation of which the market price of our common stock could fall.

The existence of an overhang, whether or not sales have

occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related

securities in the future at a time and price that we deem reasonable or appropriate.

Geo-political events, such as the crisis in Ukraine, government responses to such events and the related impact on the economy both nationally and internationally;

Changes in our industry;

Competitive pricing pressures;

Our ability to obtain working capital financing;

Additions or departures of key personnel;

Sales of our common stock;

Our ability to execute our business plan;

Operating results that fall below expectations;

Loss of any strategic relationship;

Regulatory developments;

Economic and other external factors.

In addition, the securities markets have from time-to-time

experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies.

fluctuations may also materially and adversely affect the market price of our common stock.

Offers or availability for sale of a substantial

number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts

of our common stock in the public market, including upon the expiration of any statutory holding period under Rule 144, or issued upon

the conversion of preferred stock or exercise of warrants, it could create a circumstance commonly referred to as an "overhang"

and in anticipation of which the market price of our common stock could fall.

The existence of an overhang, whether or not sales have

occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related

securities in the future at a time and price that we deem reasonable or appropriate.

STAFF COMMENTS

If our stockholders sell substantial amounts of our

common stock in the public market, including upon the expiration of any statutory holding period under Rule 144, or issued upon the conversion

of preferred stock or exercise of warrants, it could create a circumstance commonly referred to as an "overhang" and in anticipation

of which the market price of our common stock could fall.

The existence of an overhang, whether or not sales have occurred or are occurring,

also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the

future at a time and price that we deem reasonable or appropriate.

RISKS RELATED TO GOVERNMENT

Legislative and regulatory

actions taken now or in the future may increase our costs and impact our business, governance structure, financial condition or results

of operations.

Federal, state and international

regulatory agencies frequently adopt changes to their regulations or change the way existing regulations are applied.

Regulatory or legislative

changes to laws applicable to the industries in which we operate, if enacted or adopted, may impact the profitability of our business

activities, require more oversight or change certain of our business practices, including the ability to offer new products and services

and to continue offering our current products and services, and could expose us to additional costs, including increased compliance costs.

These changes also may require us to invest significant management attention and resources to make any necessary changes to operations

to comply and could have a material adverse effect on its business, financial condition and results of operations.

The regulatory environment

to which we are subject gives rise to various licensing requirements, legal and financial compliance costs and management time, and non-compliance

could result in monetary and reputational damages, all of which could have a material adverse effect on our business, financial position

and results of operations.

There can be no assurance

that we will be able to maintain our existing, or obtain additional, required regulatory licenses, certifications and regulatory approvals

in the countries where we provide services or want to expand to.

Furthermore, where we have obtained such regulatory licenses, certifications

and regulatory approvals, there are costs and potential product changes involved in maintaining such regulatory licenses, certifications,

and approvals, and we could be subject to fines or other enforcement action if we are found to violate disclosure, reporting, anti-money

laundering, capitalization, corporate governance or other requirements of such licenses.

These factors could impose substantial additional

costs and involve considerable delay to the development or provision of our products or services, or could require significant and costly

operational changes or prevent us from providing any products or services in a given market.

If we are unable to commit

sufficient resources to regulatory compliance, this could lead to delays and errors and may force us to choose between prioritizing compliance

matters over administrative support for business activities, or may ultimately force us to cease offering certain products or services

globally or in certain jurisdictions.

Any delays or errors in implementing regulatory compliance could lead to substantial monetary damages

and fines, public reprimands, a material adverse effect on our reputation, regulatory measures in the form of cease and desists orders,

increased regulatory compliance requirements or other potential regulatory restrictions on our business, enforced suspension of operations

and in extreme cases, withdrawal of regulatory licenses or authorizations to operate particular businesses, or criminal prosecution in

certain circumstances.

We are and may continue

to be subject to litigation, including individual and class action lawsuits, as well as regulatory audits, disputes, inquiries, investigations

and enforcement actions by regulators and governmental authorities.

We have been and may from

time to time become subject to material claims, arbitrations, individual and class action lawsuits, government and regulatory investigations,

inquiries, actions or requests and other proceedings alleging violations of laws, rules, and regulations, both foreign and domestic, involving

competition and antitrust law, intellectual property, privacy, data protection, information security, anti-money laundering, counter terrorist

financing, sanctions, anti-corruption, accessibility claims, securities, tax, labor and employment, payment network rules, commercial

disputes, services, and other matters.

The laws, rules and regulations

affecting our business are subject to ongoing interpretation by the courts and governmental and supervisory authorities, and the resulting

uncertainty in the scope and application of these laws, rules and regulations increases the risk that we will be subject to private claims,

governmental and regulatory actions alleging violations of those laws, rules, and regulations.

The scope, determination, and impact of claims, lawsuits,

government and regulatory investigations, enforcement actions, disputes, and proceedings to which we are subject cannot be predicted with

certainty, and may result in:

substantial payments to satisfy judgments, fines, or penalties;

substantial outside counsel legal fees and costs;

additional compliance and licensure requirements;

loss or non-renewal of existing licenses or authorizations, or prohibition from or delays in obtaining additional licenses or authorizations, required for our business;

loss of productivity and high demands on employee time;

civil or criminal sanctions or consent decrees;

termination of certain employees, including members of our management team;

barring of certain employees from participating in our business in whole or in part;

orders that restrict our business or prevent us from offering certain products or services;

changes to our business model and practices;

delays to planned transactions, product launches or improvements;

damage to our brand and reputation.

Any such matters can have

an adverse impact, which may be material, on our business, operating results, or financial condition because of legal costs, diversion

of management resources, reputational damage, and other factors.

RISKS RELATED TO OUR INTELLECTUAL

Our intellectual property

rights are valuable, and any inability to protect them could adversely impact our business, operating results, and financial condition.

Our business depends in large

part on our proprietary technology and our brand.

We rely on, and expect to continue to rely on, a combination of trademark, trade dress,

domain name, copyright, and trade secret and laws, as well as confidentiality and license agreements with our employees, contractors,

consultants, and third parties with whom we have relationships, to establish and protect our brand and other intellectual property rights.

Our efforts to protect our

intellectual property rights may not be sufficient or effective.

Our proprietary technology and trade secrets could be lost through misappropriation

or breach of our confidentiality and license agreements, and any of our intellectual property rights may be challenged, which could result

in them being narrowed in scope or declared invalid or unenforceable.

There can be no assurance that our intellectual property rights

will be sufficient to protect against others offering products, services, or technologies that are substantially similar to ours and that

compete with our business.

As we grow, we will seek

to obtain and protect our intellectual property rights in an increasing number of countries, a process that can be expensive and may not

always be successful.

For example, the U.S.

Patent and Trademark Office and various foreign governmental intellectual property agencies

require compliance with a number of procedural requirements to complete the trademark application process and to maintain issued trademarks,

and noncompliance or non-payment could result in abandonment or lapse of a trademark or trademark application, resulting in partial or

complete loss of trademark rights in a relevant jurisdiction.

Further, intellectual property protection may not be available to us in

every country in which our products and services are available.

We may also agree to license our intellectual property to third parties

as part of various agreements.

Those licenses may diminish our ability, though, to counter-assert our intellectual property rights against

certain parties that may bring claims against us.

In the future we may be sued by third parties for alleged infringement

of their proprietary rights.

In recent years, there has

been considerable patent, copyright, trademark, domain name, trade secret and other intellectual property development activity, as well

as litigation, based on allegations of infringement or other violations of intellectual property, including by large financial institutions.

Furthermore, individuals and groups can purchase patents and other intellectual property assets for the purpose of making claims of infringement

to extract settlements from companies like ours.

We use of third-party intellectual property rights also may be subject to claims of infringement

or misappropriation.

We cannot guarantee that

our internally developed or acquired/licensed technologies and content do not or will not infringe the intellectual property rights of

From time to time, our competitors or other third parties may claim that we are infringing upon or misappropriating their intellectual

property rights, and we may be found to be infringing upon such rights.

Any claims or litigation could cause us to incur significant expenses

and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering

our products or services or using certain technologies, force us to implement expensive work-arounds, or impose other unfavorable terms.

Our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management

Further, during the course of any litigation, we may make announcements regarding the results of hearings and motions, and

other interim developments.

If securities analysts and investors regard these announcements as negative, the market price of our Common

Stock may decline.

Even if intellectual property claims do not result in litigation or are resolved in our favor, these claims, and the

time and resources necessary to resolve them, could divert the resources of our management and require significant expenditures.

the foregoing could prevent us from competing effectively and could have an adverse effect on our business, operating results, and financial

UNRESOLVED STAFF COMMENTS

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 1A. Risk Factors