DigitalTown (DGTW) Risk Analysis

Our common stock is currently traded on the Over-The-Counter market "OTC" and quoted on the OTC Markets. Broker-dealers are challenged to trade in OTC stocks given that the market for such securities is often limited, the stocks are more volatile, and the risks to investors are greater. These factors may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of them. This could cause our stock price to decline. The Company is exploring the possibility of listing within a different level of OTC or transitioning to the NASDAQ exchange in an effort to help increase the liquidity of the Company's stock.

Since our common stock is thinly traded, its trading price is more likely to be volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including (but not necessarily limited to): - the trading volume of our shares;- new products or services introduced or announced by us or our competitors;- actual or anticipated variations in quarterly operating results;- general conditions or trends in our business industries;- announcements by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;- additions or departures of key personnel;- sales of our common stock; and- general stock market price and volume fluctuations of publicly-traded, and particularly microcap, companies.- the number of securities analysts, market-makers and brokers following our common stock; Investors may have difficulty reselling shares of our common stock, either at or above the price they paid for our stock, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, there is a history of securities class action litigation following periods of volatility in the market price of a company's securities. Although there is no such litigation currently pending or threatened against the Company, such activity against us could result in substantial legal fees, potential liabilities and the diversion of management's attention and resources from our business. Moreover and as previously noted, our shares are currently quoted on the OTC Markets and are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to manipulation by market-makers, short-sellers and option traders.

Provisions of Minnesota law, such as its business combination statute, may have the effect of delaying, deferring or preventing a change in control of our Company. As a result, these provisions could limit the price some investors might be willing to pay in the future for shares of our common stock.

Our current directors in the aggregate have the ability to appoint new members to the Board of Directors. Accordingly, our directors and executive officers, whether acting alone or together, may have significant influence in determining the outcome of any corporate transaction or other matter submitted to our Board for approval, including issuing common and preferred stock, and appointing officers. This influence could have a material impact on mergers, acquisitions, consolidations, the sale of all or substantially all of our assets and the power to prevent or cause a change in control. The interests of these board members may differ from the interests of the other stockholders.

Shares of our common stock may be defined as a penny stock under the Securities and Exchange Act of 1934 ("Exchange Act") and rules of the Securities and Exchange Commission ("SEC"). The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000, individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly with spouse, or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser's written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the SEC. Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or trade our common stock and may also affect your ability to resell any shares you may purchase in the public markets.

Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include: - Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; - Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; - Boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced salespersons; - Excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and, - The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices creating consequential investor losses. Our management team is aware of the abuses that have occurred historically in the penny stock market. Although we are not in a position to dictate the behavior of the market or of broker-dealers who participate in the market, we will strive within the confines of practical limitations to prevent the described abuses from being established with respect to our securities. The occurrence of these practices could increase the volatility of our share price.