Sito Mobile (STTO) Risk Analysis

Stockholders may from time to time engage in proxy solicitations, submit advance stockholder proposals, make Board nominations or otherwise attempt to effect changes, assert influence or acquire some level of control over us. If an activist campaign that seeks to replace at least a majority of the members of the Board, a change in control of the Board may be deemed to have occurred under certain of our material contracts and agreements, and such a change in control may trigger certain fundamental change and/or change in control provisions, payments, and/or redemptions under certain of our outstanding indebtedness, our employment agreements with certain of our named executive officers, our equity compensation plans and possibly some of our other plans and agreements.

Delaware law and our Certificate of Incorporation and amended and restated Bylaws contain certain provisions, and our Board recently adopted a Section 382 Tax Benefits Preservation Plan in the form of a stockholder rights agreement with an expiration date of April 3, 2020 and an ownership trigger threshold of 4.99%, each of which may render more difficult, or discourage a merger, tender offer, or assumption of control of the Company that is not approved by our Board. The Section 382 Tax Benefits Preservation Plan, however, should not interfere with any merger, tender or exchange offer, or other business combinations approved by our Board. The rights agreement does not prevent our Board from considering any offer that it considers to be in the best interest of our stockholders.

Our common stock is listed on the NASDAQ Capital Market, or "NASDAQ," under the symbol "SITO", and we also have outstanding warrants listed on NASDAQ under the symbol "SITO". For our common stock to continue to be listed on NASDAQ, we must meet the current NASDAQ continued listing requirements. If we were unable to meet these requirements, our common stock may be delisted from NASDAQ. If our securities were to be delisted from NASDAQ, our securities may continue to trade on the over-the-counter bulletin board following any delisting from NASDAQ, or on the Pink Sheets, as the case may be. Any such delisting of our securities may have an adverse effect on the market price of, and the efficiency of the trading market for our securities, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and less coverage of us by securities analysts, if any. Also, if in the future we were to determine that we need to seek additional equity capital, it may have an adverse effect on our ability to raise capital in the public or private equity markets. There can be no assurance that we will meet NASDAQ's requirements, such as the minimum stockholders' equity requirement and the minimum bid price requirement, during any compliance period or in the future, or otherwise meet NASDAQ compliance standards, or that NASDAQ will grant the Company any relief from delisting as necessary, or that we will be able to ultimately meet applicable NASDAQ requirements for any such relief.

Our quarterly operating results may fluctuate due to a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. You should not consider our past results, including our recent growth rates as indicative of our future performance. In addition to other risk factors listed in this section, factors that may affect our quarterly operating results include the following: - seasonal variations in advertising spending;- ? fluctuations in demand for our products;- the length and associated unpredictability of our sales cycle;- the timing and amount of investment in the development of new technologies, features and functionality of our platform;- changes in the availability or price of advertising inventory;- the timing and success of changes in our offerings or those of our competitors;- changes in our pricing or pricing of our competitors' solutions;- changes in government regulation applicable to our industry; and - general economic conditions. Based upon all the factors described above, we have a limited ability to forecast our future revenue, costs and expenses, and as a result, our operating results may from time to time fall below our estimates.

We must maintain effective internal controls to provide reliable financial reports and to prevent and detect fraud and other improprieties. We are responsible for reviewing and assessing our internal controls and implementing additional controls when improvement is needed. Failure to implement any required changes to our internal controls or other changes we identify as necessary to maintain an effective system of internal controls may adversely affect our operating results and cause investors to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the market price of our stock, and may otherwise have a material adverse impact on our business. Sarbanes-Oxley Act requirements regarding internal control over financial reporting, and other internal controls over business practices, are costly to implement and maintain, and such costs are relatively more burdensome for smaller companies such as us than for larger companies. We have limited internal personnel to implement procedures and must scale our procedures to be compatible with our resources. We also rely on outside professionals, including accountants and attorneys, to support our control procedures. We are working to improve all of our controls but, if our controls are not effective, we may not be able to report our financial results accurately or prevent and detect fraud and other improprieties which may lead to a decrease in the market price of our stock. We are in the process of documenting all of our accounting processes and developing step-by-step guidance for each function in our accounting department to allow employees of the department to independently perform their functions.

We intend to continue to make investments in pursuit of our strategic objectives and to support our business growth. Various business challenges may require additional funds, including the need to respond to competitive threats or market evolution by developing new solutions and improving our operating infrastructure, either through additional hiring or acquisition of complementary businesses or technologies, or both. In addition, we may incur significant expenses or shortfalls in anticipated cash generated as a result of unanticipated events in our business or competitive, regulatory, or other changes in our market, or longer payment cycles required or imposed by our customers. Our available cash and cash equivalents, and any cash we may generate from operations, may not be adequate to meet our capital needs, and therefore we may need to engage in equity or debt financings to secure additional funds. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and respond to business challenges may be significantly impaired, and our business may be adversely affected. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders may suffer dilution, which may be significant, and any new equity securities we issue may have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we secure in the future may involve restrictive covenants relating to our capital raising activities and other financial and operational matters, including the ability to pay dividends. This may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, if we issue debt, the holders of that debt would have prior claims on our assets, and in case of insolvency, the claims of creditors would be satisfied before distribution of value to equity holders, which would result in significant reduction or total loss of the value of our equity.