ROKK ROKK3R Inc (CE)

SUMMARY TERM SHEET

The following summary term sheet provides an overview of the material matters that are presented in this information statement. This summary term sheet should be read in conjunction with the full text of this information statement and the appendices attached hereto. EACH STOCKHOLDER IS URGED TO READ THE ENTIRE INFORMATION STATEMENT AND APPENDICES WITH CARE. In this information statement, the terms “the Company”, “Rokk3r”, “we,” “us,” “our,” and similar terms refer to Rokk3r Inc., a Nevada corporation, having its principal executive offices 2121 NW 2nd Avenue #203, Miami, Florida 33127, Telephone (305) 259-6637. This information statement is first being sent or delivered to the Company’s stockholders on or about April 27, 2020.

The Reverse Stock Split

On or about the 20th day following the mailing of this information statement, Rokk3r Inc., a Nevada corporation (the “Company”) will effect a 200-for-1 reverse stock split (the “Reverse Stock Split”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), as unanimously approved by the Board and the holders of a majority of the Company’s outstanding shares of Common Stock.

Each holder of record on the date of effectiveness of the Reverse Stock Split will be entitled to receive one share of new Common Stock for every 200 shares of existing Common Stock held by that person.

No fractional shares will be issued in connection with the Reverse Stock Split.

Effect of the Reverse Stock Split on the Company’s Existing Common Stockholders

The Company currently has 106,834,926 shares of Common Stock issued and outstanding. As of March 13, 2020, the Company had identified 335 non-objecting beneficial owners of the Company’s Common Stock. Of these:

Based on the aggregate number of stockholders of record of the Company’s Common Stock, and the number of stockholders of more than 200 shares of the Company’s Common Stock, the Company estimates that, following the Reverse Stock Split, there will be approximately 554,454 shares of new Common Stock issued and outstanding held by approximately 80 stockholders. For additional information concerning the effect of the Reverse Stock Split on Company stockholders, see “Special Factors-Effects of the Reverse Stock Split on Unaffiliated Stockholders Who Hold Fewer than 200 Shares of the Company’s Common Stock in a Single Account,” “Special Factors-Effects of the Reverse Stock Split on Unaffiliated Stockholders Who Hold 200 or More Shares of the Company’s Common Stock in a Single Account,” “Special Factors-Effects of the Reverse Stock Split on Affiliated Stockholders,” “Special Factors-Effects of the Reverse Stock Split on Company Affiliates’ Interests in the Company’s Net Book Value and Net Loss” and “Special Factors-General Examples of Potential Effects of the Reverse Stock Split.”

Termination of The Company’s SEC Reporting Obligations After the Reverse Stock Split

Following the completion of the Reverse Stock Split and the filing of a Form 15 with the Securities and Exchange Commission, or the SEC, the registration of the Company’s Common Stock, as well as its duty to file reports with the SEC under Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will terminate and the Company’s Common Stock will no longer be publicly-traded on the OTCPK bulletin board. The Company will continue operations as a non-reporting private corporation. The Company’s duty to file reports with the SEC under Sections 13(a) and 15(d) of the Exchange Act is sometimes referred to herein as the “registration and periodic reporting obligations.” For detailed information concerning the purpose, reasons for and effect of the Reverse Stock Split, see “Special Factors.”

Interests of the Company’s Directors, Executive Officers and Affiliates in the Reverse Stock Split

The Company’s board of directors (the “Board”), its executive officers and certain affiliates may have interests in the Reverse Stock Split that are or may be different from, or in addition to, your interests as a Company stockholder:

Each of the Company’s directors, executive officers and affiliates will receive the same cash consideration as unaffiliated stockholders for fractional shares of common stock to which they would be entitled as a result of the Reverse Stock Split. For detailed information concerning the interests of the Company’s directors and executive officers in the Reverse Stock Split, see “Special Factors - Interests of the Company’s Directors, Executive Officers and Affiliates in the Reverse Stock Split.”

Reports, Opinions and Appraisals

Determination of the Company’s Board of Directors

The Board, on behalf of the Company, unanimously determined that the Reverse Stock Split is substantively and procedurally fair to, and in the best interests of, its unaffiliated stockholders, whether they are cashed out or remain as stockholders of the Company. The Board made this determination after careful consideration of several factors relating to:

For additional information concerning the Board’s approval of the Reverse Stock Split, see “Special Factors-Background of the Reverse Stock Split; Alternatives Considered by the Board of Directors,” “Special Factors-Reasons for the Reverse Stock Split,” “Special Factors-Factors Considered by The Board and Company Affiliates as to the Fairness of the Reverse Stock Split,” and “Special Factors-Position of the Company Regarding the Fairness of the Reverse Stock Split.”

Reservation of Right to Abandon the Reverse Stock Split

The Board has retained the right to abandon the Reverse Stock Split, even though approved by the Board and Company stockholders, if the Board determines prior to the Effective Date that the Reverse Stock Split is not then in the Company’s best interests or the best interests of the Company’s stockholders.

Among the circumstances the Board may consider in reaching a decision to abandon the Reverse Stock Split is if the transaction becomes too expensive or there is a risk that it will not result in a reduction in the number of record holders to fewer than 300. For additional information concerning the Board’s right to abandon the Reverse Stock Split, see “Special Factors-Reservation of Right to Abandon the Reverse Stock Split.”

Stockholder Approval

Rights of Dissenters and Unaffiliated Stockholders

Under applicable Nevada law, stockholders are not entitled to dissenters’ rights in connection with the Reverse Stock Split (and the Company will not independently provide stockholders with any such right) unless holders of greater than 1% of the Company’s outstanding shares elect to receive cash in lieu of their shares. The Company does not believe that holders of greater than 1% of its outstanding shares will cash out their holdings in connection with the Reverse Stock Split.

Additionally, the Company has not granted unaffiliated security holders access to the Company’s corporate files or to obtain counsel or appraisal services at the expense of the Company.

Source of Funds for the Reverse Stock Split

The Company has cash on hand that will be sufficient to pay out the approximately $20,000 it estimates will be required for the fractional shares resulting from the Reverse Stock Split.

Effect on the Company’s Business

The Reverse Stock Split is not expected to have an immediate effect on the Company’s current business plan or operations, except for the anticipated cost and employee time savings associated with termination of the Company’s public company registration and periodic reporting obligations and the approximate amount of $20,000 of cash that will be spent to effectuate the Reverse Stock Split. The Company anticipates that as a private entity, it will have increased access to funds and any such funds that the Company receives could expand its business. For more information, see “Special Factors - Reasons for the Reverse Stock Split,” and “Special Factors - Effects of the Reverse Stock Split on the Company.”

Trading of Common Stock

Material Federal Income Tax Consequences

The Company believes the Reverse Stock Split will be treated as a tax-free “recapitalization” for federal income tax purposes, which will result in no material federal income tax consequences to the Company. Depending on your individual situation, the Reverse Stock Split may give rise to certain income tax consequences. For additional information concerning the potential federal income tax consequences of the Reverse Stock Split, see “Special Factors-Certain Material Federal Income Tax Consequences.”

QUESTIONS AND ANSWERS ABOUT THE REVERSE STOCK SPLIT

The following questions and answers briefly address some commonly asked questions about the Reverse Stock Split that may not be addressed in the summary above. These questions and answers may not include all the information that is important to you. We urge you to read carefully this entire information statement, including the appendices hereto.

Q: When will the Reverse Stock Split be effective?

A. The Reverse Stock Split will become effective after completion of regulatory review by the Financial Industry Regulatory Authority and SEC and no less than twenty (20) days after the mailing of this information statement to stockholders (the “Effective Date”), which mailing was first made on or about April 27, 2020.

Q: When will the Company cease to be an SEC reporting public company?

A. The registration of the Company’s Common Stock under the Exchange Act will be terminated upon the filing of a Form 15 with the SEC, which the Company will do as promptly as possible. After the Form 15 is filed with and accepted by the SEC, the registration of the Company’s Common Stock, as well as the Company’s duty to file reports with the SEC under Sections 13(a) and 15(d) of the Exchange Act, will terminate and the Company’s Common Stock will no longer be publicly-traded on the OTCPK.

The Reverse Stock Split, the filing of Form 15 and the resulting termination of the registration of the Company’s Common Stock and the termination of the Company’s duty to file reports with the SEC are sometimes referred to collectively in this information statement as the “going private” transaction.

Q: What are some of the advantages of the Reverse Stock Split?

A. The Board believes that the Reverse Stock Split will have the following advantages, among others:

For additional information concerning the advantages of the Reverse Stock Split and alternatives to the Reverse Stock Split considered by the Board, see “Special Factors - Background of the Reverse Stock Split; Alternatives Considered by the Board” and “Special Factors - Reasons for the Reverse Stock Split.”

Q: What are some of the disadvantages of the Reverse Stock Split?

A. The Board believes that the Reverse Stock Split will have the following disadvantages, among others:

The elimination of these reporting requirements will result in the loss of financial transparency for unaffiliated stockholders that remain stockholders in the Company after the Reverse Stock Split.

Q: The Company has been publicly held for several years; what are some of the reasons for “going private” now?

A. The Board believes the Company currently derives no material benefit from its public company status. In addition to the direct financial burden from being a public company, the thin trading market in its Common Stock has not provided liquidity to the Company’s stockholders, nor does the Company expect that it will be able to use its stock as currency for acquisitions or other transactions in the future. The Company is pursuing financing opportunities with potential investors that would not invest in a public company, although to date the Company has not entered into any binding agreements with such potential investors. These factors, combined with the implementation costs and ongoing expenses to be incurred by the Company during 2020 related to the internal controls requirements of Section 404 of the Sarbanes-Oxley Act of 2002, led the Board to conclude that the Company should terminate its public company status.

Q: What are some of the factors supporting the Board’s determination to approve the Reverse Stock Split?

A. The Board and certain affiliates of the Company based the determination to approve the Reverse Stock Split on several factors. Importantly, they considered the relative advantages and disadvantages discussed below and under “Special Factors - Background of the Reverse Stock Split; Alternatives Considered by the Board.” “- Reasons for the Reverse Stock Split.” “- Factors Considered by the Board and Company Affiliates as to the Fairness of the Reverse Stock Split” and “- Position of the Company Regarding the Fairness of the Reverse Stock Split.” The Board also considered certain other factors, including:

Q: What is the total cost of the Reverse Stock Split to the Company?

A. The Company estimates that the total cost of the Reverse Stock Split will be approximately $80,000 - consisting of approximately $20,000 to cash out fractional shares, approximately $40,000 in legal and accounting fees, approximately $5,000 related to the mailing of this information statement, approximately $12,000 for the Exchange Agent (as defined below) and $3,000 in other costs and expenses to effect the Reverse Stock Split. This total amount could be larger or smaller if the estimated number of fractional shares that will be outstanding after the Reverse Stock Split changes as a result of purchases or sales of Common Stock by unaffiliated stockholders.

Q: Why didn’t the Board form a committee of disinterested (or unaffiliated) directors to approve the Reverse Stock Split or require the approval of the holders of a majority of shares which are unaffiliated with the Board or management?

A. The Board considered whether, and determined not, to form a committee of disinterested directors or representatives to approve the Reverse Stock Split for several reasons. First, the Reverse Stock Split will be applied equally to the Company’s Common Stock, whether held by affiliated or unaffiliated stockholders, and the interests of unaffiliated and affiliated stockholders are the same. Second, the Board is comprised of persons with many years of corporate experience. Finally, the Board believes its long-standing familiarity with the Company, its financial condition, and its prospects make the time and expense of a special committee or independent representative unwarranted.

Q: Will I have appraisal rights in connection with the Reverse Stock Split?

A. No. The Company does not believe Nevada law, nor its Amended and Restated Articles of Incorporation, as amended, or bylaws provide you with appraisal rights in connection with the Reverse Stock Split, as currently contemplated.

Q: Will I be able to sell my shares following the Reverse Stock Split?

A. The Company’s Common Stock is currently traded on the OTCPK market. After the Reverse Stock Split, the Company’s Common Stock will no longer be eligible to be quoted on the OTCPK. As a result, stockholders may no longer have the ability of selling their shares of Common Stock on the public market, and there may be no effective trading market for the Company’s Common Stock.

Q: What will be my tax consequences if I hold 200 or more shares of Common Stock at the time of the Reverse Stock Split and remain a stockholder of the Company after the Reverse Stock Split?

A. Depending on your individual situation and depending upon whether you receive cash in addition to shares of new Common Stock as a result of the Reverse Stock Split, the Reverse Stock Split may give rise to certain income tax consequences:

For additional information concerning the potential federal income tax consequences of the Reverse Stock Split, see “Special Factors-Certain Material Federal Income Tax Consequences.”

Q: What will be my tax consequences if I hold fewer than 200 shares of Common Stock at the time of the Reverse Stock Split and do not remain a stockholder of the Company after the Reverse Stock Split?

A. Depending on your individual situation, the Reverse Stock Split may give rise to certain income tax consequences. If you (1) receive cash in exchange for a fractional share as a result of the Reverse Stock Split, (2) do not continue to hold any of Company stock immediately after the Reverse Stock Split, and (3) you are not related to any person or entity which holds Company stock immediately after the Reverse Stock Split, you will recognize capital gain or loss. For additional information concerning the potential federal income tax consequences of the Reverse Stock Split. See “Special Factors-Certain Material Federal Income Tax Consequences.”

Q: Will I continue to receive information about the Company if I remain a stockholder?

A. Stockholders may under certain circumstances obtain information from the Company in accordance with the requirements of the NRS upon submitting a written request to the Company which specifies the information sought and the purpose of the request.

Q: Should I send in my stock certificates now?

A. No. The Company has appointed Securities Transfer Corporation to act as exchange agent (the “Exchange Agent”) for holders of Common Stock in connection with the Reverse Stock Split. You may contact the Exchange Agent by mail at 2901 N. Dallas Parkway, Suite 380, Plano, Texas 75093 or by phone at (469) 633-0101.

For those stockholders who will receive cash in lieu of fractional share: The Company will deposit with the Exchange Agent, as soon as practicable prior to the Effective Date, cash in an amount equal to the value of the estimated aggregate number of fractional shares that will result from the reverse split. The Company’s stockholder list shows that some of the outstanding Common Stock is registered in the names of clearing agencies and broker nominees.

Because the Company does not know the numbers of shares held by each beneficial owner for whom the clearing agencies and broker nominees are record holders, it cannot predict with certainty the number of fractional shares that will result from the Reverse Stock Split or the total amount the Exchange Agent will be required to pay for fractional share interests.

For those stockholders who will receive new shares of the Company’s Common Stock: As of the close of business on the Effective Date, each certificate representing shares of Common Stock outstanding immediately prior to the Reverse Stock Split will be deemed, automatically and without any action on the part of individual stockholders, to represent one-two hundredth (1/200) the number of shares of Common Stock on its face after the Reverse Stock Split, with any fractional shares voided and paid in cash as discussed above. Each stockholder will be able (but not required) to obtain a new Common Stock certificate evidencing its post-reverse-split shares only by sending the Exchange Agent its old Common Stock certificate(s), together with the properly executed and completed Letter of Transmittal and such evidence of ownership of the shares as the Company may require. Stockholders will not receive certificates for new Common Stock unless and until their old Common Stock certificates are surrendered.

The related Letter of Transmittal contains specific instructions relating to the exchange of certificates and must be completed and returned together with the old Common Stock certificates in order for a new Common Stock certificate to be issued. Upon surrender of an old Common Stock certificate accompanied by a properly completed and executed Letter of Transmittal, a new certificate representing the new Common Stock and a check payable to the stockholder for any fractional share will be issued and forwarded to the stockholder after the Effective Date. Stockholders whose shares are held in brokerage accounts or in a street name need not submit old Common Stock certificates for exchange as those shares will automatically reflect the new share amount based on the Reverse Stock Split. The Exchange Agent will not send a separate Letter of Transmittal to the recipients of this information statement, as determined by the Company’s records. The Exchange Agent will, after the Effective Date, send a Letter of Transmittal to any other record holders of the Company’s issued and outstanding Common Stock as of the close of business on the Effective Date. Any stockholder whose old Common Stock certificate has been lost, destroyed or stolen will be entitled to issuance of a new Common Stock certificate upon compliance with such requirements as the Company and the Exchange Agent customarily apply in connection with lost, stolen or destroyed certificates.

Stockholders should be aware that, under the escheat laws of the various jurisdictions where stockholders may reside, where the Company is domiciled, and where the funds will be deposited, sums due for fractional interests that are not timely claimed after the Effective Date may be required to be paid to the designated agent for each such jurisdiction, unless correspondence has been received by the Company or the Exchange Agent concerning ownership of such funds within the time permitted in such jurisdiction. Thereafter, stockholders otherwise entitled to receive such funds will have to seek to obtain them directly from the state to which they were paid.

Q: Does the Company have any plans for growth and will the Reverse Stock Split enhance the value of the Company’s Common Stock?

A. Company management always hopes that the Company will grow and has strategic plans related to its growth. As the Company has limited revenue, these plans would be contingent upon receiving additional funding. The Company is pursuing financing opportunities with potential investors that would not invest in a public company, although to date the Company has not entered into any binding agreements with such potential investors.

The Company does not know what effect the Reverse Stock Split will have upon the value of its Common Stock; however, the Company hopes that the savings to be achieved from ceasing to be a public company and the other reasons for the Reverse Stock Split will result in an enhancement in the value of the Company and its Common Stock. The Company cannot assure you on this matter.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This information statement contains certain forward-looking statements that involve risks and uncertainties. Because these forward-looking statements are being made in connection with an SEC Rule 13e-3 “going private” transaction, the safe harbor created by Section 21E of the Exchange Act does not apply to these statements. Such forward-looking statements involve risks and uncertainties and include, but are not limited to, statements regarding future events and our plans, goals and objectives. Such statements are generally accompanied by words such as “intend.” “anticipate,” “believe,” “estimate,” “expect,” or similar terms. The Company’s actual results may differ materially from such statements, which reflect the Board’s and/or management’s opinions only as of the date hereof.

Although Rokk3r believes that the assumptions underlying its forward-looking statements are reasonable, any of the assumptions could prove inaccurate and. Therefore, the results contemplated in such forward-looking statements might not be realized. The inclusion of such forward-looking information should not be regarded as a representation by the Company or any other person that the future events, plans or expectations contemplated by the Company will be achieved. To the extent required by the federal securities laws. The Company has a responsibility to make full and prompt disclosure of material fact, whether favorable and unfavorable, regarding the Company’s financial condition and this responsibility may extend to situations where management knows or has reason to know that previously disclosed projections no longer have a reasonable basis. Readers should carefully review the risks set forth herein as well as other factors addressed in this report. Forward-looking statements made in this document or in any documents incorporated by reference or otherwise made in reference to this transaction are not protected under the safe harbors of the Private Securities Litigation Reform Act of 1995.

SPECIAL FACTORS

Purpose of the Reverse Stock Split

The purpose of the Reverse Stock Split is to facilitate a “going private” transaction to terminate the Company’s registration and periodic reporting obligations under the Exchange Act, and continue future operations as a private company, thereby relieving us of the costs, administrative burdens and competitive disadvantages associated with operating as a public company. The Company intends to accomplish this purpose by reducing the number of holders of record of Common Stock to fewer than 300 by cashing out the fractional shares that result from the Reverse Stock Split. The Company estimates that the Reverse Stock Split will decrease the total number of common stockholders from 335 to approximately 80.

Background of the Reverse Stock Split; Alternatives Considered by the Board

Due to (a) the costs of maintaining its public company status, (b) the time spent by directors and officers related to being a public company, (c) the fact that the Company has not realized many of the benefits associated with being a public company, such as access to the public capital markets, enhanced stockholder value and business credibility, (d) limited liquidity and the market price of the Company’s Common Stock and (e) ability to attract capital as a private company, the Board considered whether it was in the best interests of the Company and its stockholders for the Company to remain a publicly traded entity. The following is a summary of the actions taken by the Board during this process.

During the third quarter of 2019, the Board became dissatisfied with the fact that the Company had not been able to take advantage of its public company status in relations to financing research and operations and thus with the increasing costs of being a public company. The Company estimated the costs of being a public company during fiscal year 2019 to be approximately $900,000.

In addition, during discussions with potential investors to fund Company operations, several had indicated that they would not invest in a public company, and that the Company would be a more attractive investment opportunity if it were to go private. The Company has not entered into any binding agreements with any such potential investors.

During the fourth quarter of 2019, the Board and Company management began undertaking informal discussions regarding the possibility of terminating the Company’s public company status. During these conversations, management advised the Board that the Company had costs of approximately $900,000 each year as a result of being a public company and also noted that the Company had not significantly realized the benefits associated with being a public company, including access to the public capital markets and stockholder liquidity.

During the Board meeting on December 6, 2019, the CEO presented a verbal recommendation to the other board members that the subject of privatization be explored as a means of reducing both near-term and long-term overhead costs, reducing the Company’s exposure to corporate governance rules and increasing its ability to attract investors. The CEO recommended that the Board consider structuring the proposed transaction in such a way as to prevent any adverse effect to existing operations. The recommendation also pointed out that the Company was not in a position to take full advantage of its public company status, which rendered the cost of maintaining such status unwarranted.

Based on these discussions, during the Board meeting on December 6, 2019, each member of the Board agreed that serious consideration should be given to the cost reductions associated with privatization.

In January and February 2020, Company management held telephone discussions with representatives of Ballard Spahr LLP, the Company’s outside legal counsel to discuss the Reverse Stock Split and alternatives.

During these discussions, the board also considered the benefits and disadvantages of:

1. forming a special committee of the Board comprised of independent directors or other independent persons to consider and review the Reverse Stock Split and to make a recommendation to the full board as to the approval of the Reverse Stock Split. Specifically, the Board discussed the fact that the Reverse Stock Split applies equally to all stockholders, including the directors and officers, and that no director, executive officer or affiliate of the Company would receive any benefit not received by any other stockholder. Furthermore, the Board noted that the director’s ownership percentage of the Company’s Common Stock as a group would only increase from approximately 87.98% to approximately 88.00%, as a result of the Reverse Stock Split. Based on these factors, the Board determined not to appoint a special committee.

2. requiring the approval of the Reverse Stock Split by the holders of a majority of the shares of Common Stock held by our unaffiliated stockholders. In considering whether to require the approval of our unaffiliated stockholders, the Board discussed the fact that stockholders would have the option to remain stockholders of the Company if they purchase sufficient shares to bring their holdings to at least 200 shares immediately prior to the Effective Date, the fact that the Reverse Stock Split applies equally to all stockholders. The fact that the Company’s affiliate stockholders’ percentage ownership would likely not significantly change after the Reverse Stock Split and the likely inability to have a majority of the non-affiliate stockholders participate in such a vote. Based on these factors, the Board determined not to require the approval of the Reverse Stock Split by the holders of a majority of the shares of Common Stock held by unaffiliated stockholders of the Company.

The Board also discussed in detail other aspects of the going private transaction, including the price to be paid to stockholders in lieu of fractional shares. The Board also identified and undertook discussions of the disadvantages of the Reverse Stock Split, namely, the fact that stockholders of record owning fewer than 200 shares would not be able to participate in any future growth of the Company. The Board noted that this disadvantage is minimized by the fact that any stockholder who so chooses can remain a stockholder by purchasing a sufficient number of shares in order to increase the number of shares in such stockholder’s record account to more than 200. Another disadvantage discussed by the board is the fact that stockholders who remain after the Reverse Stock Split will no longer have access to information concerning the Company’s operations and financial results that is currently available in its SEC filings.

Based on these considerations, the Board determined that the results of a Reverse Stock Split are more predictable and automatic, and determined that the Reverse Stock Split is the most expeditious and economical way of reducing the number of holders of record to fewer than 300 and effecting the termination of our registration and periodic reporting obligations. The Board then unanimously approved by written consent a 200-for-1 Reverse Stock Split of the Company’s Common Stock on March 16, 2020.

On March 16, 2020, stockholders (all of whom are affiliated stockholders) of the Company holding approximately 88% of the Company’s outstanding Common Stock delivered their consent approving the Reverse Stock Split and other transactions contemplated thereby. The stockholder consent is sufficient under Nevada law to approve the Reverse Stock Split without the concurrence of any other stockholders. Therefore, no further action of the stockholders is necessary to approve the Reverse Stock Split. The Company has not required the approval of the Reverse Stock Split by the holders of a majority of Rokk3r shares held by persons unaffiliated with the Company.

Reasons for the Reverse Stock Split

Continued Survival

The Company does not believe that it could obtain the necessary financing to continue operations without going private. Like many public companies, the Company is a going concern that has never generated positive cash flow and will not do so at any point in the near term. The Company had envisioned using its status as a public company to attract long-term investors to fund its operations. Since becoming a public company, the Company was not able to conduct a registered offering of its Common Stock to raise funds.

Termination of Registration and Reporting Requirements; Reduction of Expenses

Another reason for the Reverse Stock Split is to qualify the Company for deregistration of its Common Stock under SEC Rules 12g-4(a)(1) and (b). Those rules allow a public company with a class of securities held by fewer than 500 persons to terminate its registration and reporting obligations under the Exchange Act, with respect to that class of securities. The Company believes it is its duty in fairness to all of its stockholders and an exercise of its good business judgment to accomplish the Reverse Stock Split as soon as possible.

The Reverse Stock Split will terminate the equity interests of approximately 255 of the Company’s holders of Common Stock who each own fewer than 200 shares of Common Stock and will reduce the equity interest of any record holder who beneficially holds a number of shares of Common Stock that is not evenly divisible by 200.

In addition, the Reverse Stock Split will terminate the equity interests of beneficial owners of fewer than 200 shares whose shares are held in “street name” by their broker or other record owner. The Reverse Stock Split is expected to relieve the Company of the administrative burdens and costs associated with filing reports and otherwise complying with the requirements of registration under the federal securities laws by deregistering the Company’s Common Stock. In addition, the Reverse Stock Split would provide small stockholders a beneficial mechanism to liquidate their equity interest at a fair price for their shares without having to pay brokerage commissions, particularly in light of the limited trading liquidity available to holders of the Company’s Common Stock.

This transaction will help the Company control unnecessary expenses and to cut general and administrative costs by eliminating the expenses, time and effort related to the Company’s registration and periodic reporting obligations under the Exchange Act, and the related stockholder servicing expenses associated with being an SEC reporting company. Annual costs associated with the Company’s registration and periodic reporting obligations, including auditors’ fees, attorneys’ fees, insurance costs, transfer agent fees, printing, postage and other stockholder communications expenses, stock transfer fees and other miscellaneous fees associated with being a publicly held company and servicing stockholders amount to approximately $900,000. The overall executive time currently devoted to our public company reporting obligations could be devoted to other purposes such as business development efforts, enhancement of internal operations, and research and development. The Company, its affiliates and remaining stockholders are expected to benefit from the anticipated savings in regulatory and SEC compliance-related costs.

Aspects of Remaining Public

The Board believes that the Company and its stockholders currently derive no material benefit from continued registration under the federal securities laws. Throughout the Company’s time as a public company. The Company has explored potential alternatives to increase stockholder value and attract investor interest and in some instances has implemented such measures. Generally, the Company has been unsuccessful in attracting investor interest despite operating a publicly held company for several years. The Company has been unable to provide increased value to its stockholders as a public company.

The tangible and intangible costs of being a public company are not justified because the Company has not been able to realize many of the benefits that publicly traded companies sometimes realize. The Board does not believe the Company is in a position to use its status as a public company to raise capital through sales of securities in a public offering or to otherwise access the public markets to raise equity capital. The Company’s Common Stock’s minimal public float and limited trading volume have limited the ability of its stockholders to sell their shares without also reducing our trading price. The lack of liquidity also limits the Company’s ability to use its stock as acquisition currency or to successfully attract and retain employees. During the 90 day period prior to March 11, 2020, the average daily trading volume of the Company’s Common Stock on the OTCPK was approximately 4,500 shares per day, which, using the closing price for shares of the Company’s Common Stock on March 11, 2020 would amount to sales of approximately $1,271 of shares of Common Stock per day.

Continuing as a public company would provide certain benefits, namely a public market for the sale and exchange of share, stockholder liquidity, and readily accessible financial, business and management information about the Company. The reason for terminating these benefits is that they are expensive and of limited effect for small, public companies like the Company. Over the past 12 months, very little trading has taken place in the Company’s securities, affording stockholders little liquidity for their shares. The Company’s market capitalization is so small that it does not attract substantial investment activity or analyst interest. Consequently, the benefits that generally accompany status as a publicly traded company provide little practical benefit to the Company. As a result, the Board has determined that the costs of remaining a publicly traded entity outweigh the benefits for the Company.

Factors Considered by the Board and Company Affiliates as to the Fairness of the Reverse Stock Split

The Board, on behalf of the Company, and certain of the Company’ affiliates, Rokk3r Labs LLC, Rokk3r Fuel Fund 2, LP, Nabyl Charania, German Montoya, Jeffrey S. Ransdell and Salim Ismail (such affiliates, collectively, the “Company Affiliates”) are each independently required, under Item 1014(a) of Regulation M-A (17 C.F.R. §229.1014), to determine whether it or he (as the case may be) reasonably believes that a going private transaction, such as the Reverse Stock Split, is fair or unfair to its unaffiliated stockholders.  The Board, by unanimous approval on behalf of the Company, and each of the Company Affiliates, independently and in their capacities as affiliates of the Company, have made that determination and, for the reasons set forth below, have reached a decision that the Reverse Stock Split is fair to the unaffiliated stockholders.

The Board, on behalf of the Company, and the Company Affiliates have analyzed the Reverse Stock Split and its anticipated effects on its stockholders, and all of the members of the Board, including each director who is not an employee of the Company, and the Company Affiliates deemed the Reverse Stock Split and related termination of the Company’s registration and periodic reporting obligations to be substantively and procedurally fair to, and in the best interests of, both its affiliated and unaffiliated stockholders, whether they are cashed out or remain as stockholders following the Reverse Stock Split. In reaching this conclusion, the Board and Company Affiliates considered, in no particular order and without preference, the following factors:

Substantive Factors Favoring the Reverse Stock Split

The Reverse Stock Split offers stockholders who hold fewer than 200 shares the opportunity to dispose of their holdings at a premium above current market prices, average historic market prices and net book value without brokerage commissions.

The Board and Company Affiliates weighed several factors to value the Company’s Common Stock to determine the $0.64 per share of existing Common Stock to pay to stockholders who will have fractional shares of the Company’s Common Stock as a result of the Reverse Stock Split. These factors that the Board and Company Affiliates considered included:

The cash consideration of $0.64 per share to be paid for fractional shares is 82% of the Company’s current market price (based on a closing price of $0.35 on March 11, 2020. shortly before the public announcement of the proposed Reverse Stock Split) and more than 42% of the 90 day average closing price prior to March 11, 2020. As such, the Board and Company Affiliates consider it to be fair to the Company’s stockholders. Additionally, the Company is committed to paying any transaction fees that are imposed on its stockholders by a bank, brokerage firm or other nominee, such as brokerage commissions and service charges, as a result of the Reverse Stock Split, which further supports the fairness of the transaction.

The Reverse Stock Split ratio is fair and equitable to unaffiliated stockholders. The purpose of the Reverse Stock Split is to reduce the number of record holders to fewer than 300 so that the Company can file to terminate its registration and periodic reporting obligations and continue future operations as a private company. The split ratio is a result of calculations that were intended to determine how many shares needed to be eliminated to reduce the number of record holders to fewer than 300.  The Board and Company Affiliates feel the current ratio of 1-for-200 is fair because it was calculated without bias towards any one group of stockholders. The ratio will be applied equally to all shares of Company’s Common Stock and is not designed to increase any one person’s position, ownership or financial gain as a result of the Reverse Stock Split.

Procedural Factors Favoring the Reverse Stock Split

The Reverse Stock Split provides the Company’s stockholders with liquidity. The average daily trading volume for the Company’s Common Stock over the last three months was less than one-tenth of a percent (0.1%) of its outstanding stock. The Reverse Stock Split will provide stockholders who hold fewer than 200 shares on the Effective Date the opportunity to liquidate their investment in the Company. Under normal circumstances and based on the average trading price per share of $0.35 as of March 12, 2020, a trading day shortly before the public announcement of the proposed Reverse Stock Split, stockholders with fewer than 200 shares wanting to sell their Common Stock would likely incur transaction fees that are disproportionately high relative to the market value of their holding of the Company’s Common Stock. The Reverse Stock Split will eliminate this problem for those stockholders because the Company will pay any transaction fees that are imposed on its stockholders by a bank, brokerage firm or other nominee, such as brokerage commissions and service charge, as a result of the Reverse Stock Split.

The Reverse Stock Split includes the ability to remain a stockholder of the Company. Another factor considered by the Board and Company Affiliates in determining the procedural fairness of the transaction to unaffiliated stockholders is that current holders of fewer than 200 shares of the Company’s Common Stock may elect to remain stockholders of the Company by acquiring sufficient shares so that they hold at least 200 shares in their account immediately prior to the Reverse Stock Split.

Conversely, stockholders who desire to liquidate their shares of the Company’s Common Stock for the cash consideration offered may reduce their holdings to less than 200 shares prior to the Reverse Stock Split. The Board considers the structure of the Reverse Stock Split to be fair to all stockholders because it allows them to control the decision of whether to remain a stockholder of the Company following the Reverse Stock Split or to receive the cash consideration offered in connection with the Reverse Stock Split.

No material change in percentage ownership of the affiliated stockholders. Because the Company estimates that approximately 30,000 out of 106,834,926 shares of the Company’s Common Stock will be cancelled as a result of the Reverse Stock Split, the percentage ownership of stockholders that remain after the Reverse Stock Split will change only slightly from their ownership prior to the Reverse Stock Split.

For example, the Company’s affiliated stockholders currently own approximately 87.98% of the Company’s outstanding Common Stock and will continue to own approximately 88.00% following completion of the Reverse Stock Split.  The fact that the transaction has been structured in a manner that maintains a substantially similar percentage ownership of the stockholders, whether affiliated or unaffiliated, who remain after the Reverse Stock Split, supports the fairness of the transaction to Company stockholders.

No unusual conditions to the Reverse Stock Split. The Board and Company Affiliates also considered the likelihood that the Reverse Stock Split would be implemented. In this regard, both the Board and Company Affiliates took into consideration that there are no unusual requirements or conditions to the Reverse Stock Split, and the fact that the Company has the financial resources to implement the Reverse Stock Split expeditiously. The Reverse Stock Split is not a condition precedent to any binding agreement of the Company.

Substantive Factors Disfavoring the Reverse Stock Split

Cessation of public sale opportunities. Following the Reverse Stock Split, the Company will apply for the termination of its registration and periodic reporting obligations with the SEC. Once the Company terminates its registration and periodic reporting obligations, the Company’s Common Stock will no longer be eligible to be quoted on the OTCPK. As a result, stockholders may no longer have the alternative of selling their shares of Common Stock on the public market, and there may be no effective trading market for the Company’s Common Stock. As a result, any stockholder desiring to sell his or her shares may have a difficult time finding a buyer. Such illiquidity may reduce the price a buyer is willing to pay for your shares. The Company anticipates that the public market for shares of the Company’s Common Stock will be substantially reduced or eliminated altogether. Additionally, the Company does not have any present intention or plans to sell the Company or enter into any other transaction that would provide liquidity for your shares.

However, the current public market for the Company’s Common Stock is highly illiquid. As a practical matter, there currently exists very little liquidity for the Company’s Common Stock; therefore, the Board and Company Affiliates believe any further losses of liquidity will have little effect on unaffiliated stockholders and will be outweighed by the benefits of terminating its registration and periodic reporting obligations. In addition, because the effect of further losses of liquidity due to ineligibility for quotation on the OTCPK will have the same impact on all Company stockholders, whether affiliated or unaffiliated, the Board and Company Affiliates do not believe that this factor makes the transaction unfair to unaffiliated stockholders.

Cessation of publicly available information. Stockholders remaining in the Company following the Reverse Stock Split will no longer have available all of the information regarding the Company that is currently available in the Company’s filings with the SEC. As a result of the Reverse Stock Split and resulting termination of the Company’s registration and periodic reporting obligations, it will no longer prepare or file annual or quarterly reports with the SEC. As a result, Company stockholders will no longer be provided, among other things:

This information that is currently available to the general public and investors through the Company’s SEC filings will not be publicly available after the Company terminates the registration of its securities and its registration and periodic reporting obligations. The elimination of these reporting requirements will result in the loss of financial transparency for unaffiliated stockholders that remain stockholders in the Company after the Reverse Stock Split.

The Board and Company Affiliates do not believe this factor makes the transaction unfair to unaffiliated stockholders because any detriment to unaffiliated stockholders that may result from the termination of the registration of its securities and its periodic filings will be offset by the anticipated cost-saving benefits and competitive advantages to the Company of no longer publicly filing such reports.

In addition, Company stockholders who have restricted securities because they purchased their shares from the Company in unregistered, private-placement transactions will be unable to resell their shares of the Company’s Common Stock under the exemptions provided by SEC Rule 144, unless and until (a) the Company resumes filing the information required under that rule with the SEC or (b) such stockholders are eligible to sell their shares pursuant to SEC Rule 144(k). Given the current and historically low trading volume in the Company’s Common Stock, neither the Board nor the Company Affiliates believe that the unavailability of the Rule 144 exemptions is a factor that makes the transaction unfair to unaffiliated stockholders.

Inability to participate in any future increase in the value of the Company’s Common Stock. Stockholders who are cashed out as a result of the Reverse Stock Split will have no further interest in the Company with respect to their cashed out shares, and thus will not have the opportunity to participate in the potential upside of any increase in the value of such shares. The Board and Company Affiliates determined that this factor does not make the transaction unfair to unaffiliated stockholders because those unaffiliated stockholders who desire to hold shares of the Company’s Common Stock after the Reverse Stock Split can do so by acquiring sufficient shares so that they hold at least 200 shares in their account immediately prior to the Reverse Stock Split.

Procedural Factors Disfavoring the Reverse Stock Split

The Reverse Stock Split has not been structured to require the separate approval of stockholders unaffiliated with the Company.  Among the factors weighing against the procedural fairness of the Reverse Stock Split is the fact that the Board did not establish an independent or special committee to represent the interests of its unaffiliated stockholders. Company board members consented to the Reverse Stock Split as affiliated stockholders and the holders of a majority of the voting power of the Company. In addition, the Board has not and does not intend to have a majority of its non-employee directors retain an unaffiliated representative to act solely on behalf of unaffiliated security holders for purposes of negotiation of the terms of the Reverse Stock Split or preparing a report concerning the fairness of the Reverse Stock Split.

The Board did not establish an independent or special committee or other unaffiliated representative to act on behalf of the interests of the unaffiliated stockholders for several reasons. First and foremost, the Reverse Stock Split will be applied equally to all shares of the Company, whether held by affiliated or unaffiliated stockholders. Unlike a third party tender offer or a repurchase of shares by the Company, there is no price to negotiate on behalf of the unaffiliated stockholders. In the case of the Reverse Stock Split, the Board is tasked with determining a fair price to offer all stockholders. Therefore, the interests of the unaffiliated and affiliated stockholders are the same. Additionally, the Board believes its long-standing familiarity with the Company, its financial condition, and its prospects make the time and expense of a special committee or independent representative unwarranted. Given the experience and composition of the Board, the Company did not believe it was necessary to appoint a special committee to evaluate the fairness of the terms of the Reverse Stock Split or the value of the Company’s Common Stock.

The Reverse Stock Split has not been structured so as to require the approval of at least a majority of the Company’s unaffiliated stockholders. The Board considered it a risk and potentially negative factor to the procedural fairness of the Reverse Stock Split that the approval of the Reverse Stock Split by a majority of the unaffiliated stockholders is not being sought. This risk is mitigated by the likelihood that a quorum of such unaffiliated stockholders would not be obtained and procedural factors favoring the Reverse Stock Split, such as the fact that stockholders have the option to remain stockholders of the Company if they purchase sufficient shares to bring their holdings to at least 200 shares immediately prior to the Effective Date.

Position of the Company Regarding the Fairness of the Reverse Stock Split

The Board has unanimously approved the Reverse Stock Split and declared it advisable, in the best interests of, and substantively and procedurally fair to, its unaffiliated stockholders, whether they are cashed out or remain as stockholders of the Company. In reaching these conclusions, the Board considered, among other things, the following factors relating to the fairness of the Reverse Stock Split:

Substantive Fairness

Procedural Fairness

Notwithstanding the lack of additional procedural safeguards, such as the consent of a majority of the Company’s unaffiliated stockholders or a fairness opinion rendered by an independent financial advisor, the Board and Company Affiliates all believe they have acted in the best interest of both the affiliated and unaffiliated stockholders of the Company, whether they are to be cashed out or remain as stockholders of the Company, and that the fairness determination and approval of the transaction has been procedurally fair.

In view of the foregoing, the Board and Company Affiliates believe that sufficient procedural safeguards exist to ensure the fairness of the Reverse Stock Split and that the positive factors outweighed the negative factors, such that the Reverse Stock Split is substantively and procedurally fair to the unaffiliated stockholders of the Company.

Interests of the Company’s Directors, Executive Officers and Affiliates in the Reverse Stock Split

You should be aware that the Board, executive officers of the Company and the Company Affiliates may have interests in the Reverse Stock Split that are or may be different from, or in addition to, your interests as one of the Company’s stockholders.  The following table sets forth certain information regarding the ownership of the Company’s Common Stock as of March 13, 2020 by (i) each named executive officer and each director of the Company, (ii) Rokk3r Labs LLC, (iii) the managing members of Rokk3r Labs LLC, (iv) Rokk3r Fuel Fund 2, LP, and (v) the managing and general partners of Rokk3r Fuel Fund 2, LP:

Unlike stockholders who own fewer than 200 shares of the Company’s Common Stock on the Effective Date, the directors, executive officers and affiliates listed above will have the opportunity to participate in the potential upside of any increase in the value of the Company’s Common Stock after the Reverse Stock Split. In addition, the Company expects its directors, executive officers and affiliates to retain their respective current positions as directors or executive officers of the Company following the Reverse Stock Split.

The Company will not purchase any Common Stock from any director, executive officer or affiliate of the Company in connection with the Reverse Stock Split other than any fractional shares that such person may hold after the Reverse Stock Split. Each of the Company’s directors and executive officers will receive the same cash consideration as its unaffiliated stockholders for fractional shares of Common Stock to which they would be entitled as a result of the Reverse Stock Split.

Effects of the Reverse Stock Split on Unaffiliated Stockholders Who Hold Fewer than 200 Shares of the Company’s Common Stock in a Single Account

When the Reverse Stock Split is effected, stockholders holding fewer than 200 shares of the Company’s Common Stock in a single account immediately prior to the Effective Date will not receive a fractional share of new Common Stock as a result of the Reverse Stock Split, but instead will receive cash in lieu of the fractional share on the basis of $0.64 per share of existing Common Stock that they own on the Effective Date. The amount of cash each holder of fractional Common Stock will receive will be calculated by multiplying the number of shares of existing Common Stock that the stockholder owns on the Effective Date times $0.64.

The Company intends to pay any transaction fees that are imposed on these stockholders by a bank, brokerage firm or other nominee. Given that these stockholders will not have to pay any service charges or brokerage commissions in connection with the cashing out of their shares as a result of the Reverse Stock Split and given the historical illiquidity of the Company’s Common Stock, the Company believes the structure of the Reverse Stock Split to be a benefit to these stockholders. Among the potential detriments of the Reverse Stock Split is the fact that after the Reverse Stock Split, these stockholders will have no further ownership interest in the Company and will no longer be entitled to vote as a stockholder or share in the Company’s future assets, earnings, or profits. These stockholders’ only right will be to receive cash for their shares of Common Stock.

All amounts owed to these stockholders as a result of the Reverse Stock Split will be subject to applicable federal and state income taxes. Additional details regarding the federal tax consequences are described later in this information statement under the heading “Certain Material Federal Income Tax Consequences.”

As soon as practical after the consummation of the Reverse Stock Split, the Company or its transfer agent will mail a Letter of Transmittal to each stockholder. The Letter of Transmittal will contain instructions for the surrender of your stock certificate or certificates to the Exchange Agent in exchange for the payment of the cash consideration to be received for fractional shares of new Common Stock. No cash payment will be made to any stockholder until the stockholder has surrendered his or her outstanding certificates, together with the Letter of Transmittal, to the Exchange Agent. For more detailed information, see the section entitled “Stock Certificates.”

Effects of the Reverse Stock Split on Unaffiliated Stockholders Who Hold 200 or More Shares of The Company’s Common Stock in a Single Account

When the Reverse Stock Split is effected, stockholders who hold 200 or more shares of the Company’s Common Stock in a single account immediately prior to the Effective Date will:

While the remaining stockholders continue as stockholders of the Company and will have the opportunity to share in the future successes of the Company, if any, among the detriments of the Reverse Stock Split to the remaining stockholders is the fact that they will not have the option to liquidate their holdings like the stockholders who hold fewer than 200 shares of the Company’s Common Stock prior to the Reverse Stock Split. Further, once the Company is private, it will be even more difficult to value, and therefore, sell their shares of Common Stock if they should so desire.

Effects of the Reverse Stock Split on Affiliated Stockholders

Affiliated stockholders of the Company include directors, executive officers and beneficial owners of more than 5% of the Company’s outstanding Common Stock. The affiliated stockholders will participate in the Reverse Stock Split on the same terms as the unaffiliated stockholders. All of the Company’s affiliated stockholders own more than 200 shares each. Therefore, they will all continue to be stockholders of the Company following the Reverse Stock Split, and as such can expect the same benefits and detriments described above in the “Effects of the Reverse Stock Split on Unaffiliated Stockholders Who Hold 200 or More Shares of The Company’s Common Stock in a Single Account” section. They will have the opportunity to share in the future successes of the Company, if any, but they will also not have the option to liquidate their holdings and future valuations and sales of their stock will be more difficult given the Company’s private status following the Reverse Stock Split.

Affiliated stockholders will beneficially own approximately 469,950 post-reverse split shares of Common Stock, or approximately 88.00% of the Company’s issued and outstanding shares of Common Stock after the Reverse Stock Split, as compared to approximately 87.98% of the Company’s issued and outstanding shares of Common Stock prior to the Reverse Stock Split. As with all other remaining stockholders of the Company, the percentage ownership of the total outstanding shares held by its affiliated stockholders after the Reverse Stock Split may increase slightly due to the cancellation of the cashed out shares. The amounts set forth in the section entitled “Special Factors - Interests of the Company’s Directors, Executive Officers and Affiliates in the Reverse Stock Split” illustrate the effect of the Reverse Stock Split on the Company’s affiliated stockholders.

However, only those who remain stockholders following the Reverse Stock Split, whether such stockholders are affiliated or unaffiliated with the Company, will benefit from the Company’s future use of any available operating loss carryforwards. Note, however, that the Company believes that the likelihood that any stockholder remaining following the Reverse Stock Split will derive a benefit from any future use of Company operating loss carryforwards is low given that the Company has historically had substantial operating loss carryforwards that have remained unused and the Company is uncertain whether it will be able to utilize any operating loss carryforwards in the foreseeable future.

Effects of the Reverse Stock Split on the Company

Change in Capital Structure; Certificate of Incorporation

The Reverse Stock Split is expected to reduce the number of the Company’s stockholders and the number of outstanding shares of Common Stock. The Company’s certificate of incorporation, as amended, currently authorizes the issuance of 500,000,000 shares of Common Stock, par value $0.0001 per share, of which 21.4% are currently issued and outstanding. Upon the filing of the certificate of amendment to the Company’s certificate of incorporation with the Nevada Secretary of State, the Company’s authorized shares of Common Stock will remain at 500,000,000, at which time under 0.12% will be issued and outstanding. This will significantly increase the amount of shares that the Company could issue and its ability to dilute your percentage ownership of the Company’s issued and outstanding shares.

Deregistration Under the Exchange Act; Termination of Quotation on the OTCPK

The Company’s Common Stock is currently registered under the Exchange Act, and consequently the Company is subject to its registration and periodic reporting obligations. The Company believes the Reverse Stock Split will reduce the number of beneficial holders of the Company’s Common Stock from approximately 335 to approximately 80. The Reverse Stock Split will allow the Company to file to terminate its registration and periodic reporting obligations and continue future operations as a private company.

The Company believes that following the completion of the Reverse Stock Split and the subsequent termination of its registration and periodic reporting obligations, the market for shares of the Company’s Common Stock will be substantially reduced or possibly eliminated. The Company’s Common Stock is currently traded on the OTCPK, and last sales prices are reported on the OTCPK, which is a regulated quotation service that displays real time quotes, last sales prices and volume information in over-the-counter equity securities. If the Company terminates its registration and periodic reporting obligations, its Common Stock will cease to be eligible to be traded on the OTCPK and this source of liquidity will no longer be available to stockholders.

Cost Savings to be Achieved as a Result of the Termination of the Company’s Registration and Reporting Obligations

The Company is undertaking the Reverse Stock Split at this time to, among other things, eliminate substantial costs, time and effort related to the Company’s registration and periodic reporting obligations under the Exchange Act and the related stockholder servicing expenses associated with being an SEC reporting company. Annual costs associated with the Company’s registration and periodic reporting obligations, including auditors’ fees, attorneys’ fees, payroll expenses, insurance costs, transfer agent fees, printing, postage and other stockholder communications expenses, stock transfer fees and other miscellaneous fees associated with being a publicly held company and servicing stockholders amount to approximately $900,000, and the Company expects that it, its affiliates and remaining stockholders will benefit from the anticipated savings in regulatory and SEC compliance-related costs.

Cash Consideration to be Paid to Company Stockholders in Lieu of Fractional Shares of New Common Stock

Based on the aggregate number of stockholders of the Company’s Common Stock, and the number of stockholders of record owning more than 200 shares of the Company’s Common Stock as of the record date for notice of the action by written consent of its stockholders, the Company estimates that payments of cash in lieu of the issuance of fractional shares to unaffiliated stockholders will total approximately $20,000 in the aggregate, or 30,000 pre-split shares multiplied by the cash consideration of $0.64 per pre-split share. No stockholder with a single account is expected to receive more than $64. However, more stockholders than anticipated may reduce their holdings of the Company’s Common Stock in the accounts to below 200 shares so that they can be cashed out, which would increase the costs associated with the Reverse Stock Split.

Conduct of the Company’s Business and Operations After the Reverse Stock Split

Following the completion of the Reverse Stock Split, the Company expects its operations will be conducted substantially as they are currently being conducted. Other than the Reverse Stock Split and the termination of its registration and periodic reporting obligations, the Company has no present plans or proposals that relate to or would result in an extraordinary corporate transaction involving the Company’s corporate structure, business or management, such as a merger, reorganization, liquidation, relocation of any operations or sale or transfer of a material amount of assets. However, the Company will continue to evaluate its business and operations after the Reverse Stock Split, and may develop new plans and proposals in the future.

Equity Interests and Rights of the Company’s Stockholders After the Reverse Stock Split

The rights of holders of the Company’s Common Stock as set out in its Amended and Restated Articles of Incorporation and Bylaws and under Nevada corporate law will not change as a result of the Reverse Stock Split. The Company has no current plans to issue Common Stock other than pursuant to existing stock plans, but not only does the Company reserve the right to do so at any time and from time to time at such prices and on such terms as the Board determines to be in the Company’s best interests and the best interests of its stockholders, but the Company anticipates that it will need to do so to raise sufficient capital to continue operations as envisioned. The Company’s Common Stock carries no preemptive or preferential rights to purchase any Company stock that it may issue in the future, and neither its existing certificate of incorporation nor its bylaws currently contain any provisions that have a material anti-takeover effect. Persons who continue as stockholders following implementation of the Reverse Stock Split will not have any preemptive or other preferential rights to purchase any Common Stock that the Company may issue in the future, unless such rights are specifically granted to the stockholders. Other than as described in this information statement, the Company has no current agreements to effect any extraordinary corporate transaction such as a merger, reorganization or liquidation, to sell or transfer any material amount of its assets, to change the Board or management, to change materially its capitalization, or otherwise to effect any material change in its corporate structure of business. The Board will take such action, as it deems necessary or appropriate to make equitable adjustments to any outstanding stock options or other rights to acquire the Company’s Common Stock.

Reservation of Right to Abandon the Reverse Stock Split

The Board retains the right to abandon the Reverse Stock Split, even if it determines prior to the Effective Date that the Reverse Stock Split is not then in the Company’s best interests or the best interests of its stockholders. Among the circumstances that might cause the Board to abandon the Reverse Stock Split is a significant risk of the Reverse Stock Split failing to achieve the overall goal of reducing the number of record holders to fewer than 300, or where the expense of cashing out the stockholders with fewer than 200 shares becomes so high that the transaction become financially prohibitive.

IDENTITY AND BACKGROUND OF THE DIRECTORS AND OFFICERS OF THE COMPANY AND AFFILIATES

Rokk3r Inc.

The Company is a technology and services company, providing a range of solutions in business strategy, technology development and growth services. During the last five years, neither the Company nor any of its directors and officers have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) and they have not been parties to a judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining them from future violations of, or prohibiting activities subject to, federal or state securities laws, or finding a violation of any federal or state securities law.

The directors and officers of the Company are set forth in the following table:

Nabyl Charania-Chief Executive Officer, Chairman, Director

Mr. Charania has served as the Company’s Chief Executive Officer, Chief Financial Officer, Board Chairman, and director since December 26, 2017. Mr. Charania is a co-founder and currently the Chief Executive Officer at Rokk3r Labs, where he shapes the global vision, direction, and expansion of the company and a general partner of Rokk3r Fuel ExO, where he manages fundraising and investment opportunities. Prior to joining Rokk3r Labs, Mr. Charania built multiple software companies and served as the Director of Engineering at Convergys Corporation, a global customer management and information management service provider from 2004 to 2008 His professional experience includes developing and deploying SMS billing platforms, downloadable ring-tone systems, and smart IP-based tools which reduce global deployment costs. He earned a Bachelor of Mathematics from the University of Waterloo.

German Montoya-Chief Strategy Officer, Director

Mr. Montoya has served as the Company’s Chief Exponential Officer, Secretary, and director since December 26, 2017. He is a co-founder and currently the Chief Strategy and Creative Officer at Rokk3r Labs, where he executes the strategic direction for its portfolio companies, and a general partner of Rokk3r Fuel ExO, where he manages fundraising and investment opportunities. Prior to joining Rokk3r Labs in 2012, between 2008 and 2012 he was the principal officer of an advertising company, Rokk3r Mobile Marketing and Advertising. He led strategic and commercial initiatives as the Marketing Vice President at Cycle Logic, Inc., a provider of integrated Internet solutions for wireless telephone operators throughout Latin America from 2004 to 2008. Mr. Montoya’s professional experience also includes working as a consultant at Accenture from 1997 to 2002. He earned a Bachelor of Science in Applied Economics and Business Management at Cornell University.

Jeffrey S. Ransdell-Director

Mr. Ransdell has served as a director since December 26, 2017. He is a founding partner and managing director of Rokk3r Fuel ExO, where he is responsible for all investments on behalf of the limited partners and leads efforts to raise global venture capital. Prior to joining Rokk3r Fuel ExO in 2017, between 2011 and 2016, Mr. Ransdell held positions as a managing director and division executive at Bank of America Merrill Lynch. While leading Bank of America Merrill Lynch’s Southeast Division, a region encompassing Florida, Alabama, southeast Georgia, the Caribbean and Latin America, he drove new strategic asset flows and supervised staff across various departments including client relationship management, business development, marketing, risk and compliance. Mr. Ransdell earned a Bachelor of Arts in Finance and International Finance from the University of North Dakota.

Salim Ismail-Director

Mr. Ismail has served as a director since November 2, 2018. He served as the Executive Director/Global Ambassador at Singularity University based at the NASA Research Park in Moffett Field, California, from September 2008 to August of 2014, where Mr. Ismail engaged in, amongst other things, organizational design, fundraising, faculty management, curriculum development and community development. From September of 2014 to the present Mr. Ismail has worked as a speaker and author. Mr. Ismail received a Bachelor of Sciences with honors in theoretical physics and computing from the University of Waterloo in Canada in 1989.

Mr. Charania is a citizen of Canada. Mr. Montoya is a citizen of the United States of America. Mr. Ransdell is a citizen of the United States of America. Mr. Ismail is a citizen of Canada.

Past contacts, transactions, negotiations and agreements.

Collaboration and License Agreements with Rokk3r Labs LLC

On April 9, 2018, the Company entered into a collaboration agreement with Rokk3r Labs LLC (“Rokk3r Labs”), the Company’s controlling shareholder (the “Collaboration Agreement”). Under the terms of the Collaboration Agreement, Rokk3r Labs will provide the following services to the Company on a non-exclusive, as-needed basis: delivery support of products such as consultancy services and software development services; sales support and promotion for company building and consulting services; and promotional activity, events, branding, and marketing. Once the Company is ready to undertake some or all of these activities, Rokk3r Labs will narrow the services it performs on behalf of the Company. Each party, based on its cost structure, will define the fees for the services to be provided and will invoice the other party for the services actually rendered on a monthly basis. The term of the Collaboration Agreement commenced on January 1, 2018 and has a term of two years.

On November 15, 2018, the Company entered into a Trademark License Agreement (the “License Agreement”) with Rokk3r Labs, pursuant to which Rokk3r Labs granted the Company and its subsidiaries, a limited, worldwide, non-exclusive, non-transferable, license to use the trademark ROKK3R in word form and in all style and design variations used to date by Rokk3r Labs or its authorized licensees, until November 12, 2019. The License Agreement may automatically renew for successive one-year terms unless terminated by either party, and has been renewed until November 19, 2020. If a party elects not to renew the agreement, that party shall provide a notice of that intention to the other party at least 30 days prior to the renewal date. Pursuant to the terms of the License Agreement, the Company shall pay an annual fee of $120,000, payable on the anniversary of the effective date of the License Agreement.

Salim Ismail - Retainer Agreement

Salim Ismail was appointed to the Company’s Board in 2018. Discussions related to his appointment were initiated by the Company, and on November 2, 2018, the Company entered into a Board of Directors Retainer Agreement (the “Retainer Agreement”) with Mr. Ismail, pursuant to which the Company agreed to pay Mr. Ismail the following compensation for his services: 1,000,000 shares of the Company’s Common Stock for 4 years of service, with 25% of such common stock shares vesting at the end of each calendar year, with the first vesting date on December 31, 2019, as long as Mr. Ismail remains a member of the Board and continues to fulfill his duties and provide the services during the corresponding vesting period. Notwithstanding the foregoing, if Mr. Ismail’s appointment is terminated prior to 4 years of service, at any time after the first vesting period, Mr. Ismail will continue to earn the common stock shares in the agreed upon quantity; however, the vesting period of the remaining Common Stock will then move to the end of the fourth calendar year (December 31, 2022). However, the Board, in its discretion, may at any time accelerate the vesting period for the common stock shares under the Retainer Agreement.

The term of the Retainer Agreement is from the date of execution until Mr. Ismail either resigns or is terminated from such position in accordance with the Company’s Amended and Restated Articles of Incorporation, as amended and Bylaws. Pursuant to the Retainer Agreement, the Company shall not pay Mr. Ismail any extra fees for each regularly scheduled meeting of the Board that he attends in person, nor for attending meetings telephonically. Additionally, pursuant to the Retainer Agreement, if Mr. Ismail is designated to participate in a committee of the Board as either a chairperson or non-chairperson member, he will be entitled to receive compensation in addition to the compensation previously agreed, in amounts to be later approved by the Board at the moment of such committee appointment.

Director and Officer Indemnification

The Company’s certificate of incorporation, as amended, provides that it will indemnify and advance expenses to its directors and officers to the fullest extent permitted under the Nevada Revised Statutes.

Rokk3r Labs LLC

Rokk3r Labs LLC was incorporated in Florida in February 2012 and its principal business is business and technology consulting and company building services. Neither Rokk3r Labs LLC nor its principals have been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors) or been a party to any judicial or administrative proceeding during the past five years (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the Company from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

The managing members of Rokk3r Labs LLC are set forth in the following table:

Nabyl Charania-Managing Member

Mr. Charania has served as the Company’s Chief Executive Officer, Chief Financial Officer, Board Chairman, and director since December 26, 2017. Mr. Charania is a co-founder and currently the Chief Executive Officer at Rokk3r Labs, where he shapes the global vision, direction, and expansion of the company and a general partner of Rokk3r Fuel ExO, where he manages fundraising and investment opportunities. Prior to joining Rokk3r Labs, Mr. Charania built multiple software companies and served as the Director of Engineering at Convergys Corporation, a global customer management and information management service provider from 2004 to 2008 His professional experience includes developing and deploying SMS billing platforms, downloadable ring-tone systems, and smart IP-based tools which reduce global deployment costs. He earned a Bachelor of Mathematics from the University of Waterloo.

German Montoya-Managing Member

Mr. Montoya is a managing member, co-founder and currently the Chief Strategy and Creative Officer of Rokk3r Labs, where he executes the strategic direction for its portfolio companies, and a general partner of Rokk3r Fuel ExO, where he manages fundraising and investment opportunities. Prior to joining Rokk3r Labs in 2012, between 2008 and 2012 he was the principal officer of an advertising company, Rokk3r Mobile Marketing and Advertising. He led strategic and commercial initiatives as the Marketing Vice President at Cycle Logic, Inc., a provider of integrated Internet solutions for wireless telephone operators throughout Latin America from 2004 to 2008. Mr. Montoya’s professional experience also includes working as a consultant at Accenture from 1997 to 2002. He earned a Bachelor of Science in Applied Economics and Business Management at Cornell University.

Juan Montoya-Managing Member

Mr. Montoya is a managing member and co-founder of Rokk3r Labs. He currently heads all delivery teams across Rokk3r business areas, including Rokk3r Think and Rokk3r Cobuild. Previously as an economist and management consultant, Mr. Montoya specialized in helping large private and public institutions transform themselves through the use of data and manage complex programs, leading teams of consultants in the development of complex predictive models and software tools. In this capacity he has traveled the world and worked for some of the world’s leading institutions.

Brian Sanchez-Managing Member

Mr. Sanchez is a managing member, co-founder and Technology Innovation Officer at Rokk3r Labs, and Chief Technology Officer of Rokk3r portfolio company AdMobilize. Mr. Sanchez defines, implements and supports the core technologies, infrastructure and technology delivery of Rokk3r companies. He cross-pollinates technologies and standards across Rokk3r portfolio companies and leads the invention of new engineering solutions. Mr. Sanchez leads the empowerment of the company’s engineering teams through an inspirational culture focused on execution, quality and happiness. Previously, Mr. Sanchez co-founded 5DPI Media, where he led technology research, created rapid prototyping frameworks, worked on distributed computing problems, large-scale system design, networking, security and data compression.

Rokk3r Fuel Fund 2, LP

Rokk3r Fuel Fund 2, LP was incorporated in Delaware in 2016, and its principal business is venture capital work that empowers founders who challenge accepted ideas to build new economies and opportunities. Neither Rokk3r Fuel Fund 2, LP nor its managing and general partners have been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors) or been a party to any judicial or administrative proceeding during the past five years (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the Company from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

The managing and general partners of Rokk3r Fuel Fund 2, LP are set forth in the following table:

Jeffrey S. Ransdell-Managing Partner

Mr. Ransdell is the managing partner of Rokk3r Fuel Fund 2, LP. He is also a founding partner and managing director of Rokk3r Fuel ExO, where he is responsible for all investments on behalf of the limited partners and leads efforts to raise global venture capital. Prior to joining Rokk3r Fuel ExO in 2017, between 2011 and 2016, Mr. Ransdell held positions as a managing director and division executive at Bank of America Merrill Lynch. While leading Bank of America Merrill Lynch’s Southeast Division, a region encompassing Florida, Alabama, southeast Georgia, the Caribbean and Latin America, he drove new strategic asset flows and supervised staff across various departments including client relationship management, business development, marketing, risk and compliance. Mr. Ransdell earned a Bachelor of Arts in Finance and International Finance from the University of North Dakota.

Nabyl Charania-General Partner

Mr. Charania is a general partner of Rokk3r Fuel Fund 2, LP and has served as Rokk3r Inc’s Chief Executive Officer, Chief Financial Officer, Board Chairman, and director since December 26, 2017. Mr. Charania is a co-founder and currently the Chief Executive Officer at Rokk3r Labs, where he shapes the global vision, direction, and expansion of the company and a general partner of Rokk3r Fuel ExO, where he manages fundraising and investment opportunities. Prior to joining Rokk3r Labs, Mr. Charania built multiple software companies and served as the Director of Engineering at Convergys Corporation, a global customer management and information management service provider from 2004 to 2008 His professional experience includes developing and deploying SMS billing platforms, downloadable ring-tone systems, and smart IP-based tools which reduce global deployment costs. He earned a Bachelor of Mathematics from the University of Waterloo.

German Montoya-General Partner

Mr. Montoya is a general partner of Rokk3r Fuel Fund 2, LP, and is the Chief Strategy and Creative Officer of Rokk3r Labs, where he executes the strategic direction for its portfolio companies, and a general partner of Rokk3r Fuel ExO, where he manages fundraising and investment opportunities. Prior to joining Rokk3r Labs in 2012, between 2008 and 2012 he was the principal officer of an advertising company, Rokk3r Mobile Marketing and Advertising. He led strategic and commercial initiatives as the Marketing Vice President at Cycle Logic, Inc., a provider of integrated Internet solutions for wireless telephone operators throughout Latin America from 2004 to 2008. Mr. Montoya’s professional experience also includes working as a consultant at Accenture from 1997 to 2002. He earned a Bachelor of Science in Applied Economics and Business Management at Cornell University.

CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES

We summarize below the material United States federal income tax consequences to the Company and to stockholders resulting from the Reverse Stock Split. This summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Regulations (the “Regulations”) issued pursuant thereto, and published rulings and court decisions in effect as of the date hereof, all of which are subject to change. This summary does not take into account possible changes in such laws or interpretations, including amendments to the Code, applicable statutes. Regulations and proposed Regulations or changes in judicial or administrative rulings, some of which may have retroactive effect. No assurance can be given that any such changes will not adversely affect the federal income tax consequences of the Reverse Stock Split.

This summary does not address all aspects of the possible federal income tax consequences of the Reverse Stock Split and is not intended as tax advice to any person or entity. In particular, and without limiting the foregoing, this summary does not consider the federal income tax consequences to the Company’s stockholders in light of their individual investment circumstances nor to stockholders subject to special treatment under the federal income tax laws, including, without limitation, foreign corporations and non-resident aliens (collectively. “Non-U.S. Holders”), financial institutions, regulated investment companies, real estate investment trusts, holders who are dealers in securities or foreign currency, traders in securities that elect to use a mark-to-market method of accounting for securities holdings, tax-exempt organizations, insurance companies, holders that received their Common Stock pursuant to the exercise of employee stock options or otherwise as compensation, persons liable for alternative minimum tax, holders who hold their Common Stock as part of a hedge, straddle, conversion, constructive sale or other integrated transaction, or holders whose functional currency is not the U.S. dollar. In addition, this summary does not address the tax consequences of the Reverse Stock Split arising under the unearned income Medicare contribution tax or under the laws of any foreign, state or local jurisdiction or any U.S. federal tax consequences other than federal income taxation, including any U.S. federal estate or gift tax consequences. The discussion below neither binds nor precludes the Internal Revenue Service (the “IRS”) from adopting a position contrary to that expressed below, and the Company cannot assure holders that such a contrary position could not be asserted successfully by the IRS and adopted by a court if the position were litigated.

The Company will not obtain a ruling from the IRS or an opinion of counsel regarding the federal income tax consequences to the stockholders of the Company as a result of the Reverse Stock Split. Accordingly, you are encouraged to consult your own tax advisor regarding the specific tax consequences of the proposed Reverse Stock Split, including the application and effect of state, local, and foreign income and other tax laws.

This summary assumes that you are one of the following: (i) a citizen or resident of the United States; (ii) a domestic corporation; (iii) an estate the income of which is subject to United States federal income tax regardless of its source; or (iv) a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust. This summary also assumes that you have held and will continue to hold your shares as capital assets for federal income tax purposes.

You should consult your tax advisor as to the particular federal, state, local, foreign, and other tax consequences applicable to your specific circumstances.

The decision to engage in the Reverse Stock Split at this time is not the result of any tax consequences of the Reverse Stock Split. We believe that the Reverse Stock Split will be treated as a tax-free “recapitalization” for federal income tax purposes. This should result in no material federal income tax consequences to the Company or to the stockholders who do not receive cash in the Reverse Stock Split. However, if you are a Cashed-Out Stockholder receiving cash in the Reverse Stock Split, you may not qualify for tax free “recapitalization” treatment for federal income tax purposes.

Federal Income Tax Consequences to Stockholders Who Do Not Receive Cash in Connection with the Reverse Stock Split

If you (i) continue to hold stock directly immediately after the Reverse Stock Split and (ii) you receive no cash as a result of the Reverse Stock Split, you should not recognize any gain or loss in the Reverse Stock Split for federal income tax purposes. Your aggregate adjusted tax basis in your shares of stock held immediately after the Reverse Stock Split will be equal to your aggregate adjusted tax basis in your shares of stock held immediately prior to the Reverse Stock Split and you will have the same holding period in your stock as you had in such stock immediately prior to the Reverse Stock Split.

Federal Income Tax Consequences to Stockholders Who Receive Cash in Connection with the Reverse Stock Split

If you (i) receive cash in exchange for fractional shares as a result of the Reverse Stock Split, (ii) you do not continue to hold any stock directly immediately after the Reverse Stock Split, and (iii) you are not related to any person or entity that holds stock immediately after the Reverse Stock Split, you will recognize capital gain or loss on the Reverse Stock Split for federal income tax purposes, with such gain or loss measured by the difference between the cash you receive for your cashed out stock and your aggregate adjusted tax basis in such stock.

If you receive cash in exchange for fractional shares as a result of the Reverse Stock Split, but either continue to directly own stock immediately after the Reverse Stock Split, or are related to a person or entity who continues to hold stock immediately after the Reverse Stock Split, you will recognize capital gain or loss in the same manner as set forth in the previous paragraph, provided that your receipt of cash either (i) is “not essentially equivalent to a dividend,” (ii) constitutes a “substantially disproportionate redemption of stock,” or (iii) constitutes a “complete termination of interest,” as described below.

(i) “Not Essentially Equivalent to a Dividend.” You will satisfy the “not essentially equivalent to a dividend” test if the reduction in your proportionate interest in the Company resulting from the Reverse Stock Split (taking into account for this purpose the stock owned by persons related to you) is considered a “meaningful reduction” given your particular facts and circumstances. The Internal Revenue Service has ruled that a small reduction by a minority stockholder whose relative stock interest is minimal and who exercises no control over the affairs of the corporation will satisfy this test.

(ii) “Substantially Disproportionate Redemption of Stock.” The receipt of cash in the Reverse Stock Split will be a “substantially disproportionate redemption of stock” for you if the percentage of the outstanding shares of stock of the Company owned by you (and by persons related to you) immediately after the Reverse Stock Split is (a) less than 50% of all outstanding shares and (b) less than 80% of the percentage of shares of stock owned by you (and by persons related to you) immediately before the Reverse Stock Split.

(iii) “Complete Termination of Interest.” To satisfy the “complete termination of interest” test, you cannot continue to hold any stock directly immediately after the Reverse Stock Split. If you are treated as owning shares of stock actually or constructively owned by certain individuals and entities related to you, you may still satisfy the requirements of this test if you (a) retain no interest in the corporation immediately after the Reverse Stock Split (including any interest as an officer, director, or employee), other than an interest as a creditor, (b) do not acquire an interest in the corporation within ten years after the date of the Reverse Stock Split, and (c) agree to notify the Internal Revenue Service of the acquisition of any interest in the corporation within that ten-year period. You should consult your tax advisor for details if you find that these facts describe your situation and you wish to recognize capital gain or loss on the receipt of cash for your cashed out stock.

In applying these tests, you will be treated as owning shares of stock actually or constructively owned by certain individuals and entities related to you. If your receipt of cash in exchange for stock is not treated as capital gain or loss under any of the tests, it will be treated first as ordinary dividend income to the extent of your ratable share of the Company’s current and accumulated earnings and profits, then as a tax-free return of capital to the extent of your aggregate adjusted tax basis in your shares, and any remaining amount will be treated as capital gain. For a more detailed discussion, please see “Capital Gain and Loss” and “Special Rate for Certain Dividends” in this section below. If your receipt of cash in exchange for stock is treated as ordinary dividend income, you may not receive any tax benefit from your basis in such shares.

Capital Gain and Loss

For individuals, net capital gain (defined generally as your total capital gains in excess of capital losses for the year) recognized upon the sale of capital assets that have been held for more than 12 months generally will be subject to tax at a rate not to exceed 15%. Net capital gain recognized from the sale of capital assets that have been held for 12 months or less will continue to be subject to tax at ordinary income tax rates. Capital gain recognized by a corporate taxpayer will continue to be subject to tax at the ordinary income tax rates applicable to corporations. There are limitations on the deductibility of capital losses.

Special Rate for Certain Dividends

In general, dividends are taxed at ordinary income rates. However, you may qualify for a 15% rate of tax on any cash received in the Reverse Stock Split that is treated as a dividend as described above, if (i) you are an individual or other non-corporate stockholder, (ii) you have held the share of stock with respect to which the dividend was received for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date, as determined under the Code, and (iii) you were not obligated during such period (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. You are urged to consult with your tax advisor regarding your applicability for, and the appropriate federal, state, local, foreign or other tax treatment of, any such dividend income.

Backup Withholding

Stockholders will be required to provide their social security or other taxpayer identification numbers (or. in some instances. additional information) to the Transfer Agent in connection with the Reverse Stock Split to avoid backup withholding requirements that might otherwise apply. The Letter of Transmittal will require each stockholder to deliver such information when the Common Stock certificates are surrendered following the Effective Date of the Reverse Stock Split. Failure to provide such information may result in backup withholding at a rate of 24%.

As explained above, the amounts paid to you as a result of the Reverse Stock Split may result in dividend income, capital gain income, or some combination of dividend and capital gain income to you depending on your individual circumstances. You should consult your tax advisor as to the particular federal, state, local, foreign, and other tax consequences of the Reverse Stock Split, in light of your specific circumstances.

Tax Consequences of the Reverse Stock Split to the Company

With respect to the Reverse Stock Split, the Company generally should not recognize any gain or loss for U.S. federal income tax purposes. Under the Code, an “ownership change” with respect to a corporation can significantly limit the amount of pre-ownership change net operating losses (“NOLs”) and certain other tax assets that the corporation may utilize after the ownership change to offset future taxable income. Very generally, an ownership change occurs if the aggregate stock ownership of holders of at least 5% of a corporation’s stock increases by more than 50 percentage points over the preceding 3-year period. The Company does not expect the Reverse Stock Split to have a material impact on its NOLs or other relevant tax assets, as determined for U.S. federal income tax purposes.

THE PRECEDING DISCUSSION OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT IS GENERAL AND DOES NOT INCLUDE ALL CONSEQUENCES TO EVERY STOCKHOLDER UNDER FEDERAL. STATE. LOCAL. OR FOREIGN TAX LAWS. ACCORDINGLY. EACH STOCKHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO IT OF THE REVERSE SPLIT. INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAW.