Company Quick10K Filing
Quick10K
Rokk3R
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$2.00 101 $203
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-09-04 Regulation FD, Exhibits
8-K 2019-07-08 Accountant
8-K 2019-06-01 Accountant, Exhibits
8-K 2019-05-22 Regulation FD, Exhibits
8-K 2018-11-02 Enter Agreement, Sale of Shares, Officers, Exhibits
8-K 2018-07-26 Enter Agreement, Sale of Shares, Amend Bylaw, Exhibits
8-K 2018-06-18 Regulation FD, Exhibits
8-K 2018-06-15 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-03-23 Amend Bylaw, Exhibits
8-K 2018-03-02 Regulation FD, Exhibits
8-K 2018-02-23 Regulation FD, Exhibits
8-K 2018-01-24 Other Events
8-K 2017-11-19 Enter Agreement, M&A, Sale of Shares, Control, Officers, Exhibits
CORI Corium 295
UCBB US-China Biomedical Technology 16
SUWN Sunwin Stevia 16
NVL Novelis 0
RYAA Ryanair Holdings 0
SPS Southwestern Public Service 0
TFVR Timefirevr 0
SQFL SQL Technologies 0
AMGI Ameri Metro 0
MESS Messagebgone 0
EDRG 2019-06-30
Part I - Financial Information
Item 1. Financial Statements
Note 1 - Organization and Description of Business
Note 2 - Summary of Significant Accounting Policies
Note 3 - Going Concern
Note 4 - Investments
Note 5 - Non-Controlling Interest
Note 6 - Acquisition of Bullfrog Ventures, Llc
Note 7- Convertible Promissory Note
Note 8- Series B Redeemable Convertible Preferred Stock
Note 9- Stockholders' Equity
Note 10- Concentrations
Note 11- Related-Party Transactions
Note 12 - Commitments and Contingencies
Note 13- Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm

Rokk3R Earnings 2019-06-30

EDRG 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 g8738.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2019

or

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________
 
Commission File Number: 000-28453

ROKK3R INC.
(Exact name of registrant as specified in its charter)

Nevada
75-2610236
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
2121 NW 2nd Avenue #203, Miami, FL
33127
(Address of principal executive offices)
(Zip Code)

(305) 259-6637
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading Symbol(s)
 
Name of exchange on which registered
         
None
  N/A
  N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such fling requirements for the past 90 days. Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐
 
Accelerated filer 
Non-Accelerated filer ☒
Smaller reporting company ☒
Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be fled by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 106,472,105 Shares of Common Stock, par value $0.0001 per share as of August 23, 2019.


ROKK3R INC. AND SUBSIDIARIES

Form 10-Q
June 30, 2019
 
INDEX
 
PART I. FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements
 
 
Condensed Consolidated Balance Sheets – As of June 30, 2019 and December 31, 2018(unaudited)
3
 
Condensed Consolidated Statements of Operations – For the Three and Six Months ended June 30, 2019 and 2018 (unaudited)
4
 
Condensed Consolidated Statements of Changes in Stockholders’ Equity – For the Six Months ended June 30, 2019 and 2018 (unaudited)
5
 
Condensed Consolidated Statements of Cash Flows – For the Six Months ended June 30, 2019 and 2018 (unaudited)
6
 
Notes to the Condensed Consolidated Financial Statements
7
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
28
     
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
34
     
Item 4.
Controls and Procedures
34
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
35
     
Item 1A.
Risk Factors
35
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
35
     
Item 3.
Defaults Upon Senior Securities
35
     
Item 4.
Mine Safety Disclosures
35
     
Item 5.
Other Information
35
     
Item 6.
Exhibits
35
 
 
 
 SIGNATURES 
36
 
2


 

 
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ROKK3R INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

   
June 30,
   
December 31,
 
   
2019
   
2018
 
ASSETS
           
CURRENT ASSETS:
           
Cash
 
$
881,181
   
$
2,297,902
 
Accounts receivable, net
   
693,675
     
400,182
 
Accounts receivable  - related parties
   
333,531
     
-
 
Prepaid expenses - related party
   
250,000
     
425,000
 
Prepaid expenses
   
23,629
     
18,953
 
Other receivable
   
508
     
-
 
Due from parent company
   
117,124
     
75,138
 
Investment in digital currencies
   
59,720
     
-
 
Total Current Assets
   
2,359,368
     
3,217,175
 
                 
Furniture and equipment, net
   
22,248
     
19,015
 
Intangible assets
   
160,760
     
-
 
Investment in Rokk3r Labs (parent) - cost method
   
1,000,000
     
1,000,000
 
                 
Total Assets
 
$
3,542,376
   
$
4,236,190
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES:
               
Accounts payable
 
$
237,769
    $
192,225
 
Accrued expenses
   
46,135
     
18,407
 
Accrued expenses - related party
   
15,000
     
15,000
 
Due to related party
   
37
     
-
 
Deferred revenue
   
15,300
     
20,000
 
Notes payable - other
   
12,000
     
12,000
 
Total Current Liabilities
   
326,241
     
257,632
 
                 
Redeemable Series B  Convertible Preferred stock - $0.0001 par value; 4,687,500 shares authorized; 4,085,938 issued and
               
outstanding at June 30, 2019 and December 31, 2018 (liquidation preference of $2,925,179 and $2,719,419, respectively)
   
2,925,179
     
2,719,419
 
                 
Commitments and Contingencies (Note 12)
               
                 
STOCKHOLDERS' EQUITY:
               
Preferred stock - $0.0001 par value; 50,000,000 shares authorized; Series A non-convertible preferred stock, 1,000,000 authorized;
               
$0.0001 par value; no shares issued and outstanding at June 30, 2019 and December 31, 2018
   
-
     
-
 
Common stock - $0.0001 par value; 500,000,000 shares authorized; 101,472,105 shares issued and outstanding at
               
June 30, 2019 and December 31, 2018
   
10,147
     
10,143
 
Common stock issuable; 2,261,238 and 1,000,000 shares issuable at June 30, 2019 and December 31, 2018, respectively
   
226
     
100
 
Additional paid in capital
   
76,615,605
     
76,217,441
 
Accumulated deficit
   
(76,320,829
)
   
(74,968,545
)
Total Rokk3r, Inc Stockholders' Equity
   
305,149
     
1,259,139
 
Non-controlling interest in consolidated subsidiary (Note 5)
   
(14,193
)
   
-
 
                 
Total Stockholders' Equity
   
290,956
     
1,259,139
 
                 
Total Liabilities and Stockholders' Equity
 
$
3,542,376
   
$
4,236,190
 




See accompanying notes to the unaudited condensed consolidated financial statement.

3


 

ROKK3R INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


   
For the Three Months Ended
   
For the Six Months Ended
 
   
June 30,
   
June 30,
 
   
2019
   
2018
   
2019
   
2018
 
                         
Revenues
 
$
1,235,225
   
$
507,845
   
$
2,124,145
   
$
507,845
 
Revenues - related party
   
483,531
     
-
     
733,531
     
-
 
Total Revenue
   
1,718,756
     
507,845
     
2,857,676
     
507,845
 
                                 
Operating Expenses:
                               
Consulting fees - parent
   
819,167
     
750,000
     
1,412,238
     
1,500,000
 
Consulting fees - other
   
139,704
     
-
     
266,678
     
-
 
Compensation expense
   
379,718
     
57,306
     
638,702
     
57,306
 
Contract  labor
   
489,029
     
138,839
     
882,546
     
138,839
 
Legal expense
   
140,597
     
75,926
     
265,170
     
219,073
 
Professional fees
   
61,630
     
339,665
     
117,311
     
333,897
 
Bad debt (recovery) expense
   
13,380
     
-
     
(94,399
)
   
-
 
General and administrative expenses
   
279,104
     
115,857
     
461,035
     
136,756
 
Impairment loss
   
40,280
     
-
     
69,180
     
-
 
Total Operating Expenses
   
2,362,609
     
1,477,593
     
4,018,461
     
2,385,871
 
                                 
Loss from Operations
   
(643,853
)
   
(969,748
)
   
(1,160,785
)
   
(1,878,026
)
                                 
Other Income (Expense)
                               
Interest income (expense), net
   
2,195
     
(16,620
)
    1,665
     
(32,659
)
Other expense, net
   
(462
)
   
-
     
(1,185
)
   
-
 
Loss on equity method investments
   
(701
)
   
-
     
(852
)
   
-
 
Total Other Income (Expense)
   
1,032
     
(16,620
)
   
(372
)
   
(32,659
)
                                 
Loss Before Provision for Income Taxes
   
(642,821
)
   
(986,368
)
   
(1,161,157
)
   
(1,910,685
)
                                 
Provision for income taxes
   
-
     
-
     
-
     
-
 
                                 
Net Loss
   
(642,821
)
   
(986,368
)
   
(1,161,157
)
   
(1,910,685
)
                                 
Series B Preferred stock redemption premium
   
(103,448
)
   
-
     
(205,760
)
   
-
 
                                 
Net Loss Attributable to Common Stockholders Before Allocation to Non-controlling Interest
   
(746,269
)
   
(986,368
)
   
(1,366,917
)
   
(1,910,685
)
Less Net Loss Allocated to Non-controlling Interest in Consolidated Subsidiary
   
(8
)
   
-
     
(14,633
)
   
-
 
                                 
Net Loss Applicable to Rokk3r, Inc Common Stockholders
 
$
(746,261
)
 
$
(986,368
)
 
$
(1,352,284
)
 
$
(1,910,685
)
                                 
Net Loss per Share of Common Stock Outstanding:
                               
Basic and Diluted
 
$
(0.01
)
 
$
(0.01
)
 
$
(0.01
)
 
$
(0.02
)
                                 
Weighted-Average Number of Shares Outstanding:
                               
Basic and Diluted
   
102,953,530
     
101,783,317
     
102,717,876
     
97,717,445
 




See accompanying notes to the unaudited condensed consolidated financial statement.

4


 

ROKK3R INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 2018 and 2019
(Unaudited)

   
Preferred Stock
   
Common Stock
   
Common Stock Issuable
   
Additional
paid-in
   
Accumulated
    Non-controlling        
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
deficit
   
interest
   
Total
 
                                                             
Balance at December 31, 2017
   
-
   
$
-
     
94,828,287
   
$
9,483
     
-
   
$
-
   
$
71,814,487
   
$
(71,454,325
)
 
$
-
  $
369,645
 
                                                                               
Stock issued for cash
   
-
     
-
     
3,395,125
     
339
     
-
     
-
     
2,172,661
     
-
     
-
   
2,173,000
 
                                                                               
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(924,317
)
   
-
   
(924,317
)
                                                                               
Balance at March 31, 2018
   
-
   
$
-
     
98,223,412
   
$
9,822
     
-
   
$
-
   
$
73,987,148
   
$
(72,378,642
)
 
$
-
  $
1,618,328
 
                                                                               
Stock issued for cash
   
-
     
-
     
2,441,407
     
245
     
-
     
-
     
1,562,135
     
-
     
-
   
1,562,380
 
                                                                               
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(986,368
)
   
-
   
(986,368
)
                                                                               
Balance at June 30, 2018
   
-
   
$
-
     
100,664,819
   
$
10,067
     
-
   
$
-
   
$
75,549,283
   
$
(73,365,010
)
 
$
-
  $
2,194,340
 

   
Preferred Stock
   
Common Stock
   
Common Stock Issuable
   
Additional
paid-in
   
Accumulated
    Non-controlling          
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
deficit
   
interest
   
Total
 
                                                                                 
Balance at December 31, 2018
   
-
   
$
-
     
101,427,105
   
$
10,143
     
1,000,000
   
$
100
   
$
76,217,441
   
$
(74,968,545
)
 
$
-
   
$
1,259,139
 
                                                                                 
Common stock issued to consultants for services
   
-
     
-
     
-
     
-
     
50,000
     
5
     
31,995
     
-
     
-
     
32,000
 
                                                                                 
Stock-based compensation
   
-
     
-
     
-
     
-
     
-
     
-
     
74,979
     
-
     
-
     
74,979
 
                                                                                 
Series B Preferred stock redemption premium
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(102,312
)
   
-
     
(102,312
)
                                                                                 
Sale of non-controlling interest in a subsidiary
   
-
     
-
     
45,000
     
4
     
-
     
-
     
28,796
     
-
     
(3,656
)
   
25,144
 
                                                                                 
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(514,680
)
   
-
     
(514,680
)
                                                                                 
Balance at March 31, 2019
   
-
   
$
-
     
101,472,105
   
$
10,147
     
1,050,000
   
$
105
   
$
76,353,211
   
$
(75,585,537
)
 
$
(3,656
)
 
$
774,270
 
                                                                                 
Stock-based compensation
   
-
     
-
     
-
     
-
     
918,988
     
92
     
102,854
     
-
     
-
     
102,946
 
                                                                                 
Series B Preferred stock redemption premium
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(103,448
)
   
-
     
(103,448
)
                                                                                 
Acquisition of Bullfrog Venture LLC
   
-
     
-
     
-
     
-
     
292,250
     
29
     
159,540
     
-
     
-
     
159,569
 
                                                                                 
Sale of non-controlling interest in a subsidiary
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
10,969
     
(10,529
)
   
440
 
                                                                                 
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(642,813
)
   
(8
)
   
(642,821
)
                                                                                 
Balance at June 30, 2019
   
-
   
$
-
     
101,472,105
   
$
10,147
     
2,261,238
   
$
226
   
$
76,615,605
   
$
(76,320,829
)
 
$
(14,193
)
 
$
290,956
 


See accompanying notes to the unaudited condensed consolidated financial statement.

5


 
ROKK3R INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


   
For the Six Months Ended
 
   
June 30,
 
   
2019
   
2018
 
Cash Flows from Operating Activities:
           
Net loss
 
$
(1,161,157
)
 
$
(1,910,685
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization expense
   
2,815
     
393
 
Stock-based compensation
   
177,925
     
-
 
Common stock issued for compensation and consulting services
   
32,000
     
-
 
Bad debt recovery
   
(94,299
)
   
-
 
Impairment loss
   
69,180
     
-
 
Loss on equity investments
   
852
     
-
 
Change in operating assets and liabilities:
               
Accounts receivable
   
(192,694
)
   
(86,752
)
Accounts receivable - related parties
   
(333,531
)
   
-
 
Prepaid expenses
   
170,369
     
(15,000
)
Accounts payable
   
45,544
     
112,658
 
Accounts payable - parent
   
-
     
(250,000
)
Deferred revenue
   
(4,700
)
   
-
 
Accrued expenses
   
(2,909
)
   
60,579
 
Net cash used in operating activities
   
(1,290,605
)
   
(2,088,807
)
                 
Cash Flows from Investing Activities:
               
Investment in digital currencies
   
(100,000
)
   
-
 
Cash paid for equity Investments
   
(852
)
   
-
 
Cash acquired from acquisition of Bullfrog Venture LLC
   
22,938
     
-
 
Cash paid for purchase of additional equity in a majority-owned subsidiary
   
(168
)
   
-
 
Due from parent company
   
(41,986
)
   
-
 
Purchases of property and equipment
   
(6,048
)
   
(8,711
)
Net cash used in investing activities
   
(126,116
)
   
(8,711
)
                 
Cash Flows from Financing Activities:
               
Payments on parent advances
   
-
     
(4,810
)
Cash proceeds from sale of common stock
   
-
     
3,735,380
 
Net cash provided by financing activities
   
-
     
3,730,570
 
                 
Change in Cash
   
(1,416,721
)
   
1,633,052
 
                 
Cash at beginning of period
   
2,297,902
     
-
 
                 
Cash at end of period
 
$
881,181
   
$
1,633,052
 
                 
Supplemental Disclosure of Interest and Income Taxes Paid:
               
Interest paid
 
$
-
   
$
-
 
Income taxes paid
 
$
-
   
$
-
 
                 
Supplemental schedule of non-cash investing and financing activities
               
Subscription Receivable
 
$
408
   
$
-
 
Common shares issued in connection with the sale of non-controlling interest in a subsidiary
 
$
29,244
   
$
-
 
Subscription payable in connection with acquisition of subsidiaries
 
$
302
   
$
-
 
Series B Preferred stock redemption premium
 
$
205,760
   
$
-
 
                 
Net Assets Acquired in Acquisition:
               
Cash
 
$
22,938
   
$
-
 
Account receivable
   
6,500
     
-
 
Deposit
   
45
     
-
 
Intangible  asset
   
160,760
     
-
 
Accrued expenses
   
(30,664
)
   
-
 
Common stock issued in connection with the acquisition of Bullfrog Ventures, LLC
 
$
159,579
   
$
-
 




See accompanying notes to the unaudited condensed consolidated financial statement.

6


 

 
ROKK3R INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)


NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
 
The Company was formerly known as Eight Dragons Company, a Nevada corporation. The predecessor was incorporated in Delaware on September 27, 1996 and on October 24, 2007 changed its state of incorporation from Delaware to Nevada by means of a merger with and into Eight Dragons Company. On March 23, 2018, the Company changed itsname to Rokk3r Inc. In connection with this name change, on June 18, 2018, the Company’s trading symbol was changed to “ROKK.”

The Company generates revenues primarily from consulting services agreements focused on education, consulting, development and growth. Agreements are individually negotiated and are meant to help entrepreneurs and business professionals to innovate and create high growth companies through training, mentors, and access to our global network of advisors, investors and business builders.

In connection with the new business initiatives, the Company has formed or acquired the following subsidiaries:
 
·
Rokk3r Ops Inc. (“Rokk3r Ops”), a company incorporated in Florida on May 16, 2018 and wholly owned by the Company that provides our "Think Phase", "Co-build", and “Scale” services.
·
Rokk3r Ai Inc. (“Rokk3r Ai”), a company incorporated in Delaware on November 20, 2018 and a majority-owned subsidiary of Rokk3r Ops. As of June 30, 2019, Rokk3r Ai is not yet operational (see Note 5).
·
Bullfrog Ventures, LLC (“Bullfrog”), a company incorporated in Florida on May 20, 2016, was acquired by the Company on May 21, 2019 and is a wholly owned subsidiary of the Company (see Note 6).
·
ROKKCB10, Inc. (“ROKKCB10”), a company incorporated in Delaware on June 11, 2019, and a wholly owned subsidiary of Rokk3r Ops. As of June 30, 2019, ROKKCB10 is not yet operational.
·
Termo VB, Inc. (“Termo VB”), a company incorporated in Delaware on June 20, 2019, and a wholly owned subsidiary of Rokk3r Ops. As of June 30, 2019, Termo VB is not yet operational.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial information, which includes unaudited condensed consolidated financial statements of the Company and its whollyowned subsidiaries, of which all are inactive as of June 30, 2019, except Rokk3r Ops and Bullfrog. All intercompany transactions and balances have been eliminated. In the opinion of management, all adjustments necessary to present fairly our financial position, results of operations, and cash flows as of June 30, 2019 and 2018, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. Certain information and note disclosures normally included in our annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2018 and footnotes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2019. The results of operations for the six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year.

The Company’s condensed consolidated financial statements include the financial statements of its whollyowned and majority-owned subsidiaries discussed above. All significant intercompany accounts and transactions have been eliminated in consolidation.

Non-Controlling Interest

On February 11, 2019, Rokk3r Ai sold 12.5% common stock of Rokk3r Ai to an investor. As a result of these transactions, Rokk3r Ops’ ownership and voting interest decreased from 100% to 87.5% as of March 31, 2019.

On April 12, 2019, Rokk3r Ai sold additionalequity which resulted ina further decrease of Rokk3r Ops’ equity ownership in Rokk3r Aidown to 50% and its voting interest down to 75%, with Rokk3r Ops retaining control over Rokk3r Ai.The allocation of income (loss) to non-controlling interest was adjusted to reflect the change in the non-controlling interest in the subsidiary from 12.5% to 50% as of June 30, 2019 (see Note 5).

7


 

 
ROKK3R INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)


The Company presented non-controlling interest as a component of equity on its unaudited condensed consolidated balance sheets under the heading “Non-controlling interest in consolidated subsidiary” and reported non-controlling interest net income or loss under the heading “Net (income) loss allocated to non-controlling interest in consolidated subsidiary” in the unaudited condensed consolidated statements of operations based on its 50% ownership as of June 30, 2019.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates. Significant estimates for the six months ended June 30, 2019 and year ended December 31, 2018 include the assumptions used in assessing impairment of investments, allowances on uncollectible accounts receivable, useful life of property and equipment, valuation allowances for deferred tax assets, the fair value of equity method investments and acquisitions, the fair value of intangible assets acquired, non-cash equity transactions and stock-based compensation.

Cash and Cash Equivalents

For the purposes of the condensed consolidated statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at June 30, 2019 and December 31, 2018, respectively. The Company maintained its cash in various financial institutions during the six months ended June 30, 2019. Balances were insured up to Federal Deposit Insurance Corporation limits.

Accounts Receivable

Accounts receivable are stated at their net realizable value. The Company reviews its accounts to estimate losses resulting from the inability of its customer to make required payments. Any required allowance is based on specific analysis of past due accounts and considers historical trends if write-offs. Past due is based on how recently payments have been received from customers. The Company’s collection experience has been favorableand does not believe that an allowance for bad debt is needed. During the six months ended June 30, 2019, the Company recovered $107,779 of account receivable previously written off which reduced the allowance for bad debt balance to $0. As of June 30, 2019 and December 31, 2018, the recorded allowance for bad debt were $0 and $148,982, respectively.

Investments in Digital Currencies

The Company believes that digital currencies meet the definition of indefinite-lived intangible assets and accounts for them at historical cost less impairment, applying the guidance in Accounting Standards Codification (“ASC”) 350, Intangibles — Goodwill and Other.There are uncertaintiesrelatedto the application of ASC 350 to digital currencies, as it does not appropriately reflect the economics associated with digital currencies. However, in the absence of standards that specifically address the accounting for digital currencies, the Company believes that it must apply existing accounting standards in accounting for its investment in digital currencies. The Financial Accounting Standards Board (“FASB”) does not have a standard-setting project on digital currenciesor other similar digital assets on its agenda, but an industry trade group has requested that the FASB address the accounting for cryptocurrencies, a category of digital asset under which the Company believes that digital currencies fall. Accordingly, the FASB staff has researched blockchain technology and cryptocurrency market activities and the accounting challenges they present. The Company monitors any standard-setting, regulatory or technological developments that may affect theCompany’saccounting for digital currenciesor its controls and processes related to digital currencies.

The Company’s digital currencies are accounted for as indefinite-lived intangible assets therefore are not subject to amortization. Instead, its tested for impairment annually and more frequently, if events or circumstances change that indicate that it’s more likely than not that the asset is impaired (i.e., if an impairment indicator exists). As a result, the Company only recognize decreases in the value of itsdigital currencies, and any increase in value will be recognized only upon disposition.The Company’s digital currenciesare accounted for as an intangible asset, however it’s reflected as a current asset under “Digital currencies” in the accompanying condensed consolidated balance sheets because it is traded in a market and can be sold at any time. At June 30, 2019, the Company tested the digital currencies for impairment and concluded that it was impaired due to the decline of its level 2 fair value. During the three and six months ended June 30, 2019, an impairment expense of $40,280 was recorded in connection with the impairment of the digital currencies.

8


 
ROKK3R INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)


Fair Value of Financial Instruments

ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2019 and December 31, 2018.

The carrying amounts reported in the balance sheets for accounts receivable, prepaid expenses, accounts payable, accrued expenses, notes payable and amounts due to parent company approximate their fair market value based on the short-term maturity of these instruments.

Property and Equipment
 
Property are stated at cost and are depreciated using the straight-line method over their estimated useful lives, which range from three to five years. Leasehold improvements are depreciated over the shorter of the useful life or lease term including scheduled renewal terms. Maintenance and repairs are charged to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
 
Cost and Equity Method Investments

The method of accounting applied to long-term investments, whether consolidated, equity or cost, involves an evaluation of the significant terms of each investment that explicitly grant or suggest evidence of control or influence over the operations of the investee and also includes the identification of any variable interests in which the Company is the primary beneficiary.

Cost Method

The Company accounts for investments in which the Company does not have the ability to exercise significant influence over operating and financial matters using the cost method in accordance with ASC Topic 325-20, Cost Method Investments. An equity investment is accounted for under the cost method if it:

·
Does not provide the investor with a controlling investment
·
Does not provide the investor with the ability to exercise significant influence
·
Does not have readily determinable fair values
·
Is not subject to other industry-specific guidance

Under ASC 325-20, cost method investments are recorded initially at historical cost. Dividends on cost method investments received as part of the investor’s share of net earnings of the investee after the date of investment (i.e., a return on investment) are recorded as income. However, the investment is reduced if dividends received are in excess of the investor’s share of investee earnings (i.e., a return of investment) after the date of investment (see Note 4). Cost method investments are assessed for other-than-temporary impairments under the provisions of ASC 320 and are adjusted accordingly. As of June 30, 2019, the cost method investment consists of a non-controlling 18.79% membership interest in our majority owner Rokk3r Labs (see Note 4). This has been presented as has a long-term asset on the accompanying condensed consolidated balance sheets.

Equity Method

The Company accounts for investments in which the Company owns more than 20% or has the ability to exercise significant influence of the investee, using the equity method in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures. Under the equity method, an investor initially records an investment in the stock of an investee at cost and adjusts the carrying amount of the investment to recognize the investor’s share of the earnings or losses of the investee after the date of acquisition. The amount of the adjustment is included in the determination of net income by the investor, and such amount reflects adjustments similar to those made in preparing consolidated statements including adjustments to eliminate intercompany gains and losses, and to amortize, if appropriate, any difference between investor cost and underlying equity in net assets of the investee at the date of investment. The investment of an investor is also adjusted to reflect the investor’s share of changes in the investee’s capital. Dividends received from an investee reduce the carrying amount of the investment. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred which is other than temporary, and which should be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method (see Note 4).

9


 

 
ROKK3R INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)


In accordance to ASC 323-10-35-20 through 35-22, the investor ordinarily shall discontinue applying the equity method if the investment (and net advances) is reduced to zero and shall not provide for additional losses unless the investor has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee. An investor shall, however, provide for additional losses if the imminent return to profitable operations by an investee appears to be assured. For example, a material, nonrecurring loss of an isolated nature may reduce an investment below zero even though the underlying profitable operating pattern of an investee is unimpaired. If the investee subsequently reports net income, the investor shall resume applying the equity method only after its share of that net income equals the share of net losses not recognized during the period the equity method was suspended.

Equity and cost method investments are classified as investments in the accompanying consolidated balance sheets. The Company periodically evaluates its equity and cost method investments for impairment due to declines considered to be other than temporary. If the Company determines that a decline in fair value is other than temporary, then a charge to earnings is recorded as an impairment loss in the accompanying consolidated statements of operations. 

Based on an impairment analysis, the Company did not record any impairment loss related to such investments during the six months ended June 30, 2019 and 2018.

Impairment of Intangible Assets
 
In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment losses when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. During the six months ended June 30, 2018, there were no impairment losses incurred.During the six months ended June 30, 2019, the Company recorded an aggregate impairment loss of $69,180 of which $28,900 was related to the impairment of intangible assetsin a subsidiary (see Note 5) and $40,280 was related to the impairment of digital currencies as discussed above under “Investments in Digital Currencies”.

Revenue Recognition
 
In May 2014, FASB issued an update Accounting Standards Update (“ASU”)2014-09 ("ASU 2014-09") establishing ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"). ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard, which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. The Company adopted this standard in 2018 using the modified retrospective approach, which requires applying the new standard to all existing contracts not yet completed as of the effective date and recording a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Based on an evaluation of the impact ASU 2014-09 will have on the Company's sources of revenue, the Company has concluded that ASU 2014-09 did not have any impact on the process for, timing of, and presentation and disclosure of revenue recognition from customers.

The services that are offered are focused on education, consulting (“Think Phases”), development (“Co-build”) and growth (“Scale”). The Company provides services to help entrepreneurs and business professionals to innovate and create high growth companies through training, mentorship, and access to our global network of advisors, investors and business builders (“Education Services”). Revenue is recognized when the Company performs services pursuant to its agreements with customers and collectability is reasonably assured.

If at the outset of an arrangement, the Company determines that collectability is not reasonably assured, revenue is deferred until the earlier of when collectability becomes probable or the receipt of payment. If there is uncertainty as to the customer’s acceptance of the Company’s deliverables, revenue is not recognized until the earlier of receipt of customer acceptance or expiration of the acceptance period. If at the outset of an arrangement, the Company determines that the arrangement fee is not fixed or determinable, revenue is deferred until the arrangement fee becomes estimable, assuming all other revenue recognition criteria have been met.

10


 

 
ROKK3R INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)


Litigation settlements are accounted for in accordance with the gain contingency provisions of ASC Subtopic 450-30, Gain Contingencies, or ASC 450-30.
 
Redeemable Preferred Stock
 
Redeemable preferred stock (i.e., redeemable upon the occurrence of an event) and preferred stock that is redeemable (outside the control of the issuer), including those instruments that are redeemable at the option of the holder, are required to be present in mezzanine equity. Mezzanine equity is presented after liabilities and before stockholders’ equity on the balance sheet. The purpose of this classification is to convey that such a security may not be permanently part of equity and could result in a demand for cash or other assets of the entity in the future. Pursuant to ASC 480-10-S99, the Company presents redeemable securities that are classified as mezzanine equity separate from all other stockholders’ equity accounts that are classified as permanent equity (e.g., non-redeemable preferred, common stock, and retained earnings). The Company sold 4,085,938 shares of Series B Preferred for net proceeds of $2,615,000, or $0.64 per preferred share, during the year ended December 31, 2018 which is classified in mezzanine equity under “Redeemable Preferred Stock” (see Note 7).
 
Basic (Loss) Income per Common Share

Basic (loss) income per share is calculated by dividing the net (loss) income attributable to stockholders by the weighted-average number of shares outstanding for the period. Diluted (loss) income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings (loss) of the Company. Diluted (loss) income per share is computed by dividing the (loss) income available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless such dilutive potential shares would result in anti-dilution. Potentially dilutive common shares were excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following as of June 30, 2019 and 2018:

   
 
June 30, 2019
 
 
June 30, 2018
 
 
 
 
 
 
 
 
Convertible debt
 
 
 
 
 
750,000
 
Series B Preferred Stock
   
4,085,938
     
 
     
4,085,938
     
750,000
 

Stock-Based Compensation

Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation,” which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Additionally, effective January 1, 2017, the Company adopted the ASU No. 2016-09 (“ASU 2016-09”), Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 permits the election of an accounting policy for forfeitures of share-based payment awards, either to recognize forfeitures as they occur or estimate forfeitures over the vesting period of the award. The Company has elected to recognize forfeitures as they occur, and the cumulative impact of this change did not have any effect on the Company’s consolidated financial statements and related disclosures.

Through March 31, 2018, pursuant to ASC 505-50 – “Equity-Based Payments to Non-Employees,all share-based payments to non-employees, including grants of stock options, were recognized in the consolidated financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. Using a Black-Scholes valuation model, the Company periodically reassessed the fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusted the expense recognized in the consolidated financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company early adopted ASU No. 2018-07 in the second quarter of 2018, and the adoption did not have any impact on its consolidated financial statements.

11


 

 
ROKK3R INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)


Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606. The updated guidance is effective for interim and annual periods beginning after December 15, 2018.

On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. 
 
Operating lease right-of-use assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the consolidated statements of operations. As of June 30, 2019, the Company did not have any operating or capital leases.

Reclassifications

The Company segregated the compensation, legal and professional expense for the six months ended June 30, 2019 into separate line items in the operating expense section of the accompanying unaudited condensed consolidated statement of operations and conformed the presentation of the same for the three and six months ended June 30, 2018, for comparative presentation.

Recent Accounting Pronouncements

In November 2018, the FASB issued ASU 2018-18— Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. The ASU targeted improvements to GAAP for collaborative arrangements as follows:


1.
Clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all the guidance in Topic 606 should be applied, including recognition, measurement, presentation, and disclosure requirements.


2.
Adds unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606.


3.
Requires that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer.
 
For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted, including adoption in any interim period, (1) for public business entities for periods for which financial statements have not yet been issued and (2) for all other entities for periods for which financial statements have not yet been made available for issuance.

12


 

 
ROKK3R INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)


An entity may not adopt the amendments earlier than its adoption date of Topic 606. The amendments in this Update should be applied retrospectively to the date of initial application of Topic 606. An entity should recognize the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings of the later of the earliest annual period presented and the annual period that includes the date of the entity’s initial application of Topic 606. An entity may elect to apply the amendments in this Update retrospectively either to all contracts or only to contracts that are not completed at the date of initial application of Topic 606. An entity should disclose its election. An entity may elect to apply the practical expedient for contract modifications that is permitted for entities using the modified retrospective transition method in Topic 606. The Company is currently evaluating the effect on its consolidated financial statements.

NOTE 3 – GOING CONCERN
 
The Company’s unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. As reflected in the accompanying condensed consolidated financial statements, for the six months ended June 30, 2019, the Company had a net loss of $1,161,157 and net cash used in operations was $1,309,545, respectively.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. These consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
NOTE 4 – INVESTMENTS

Rokk3r Labs, Inc.

On April 30, 2017, the Company completed a purchase of a non-controlling 18.72% membership interest in Rokk3r Labs for a purchase price of $1,000,000.  Rokk3r Labs is a venture builder and operator of a ‘co-building’ platform for entrepreneurs, corporations and investors to create exponential startups.
 
In 2017, the Company became a majority-owned subsidiary of Rokk3r Labs and the Company keptits investment in Rokk3r Labs at cost of $1,000,000 which represents the cash purchase price. At June 30, 2019 and December 31, 2018, the Company’s cost method investment in Rokk3r Labs was $1,000,000 (see Note 2) which is classified as long-term asset on the accompanying condensed consolidated balance sheets. 
 
Rokk3r Flamingo, Inc.

On December 21, 2018, Rokk3r Flamingo, Inc. (“Rokk3r Flamingo”), then a whollyowned subsidiary of Rokk3r Ops, sold additional equity of Rokk3r Flamingo to several investors in order to raise capital and commence operation. As a result of these transactions Rokk3r Ops’ ownership and voting interest decreased from 100% to 35%. At June 30, 2019, Rokk3r Ops owned 35% of Rokk3r Flamingo and accounts for the investment in Rokk3r Flamingo under the equity method of accounting in accordance with ASC 323.

During the six months ended June 30, 2019, Rokk3r Ops’ share of Rokk3r Flamingo’s net loss was $19,736.In accordance to ASC 323-10-35-20, Rokk3r Ops only recognized its share of the net loss equivalent to the basis in its investment in Rokk3r Flamingo, which was $350, and the Company discontinued applying the equity method since the investment is reduced to zero and Rokk3r Ops shall not provide for additional losses since Rokk3r Ops has not guaranteed obligations to Rokk3r Flamingo and has not otherwise committed to further financial support for Rokk3r Flamingo. The Company will resume such application after its share of the Rokk3r Flamingo net income equals its share of the net loss in Rokk3r Flamingo not recognized during the period the equity method was suspended (see Note 11).

Ai Venture Builder, Inc.

On March 26, 2019, Rokk3r Ops entered into a Subscription Agreement (the “Subscription Agreement”) with Ai Venture Builder, Inc. (“Ai VB”), a Delaware corporation incorporated on March 22, 2019.  In connection with the Subscription Agreement, the Company purchased founder shares of Ai VB consisting of; (i) 1,250,000 shares of Ai VB common stock at par value of $0.0001 per share; (ii) one share of Ai VB Series A Preferred Stock (“Series A Preferred”) at par value of $0.0001 per share which represent 100% of the authorized Series A Preferred and has voting rights equal to the number of outstanding common stock multiplied by nine; and (iii) 250,000 shares of Ai VB Series C Preferred Stock (“Series C Preferred”) at par value of $0.0001 per share which represent 25% of the authorized Series C Preferred, convertible into shares of common stock in the ratio of

13


 
ROKK3R INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)


one-to-one and has one voting right per share (collectively the “Ai VB Shares”), for an aggregate purchase price $151. The Ai VB Shares purchased gave Rokk3r Ops a 50% equity ownership in Ai VB. The Series A Preferred provided Rokk3r Ops power and rights to elect two directors to serve on the three member Board of Directors of Ai VB (the “Ai VB Board”). Provisions in the Ai VB’s Articles of Incorporation and Bylaws set forth the Ai VB Board’s power and authority to decide, by majority votes, over the Ai VB’s operations through, but not limited to; (i) election/appointment or removal of officers; (ii) determine salaries or other compensation of officers and directors; (iii) designate committees and; (iv) change the number of directors. Furthermore, there were no provisions in Ai VB’s Articles of Incorporation or Bylaws for veto rights that would allow an Ai VB Board member to block significant decision without their consent and there was no operating agreement between Ai VB and its investors. The voting power for appointing two-thirds of the Ai VB Board members, provided by the Series A Preferred, granted Rokk3r Ops significant influence over Ai VB and in accordance with ASC 323-10 – Investments- Equity and Joint Ventures, the Company accounted for its investment in Ai VB under the equity method (see Note 2).

Pursuant to the terms of the Subscription Agreement, as amended on May 14, 2019, to correct the acquisition of the Series A Preferred by Rokk3r Ops which was an error in the original Subscription Agreement, Rokk3r Ops and the holder (the “Investor”) (collectively the “Parties”) of the Series B Preferred Stock (“Series B Preferred”) acknowledged and agreed that the acquisition of the Series A Preferred by Rokk3r Ops and the acquisition of the Series B Preferred by the Investor was in error, in that the Parties intended that on March 26, 2019, the Investor have the rights and preferences accruing to the Series A Stock and Rokk3r Ops have the rights and preferences accruing to the Series B Stock and therefore the Parties exchanged their respective holdings of Series A Preferred and Series B Preferred. Furthermore, pursuant to the amendment, Rokk3r Ops holds one share of Ai VB Series B Preferred at par value of $0.0001 per share which represent 100% of the authorized Series B Preferred and has voting rights equal to the number of outstanding common stock multiplied by nine. In addition, Series B Preferred provided Rokk3r Ops power and rights to elect one director to serve on the three member of the Ai VB Board. There was no change in the accounting method for Rokk3r Ops’ investment in Ai VB as it still meets the criteria for equity method in accordance to ASC 323.

During the three and six months ended June 30, 2019, Rokk3r Ops provided services Ai VB in the amount of $450,000 and $700,000, respectively, which was recognized by Rokk3r Ops as revenue from related party in accordance with ASC 323 and ASC 850 (see Note 11). As of June 30, 2019, $300,000 of these services remain unpaid and is included in the account receivable – related parties balance.

During the six months ended June 30, 2019, Rokk3r Ops’ share of the Ai VB’s net loss was $350,000. In accordance to ASC 323-10-35-20 Rokk3r Ops only recognized its share of the net loss equivalent to the basis in its investment in Ai VB, which was $151, and the Company discontinued applying the equity method since the investment is reduced to zero and Rokk3r Ops shall not provide for additional losses since Rokk3r Ops has not guaranteed obligations of Ai VB and is not otherwise committed to further financial support for Ai VB. The Company will resume such application after its share of the Ai VB net income equals its share of the net loss in Ai VB not recognized during the period the equity method was suspended (see Note 11).

B3riblock, Inc

On October 15, 2018, B3riblock, Inc. (“B3riblock”) was incorporated in the State of Delaware, asa whollyowned subsidiary of Rokk3r Ops and its investment in B3riblock was consolidated during the quarter ended March 31, 2019.

On June 5, 2019, B3riblock entered into a Stock Purchase Agreement (“SPA”) with Rokk3r Ops and a non-affiliated party, a Columbian corporation, in order to raise capital and commence operation. Pursuant to the SPA, B3riblock sold shares to Rokk3r Ops consisting of; (i) 1,990,000 shares of B3riblock common stock at a purchase price of $0.0001 per share, total purchase amount of $199; (ii) one share of B3riblock Series A Preferred Stock (“Series A”) at a purchase price of $1.00, which represent 100% of the authorized Series A and has no voting rights; and (iii) 500,000 shares of B3riblock Series C Preferred Stock (“Series C”) at a purchase price of $0.0001 per share, total purchase price of $50, which represents 40% of the authorized Series C, convertible into shares of common stock in the ratio of one-to-one, has one voting right per share and rights to elect one director to serve on the three member Board of Directors of B3riblock, (collectively “B3riblock Shares”), for a total purchase price of $250.The total B3riblock Shares purchased together with the 10,000 shares of B3riblock common stock already owned gave Rokk3r Ops 40% equity ownership in B3riblock. As a result of this transaction, Rokk3r Ops’ ownership and voting interest in B3riblockdecreased from 100% to 40% with loss of control but significant influence overB3riblock,its investment was accounted for under the equity method of accounting in accordance with ASC 323.

14


 

 
ROKK3R INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)


During the three and six months ended June 30, 2019, Rokk3r Ops provided services B3riblockin the amount of $15,484 and $19,396, respectively, which was recognized by Rokk3r Ops as revenue from related party in accordance with ASC 323 and ASC 850 (see Note 11). As of June 30, 2019, $19,396 of these services remain unpaid and is included in the account receivable – related parties balance.

In accordance to ASC 323-10-35-20, during the six months ended June 30, 2019, Rokk3r Ops’ share of the B3riblock’snet loss was $19,371, however, Rokk3r Ops only recognized its share of the net loss equivalent to the basis in its investment in B3riblock, which was $350, and the Company discontinued applying the equity method since the investment is reduced to zero and Rokk3r Ops shall not provide for additional losses since Rokk3r Ops has not guaranteed obligations toB3riblockand has not otherwise committed to further financial support for B3riblock. The Company will resume such application after its share of the B3riblock net income equals its share of the net loss in B3riblock not recognized during the period the equity method was suspended (see Note 11).

Cargologik, Inc

On May 3, 2019, Cargologik, Inc (“Cargologik”) was incorporated in Delaware as a wholly owned subsidiary of Rokk3r Ops. The Board of Directors of Cargologik (“Cargologik Board”) approved the sale of 500,000 shares of Cargologik common stock at par value of $0.0001 per share with total sale price of $50.

On May 28, 2019, Cargologik entered into a Stock Purchase Agreement (“SPA”)a non-affiliated party, a British Virgin Islands corporation. Pursuant to the SPA, the non-affiliated party,purchased 500,000 shares of Cargologik common stock at a purchase price of $0.50 per share, for a total purchase price of $250,000 (“Purchase Price”) of which 50% or $125,000 of the Purchase Price was paid in cash and a Promissory Note was issued by the non-affiliated party,for the remaining 50% balance of the Purchase Price. The Promissory Note matured on July 28, 2019 and was paid on before the maturity date.

The transactions discussed above resulted in a joint venture, in accordance with ASC 323-10 – Investments- Equity and Joint Ventures, between Rokk3r Ops and the non-affiliated party. Each of the entities had 50% equity ownership and voting rights and joint control in Cargologik. Rokk3r Ops accounted for its investment in Cargologik for under the equity method of accounting in accordance with ASC 323(see Note 2).

During the threeand six months ended June 30, 2019, Rokk3r Ops provided services to Cargologik in the amount of $14,135 which was recognized by Rokk3r Ops as revenue from related party in accordance with ASC 323 and ASC 850 (see Note 11).

In accordance to ASC 323-10-35-20, during the three months ended June 30, 2019, Rokk3r Ops’ share of the Cargologik’s net loss was $7,068, however, Rokk3r Ops only recognized its share of the net loss equivalent to the basis in its investment in Cargologik, which was $50, and the Company discontinued applying the equity method since the investment is reduced to zero and Rokk3r Ops shall not provide for additional losses since Rokk3r Ops has not guaranteed obligations of Cargologik and is not otherwise committed to further financial support for Cargologik. The Company will resume such application after its share of the Cargologik net income equals its share of the net loss in Cargologik not recognized during the period the equity method was suspended (see Note 11).

NOTE 5 – NON-CONTROLLING INTEREST

On February 11, 2019, Rokk3r Ai entered into a Stock Purchase Agreement (“SPA”) with a non-affiliated party, a Delaware limited liability company (the “Purchaser”), pursuant to which Rokk3r Ai sold (i)12.5% ownership or 1,000,000 shares of common stock (the “Rokk3r Ai Stock”) of Rokk3r Ai at par value of $0.0001 per share, for a total amount of $100, and (ii) 45,000 shares of common stock (the “Rokk Stock”) of the Company at fair value of $0.64 per share, for a total amount of $28,800. In exchange for the Rokk3r Ai Stock and Rokk Stock, Rokk3r Ai received intangible assets that include but are not limited to, computer code, service brand, social media accounts, customer prospect lists, and all intangible rights, including but not limited to all goodwill in or arising from the business as a going concern (collectively, the “Intangible Assets”). The total fair value of consideration amounting to $28,900 was allocated to the Intangible Assets under Rokk3r Ai. At March 31, 2019, the Company performed an impairment test of the Intangible Assets and concluded based on the information available at that time, the carrying value of the Intangible Assets were impaired. An aggregate amount of $28,900, representing the full impairment of the Intangible Assets, was charged to impairment expense during the six months ended June 30, 2019.
 
15


 
ROKK3R INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)


On April 12, 2019, Rokk3r Ai entered into an employment agreement with an Executive, effective as of April 12, 2019, to serve as Rokk3r Ai’s Chief Executive Officer. Pursuant to this employment agreement, Rokk3r Ai issued 1,813,332 shares of Rokk3r Ai common stock and 453,332 shares of Rokk3r Ai Series C Preferred Stock (“Series C”), representing 17% of the authorized Series C, to the Executive, subject to vesting, acceleration and forfeiture, pursuant to the terms and conditions of the Restricted Stock Award Agreement.
On April 12, 2019, Rokk3r Ai entered into a Stock Purchase Agreement (“SPA”) with a non-affiliated party, Rokk3r Ops and the Executive (the “Purchasers”) for sale of additional equity.Pursuant to the SPA, Rokk3r Ai:

·
sold shares to the Executive consisting of (i) 853,334 shares of Rokk3r Ai common stock at a purchase price of $0.0001 per share, for a total purchase price of $85.33; (ii) one share of Rokk3r Ai Series B Preferred Stock (“Series B”) at a purchase price of $1.00, which represents 100% of the authorized Series B and has no voting rights; and (iii) 213,335 shares of Rokk3r Ai Series C Preferred Stock (“Series C”) at a purchase price of $0.0001 per share, for a total purchase price of $21.33, which represents 8% of the authorized Series C, convertible into shares of common stock in the ratio of one-to-one, has one voting right per share and rights to elect one director to serve on the three member Board of Directors of Rokk3r Ai (collectively “Rokk3r Ai Shares”), for a total purchase price of $107.67.
·
sold shares to Rokk3r Ops consisting of (i) one share of Rokk3r Ai Series A Preferred Stock (“Series A”) at a purchase price of $1.00, which represents 100% of the authorized Series A and has one voting right per share and one voting right per total outstanding shares of all classes (common and preferred shares) and rights to elect two directors to serve on the three member Board of Directors of Rokk3r Ai; and (ii) 1,7500,000 shares of Rokk3r Ai Series C Preferred Stock (“Series C”) at a purchase price of $0.0001 per share, total purchase price of $175, which represents 66% of the authorized Series C, convertible into shares of common stock in the ratio of one-to-one, has one voting right per share, (collectively “Rokk3r Ai Shares”) for a total purchase price of $176.
·
sold to the non-affiliated party, 250,000 shares of Rokk3r Ai Series C Preferred Stock (“Series C”) at a purchase price of $0.0001 per share, total purchase price of $25, which represent 9% of the authorized Series C, convertible into shares of common stock in the ratio of one-to-one, has one voting right per share.

On May 2, 2019, Rokk3r Ops and a related party entered into a joinder agreement (“Agreement”) for sale of Rokk3r Ai equity. Pursuant to the Agreement, Rokk3r Ops sold to a related party; (i) 1,655,000 shares of Rokk3r Ai common stock at a sale price of $0.0001 per share, for a total saleprice of $165.50; and (ii) 413,750 shares of Rokk3r Ai Series C Preferred Stock (“Series C”) at a purchase price of $0.0001 per share, for a total purchase price of $41.38, convertible into shares of common stock in the ratio of one-to-one, has one voting right per share, (collectively “Rokk3r Ai Shares”) for a total purchase price of $206.88.

As a result of the above transactions, Rokk3r Ops’ ownership in Rokk3r Ai decreased from 100% to 50% and voting interest in Rokk3r Ai decreased from 100% to 75%, with Rokk3r Ops retaining control over Rokk3r Ai. The Company accounted the for sale of the non-controlling interest as an equity transaction in accordance with ASC 810 and no gain or loss was recognized in the accompanying unaudited condensed consolidated statement of operations. The Company presented the non-controlling interest as a separate component of equity on its unaudited condensed consolidated balance sheets under the heading “Non-controlling interest in consolidated subsidiary” and reported non-controlling interest net income or loss under the heading “Net (income) loss allocated to non-controlling interest in consolidated subsidiary” in the unaudited condensed consolidated statements of operations based on its 50% ownership and the allocation of income (loss) was adjusted to reflect the change in the non-controlling interest in the subsidiary from 12.5% to 50% as of June 30, 2019 (detailed below).

Non-controlling interest balance reconciliation:
     
Beginning balance, January 1, 2019
 
$
 
Loss allocated to non-controlling interest for quarter ended March 31, 2019
   
(3,656
)
Ending balance at March 31, 2019
   
(3,656
)
Adjustment on loss allocated to non-controlling interest due to increase in non-controlling interest from 12.5% to 50%
   
(10,529
)
Loss allocated to non-controlling interest for the quarter ended June 30, 2019
   
(8
)
Ending balance at June 30, 2019
 
$
(14,193
)

16


 
 
ROKK3R INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)


NOTE 6 – ACQUISITION OF BULLFROG VENTURES, LLC

On May 21, 2019 (the “Acquisition Date”), the Company completed the acquisition of 100% of the issued and outstanding membership interests of Bullfrog Ventures LLC, a Florida limited liability company (“Bullfrog”), from its members pursuant to the terms and conditions of the Membership Interest Purchase Agreement entered into among the Company and the Bullfrog members on the Closing Date (the “Purchase Agreement”). Bullfrog is a Florida based consulting company with a focus on technologies related to the insurance industry.The Company acquired Bullfrog primarily for the knowledge and experience of its workforce and business model with the sole intent of bringing Bullfrog’s executives, and their business model under the Company’s newly created Insuretech division. On May 31, 2019 the Company entered into an employment agreement with two former members of Bullfrog (see Note 12).

Pursuant to the Purchase Agreement, the Company issued 292,250 shares of the Company’s common stock and cash compensation of $10 in exchange for 1,100 shares of Bullfrog common stock, of which 940 were issued and outstanding, comprising 100% of the Bullfrog authorized shares. The 292,250 shares of the Company’s common stock were valued at $159,569, or $0.546 per share, which was the Volume Weighted Average Pricevalue of the Company’s common stock based on the trading price of the Company’s common stock thirty days preceding and including the trading price on the Acquisition Date.

The fair value of the assets acquired and liabilities assumed are based on management’s initial estimates of the fair values on May 21, 2019. Based upon the purchase price allocation, the following table summarizes the estimated fair value of the assets acquired and liabilities assumed on the Acquisition Date:
 
Assets acquired:
     
Cash
 
$
22,938
 
Accounts receivable
   
6,500
 
Deposit
   
45
 
Intangible asset
   
160,760
 
Total assets acquired at fair value
   
190,243
 
 
       
Liabilities assumed:
       
Accrued expenses
   
30,664
 
Total liabilities assumed
   
30,664
 
Net asset acquired
 
$
159,579
 
 
       
Purchase consideration paid:
       
Cash
  $
10
 
Common stock
   
159,569
 
Total purchase consideration paid
 
$
159,579
 

The intangible asset assumed was recorded at its estimated fair value on the Acquisition Date and was inherently uncertain, subject to refinement, pending an independent valuation of the intangible asset acquired. Management develops estimates based on assumptions as a part of the purchase price allocation process to value the assets acquired and liabilities assumed as of the date of acquisition. As a result, during the purchase price measurement period, which may be up to one year from the business Acquisition Date, the Company may record adjustments to the assets acquired and liabilities assumed based on completion of valuations, with the corresponding offset to intangible asset acquired. After the purchase price measurement period, the Company will record adjustments to assets acquired or liabilities assumed in operating expenses in the period in which the adjustments were determined.

The Company records acquisition and transaction related expenses in the period in which they are incurred. During the three and six months ended June 30, 2019, acquisition related expenses primarily consisted of legal fees of approximately $12,800. 

The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of Bullfrog had occurred as of the beginning of the following periods:

17


 

 
ROKK3R INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
 

 
 
Three Months Ended
June 30, 2019