Company Quick10K Filing
Rokk3R
Price-0.00 EPS-0
Shares107 P/E0
MCap-0 P/FCF0
Net Debt-1 EBIT-3
TEV-1 TEV/EBIT0
TTM 2019-09-30, in MM, except price, ratios
10-Q 2019-09-30 Filed 2019-11-19
10-Q 2019-06-30 Filed 2019-08-26
10-Q 2019-03-31 Filed 2019-05-20
10-K 2018-12-31 Filed 2019-04-01
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-04-17
10-Q 2017-09-30 Filed 2018-01-12
10-Q 2017-06-30 Filed 2017-08-21
10-Q 2017-03-31 Filed 2017-05-18
10-K 2016-12-31 Filed 2017-03-15
10-Q 2016-09-30 Filed 2016-11-10
10-Q 2016-06-30 Filed 2016-08-10
10-Q 2016-03-31 Filed 2016-05-04
10-K 2015-12-31 Filed 2016-04-08
10-Q 2015-09-30 Filed 2015-11-12
10-Q 2015-06-30 Filed 2015-08-14
10-Q 2015-03-31 Filed 2015-05-14
10-K 2014-12-31 Filed 2015-03-30
10-Q 2014-09-30 Filed 2014-11-05
10-Q 2014-06-30 Filed 2014-08-06
10-Q 2014-03-31 Filed 2014-05-07
10-K 2013-12-31 Filed 2014-03-25
10-Q 2013-09-30 Filed 2013-10-30
10-Q 2013-06-30 Filed 2013-07-31
10-Q 2013-03-31 Filed 2013-04-23
10-K 2012-12-31 Filed 2013-02-11
10-Q 2012-09-30 Filed 2012-11-01
10-Q 2012-06-30 Filed 2012-08-13
10-Q 2012-03-31 Filed 2012-04-27
10-K 2011-12-31 Filed 2012-02-23
10-Q 2011-09-30 Filed 2011-11-02
10-Q 2011-06-30 Filed 2011-07-25
10-Q 2011-03-31 Filed 2011-04-19
10-K 2010-12-31 Filed 2011-01-28
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-11
10-K 2009-12-31 Filed 2010-03-09
8-K 2020-03-30
8-K 2019-11-08
8-K 2019-09-04
8-K 2019-07-08
8-K 2019-06-01
8-K 2019-05-22
8-K 2018-11-02
8-K 2018-07-26
8-K 2018-06-18
8-K 2018-06-15
8-K 2018-03-23
8-K 2018-03-02
8-K 2018-02-23
8-K 2018-01-24
8-K 2017-11-19

EDRG 10Q Quarterly Report

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-32.1 ex32-1.htm

Rokk3R Earnings 2019-09-30

Balance SheetIncome StatementCash Flow
20151162-12012201420172020
Assets, Equity
2.5-5.0-12.5-20.0-27.5-35.02012201420172020
Rev, G Profit, Net Income
2.31.50.80.0-0.7-1.52012201420172020
Ops, Inv, Fin

10-Q 1 g8752.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: September 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: 106,834,926 Shares of Common Stock, par value $0.0001 per share as of November 13, 2019.


ROKK3R INC. AND SUBSIDIARIES

Form 10-Q
September 30, 2019
 
INDEX
 
PART I. FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements
3
 
Condensed Consolidated Balance Sheets – As of September 30, 2019 and December 31, 2018 (unaudited)
3
 
Condensed Consolidated Statements of Operations – For the Three and Nine Months ended September 30, 2019 and 2018 (unaudited)
4
 
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)  – For the Nine Months ended September 30, 2019 and 2018 (unaudited)
5
 
Condensed Consolidated Statements of Cash Flows – For the Nine Months ended September 30, 2019 and 2018 (unaudited)
6
 
Notes to the Condensed Consolidated Financial Statements (unaudited)
7
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
27
     
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
32
     
Item 4.
Controls and Procedures
32
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
33
     
Item 1A.
Risk Factors
33
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
33
     
Item 3.
Defaults Upon Senior Securities
33
     
Item 4.
Mine Safety Disclosures
33
     
Item 5.
Other Information
33
     
Item 6.
Exhibits
34
 
 
 
 SIGNATURES 
35
 
2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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


   
September 30,
   
December 31,
 
   
2019
   
2018
 
ASSETS
           
CURRENT ASSETS:
           
Cash
 
$
676,875
   
$
2,297,902
 
Accounts receivable, net
   
670,556
     
400,182
 
Prepaid expenses - related party
   
250,000
     
425,000
 
Prepaid expenses
   
28,299
     
18,953
 
Other receivable
   
11,142
     
-
 
Due from parent company
   
98,908
     
75,138
 
Investment in digital currencies
   
10,842
     
-
 
                 
Total Current Assets
   
1,746,622
     
3,217,175
 
                 
Furniture and equipment, net
   
24,418
     
19,015
 
Intangible assets
   
160,760
     
-
 
Investment in Rokk3r Labs LLC (parent) - cost method
   
1,000,000
     
1,000,000
 
Investment - equity method
   
100
     
-
 
                 
Total Assets
 
$
2,931,900
   
$
4,236,190
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
CURRENT LIABILITIES:
               
Accounts payable
 
$
445,597
     
192,225
 
Accrued expenses
   
304,316
     
18,407
 
Accrued expenses - related party
   
45,000
     
15,000
 
Due to related party
   
10
     
-
 
Contract liability
   
40,000
     
20,000
 
Notes payable
   
12,000
     
12,000
 
                 
Total Current Liabilities
   
846,923
     
257,632
 
                 
Redeemable Series B Convertible Preferred stock - $0.0001 par value; 4,687,500 shares authorized; 4,085,938 issued and
 
outstanding at September 30, 2019 and December 31, 2018 (liquidation preference of $3,029,764 and $2,719,419, respectively)
   
3,029,764
     
2,719,419
 
                 
Commitments and Contingencies (Note 12)
               
                 
STOCKHOLDERS' EQUITY (DEFICIT):
               
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 September 30, 2019 and December 31, 2018
   
-
     
-
 
Common stock - $0.0001 par value; 500,000,000 shares authorized; 106,764,355 and 101,427,105 shares issued and
         
outstanding at September 30, 2019 and December 31, 2018
   
10,676
     
10,143
 
Common stock issuable; 1,968,988 and 1,000,000 shares issuable at September 30, 2019 and December 31, 2018,  respectively
   
197
     
100
 
Additional paid in capital
   
77,259,775
     
76,217,441
 
Accumulated deficit
   
(78,304,430
)
   
(74,968,545
)
Total Rokk3r, Inc Stockholders' Equity (Deficit)
   
(1,033,782
)
   
1,259,139
 
Non-controlling interest in consolidated subsidiary and VIE (Note 5)
   
88,995
     
-
 
                 
Total Stockholders' Equity (Deficit)
   
(944,787
)
   
1,259,139
 
                 
Total Liabilities and Stockholders' Equity (Deficit)
 
$
2,931,900
   
$
4,236,190
 



See accompanying notes to the unaudited condensed consolidated financial statements.

3

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


   
For the Three Months Ended
   
For the Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2019
   
2018
   
2019
   
2018
 
                         
Revenues
 
$
925,856
   
$
584,324
   
$
3,050,001
     
1,092,169
 
                                 
Operating Expenses:
                               
Consulting fees - parent
   
719,950
     
625,000
     
2,132,188
     
2,125,000
 
Consulting fees - other
   
54,640
     
147,958
     
321,318
     
367,878
 
Compensation expense
   
490,654
     
185,032
     
1,129,310
     
242,338
 
Contract  labor
   
653,914
     
315,696
     
1,536,460
     
454,536
 
Legal expense
   
125,219
     
81,131
     
390,389
     
300,204
 
Professional fees
   
72,952
     
69,715
     
190,262
     
183,692
 
Bad debt (recovery) expense
   
67,145
     
-
     
(27,254
)
   
-
 
General and administrative expenses
   
250,347
     
105,445
     
711,705
     
242,198
 
Impairment losses
   
48,878
     
-
     
118,058
     
-
 
                                 
Total Operating Expenses
   
2,483,699
     
1,529,977
     
6,502,436
     
3,915,846
 
                                 
Loss from Operations
   
(1,557,843
)
   
(945,653
)
   
(3,452,435
)
   
(2,823,677
)
                                 
Other Income (Expense)
                               
Interest income (expense), net
   
-
     
(7,789
)
   
2,736
     
(40,448
)
Other income (expense), net
   
933
     
(427
)
   
(1,322
)
   
(427
)
Loss on equity method investments
   
-
     
-
     
(350
)
   
-
 
Total Other Income (Expense), net
   
933
     
(8,216
)
   
1,064
     
(40,875
)
                                 
Loss Before Provision for Income Taxes
   
(1,556,910
)
   
(953,869
)
   
(3,451,371
)
   
(2,864,552
)
                                 
Provision for income taxes
   
-
     
-
     
-
     
-
 
                                 
Net Loss
   
(1,556,910
)
   
(953,869
)
   
(3,451,371
)
   
(2,864,552
)
                                 
Series B Preferred stock redemption premium
   
(104,585
)
   
-
     
(310,345
)
   
-
 
                                 
Net Loss Attributable to Common Stockholders Before Allocation to Non-controlling Interest
   
(1,661,495
)
   
(953,869
)
   
(3,761,716
)
   
(2,864,552
)
                                 
Less Net Loss Allocated to Non-controlling Interest in Consolidated Subsidiary and VIE
   
(42,328
)
   
-
     
(425,831
)
   
-
 
                                 
Net Loss Applicable to Rokk3r, Inc Common Stockholders
 
$
(1,619,168
)
 
$
(953,869
)
 
$
(3,335,885
)
 
$
(2,864,552
)
                                 
Net Loss per Share of Common Stock Outstanding:
                               
Basic and Diluted
 
$
(0.02
)
 
$
(0.01
)
 
$
(0.04
)
 
$
(0.03
)
                                 
Weighted-Average Number of Shares Outstanding:
                               
Basic and Diluted
   
103,733,343
     
101,082,850
     
103,060,085
     
98,851,573
 



See accompanying notes to the unaudited condensed consolidated financial statements.

4

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

                      Additional
             
   
Preferred Stock
   
Common Stock
   
Common Stock Issuable
   
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
)
                                                                                 
Issuance of common stock for intangible assets
   
-
     
-
     
45,000
     
4
     
-
     
-
     
25,283
             
3,613
     
28,900
 
                                                                                 
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(643,441
)
   
(128,656
)
   
(772,097
)
                                                                                 
Balance at March 31, 2019
   
-
   
$
-
     
101,472,105
   
$
10,147
     
1,050,000
   
$
105
   
$
76,349,698
   
$
(75,714,298
)
 
$
(125,043
)
 
$
520,609
 
                                                                                 
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 VIE equity in subsidiaries
   
-
     
-
     
-
     
-
     
-
     
-
     
500,000
     
-
     
500,000
     
1,000,000
 
                                                                                 
Adjustment to non-controlling interest
   
-
     
-
     
-
     
-
     
-
     
-
     
(10,602
)
   
13,316
     
(2,103
)
   
611
 
                                                                                 
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(880,833
)
   
(241,531
)
   
(1,122,364
)
                                                                                 
Balance at June 30, 2019
   
-
   
$
-
     
101,472,105
   
$
10,147
     
2,261,238
   
$
226
   
$
77,101,490
   
$
(76,685,263
)
 
$
131,323
   
$
557,923
 
                                                                                 
Stock-based compensation
   
-
     
-
     
-
     
-
     
-
     
-
     
158,785
     
-
     
-
     
158,785
 
                                                                                 
Series B Preferred stock redemption premium
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(104,585
)
   
-
     
(104,585
)
                                                                                 
Issuance of common stock in connection with acquisition of Bullfrog Venture LLC
   
-
     
-
     
292,250
     
29
     
(292,250
)
   
(29
)
   
-
     
-
     
-
     
-
 
                                                                                 
Issuance of common stock pursuant to an agreement (Note 11)
   
-
     
-
     
5,000,000
     
500
     
-
     
-
     
(500
)
   
-
     
-
     
-
 
                                                                                 
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(1,514,583
)
   
(42,328
)
   
(1,556,910
)
                                                                                 
Balance at September 30, 2019
   
-
   
$
-
     
106,764,355
   
$
10,676
     
1,968,988
   
$
197
   
$
77,259,775
   
$
(78,304,430
)
 
$
88,995
   
$
(944,787
)

                                                   
Additional
                         
   
Preferred Stock
   
Common Stock
   
Common Stock Issuable
   
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
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(986,366
)
   
-
     
(986,366
)
                                                                                 
Balance at June 30, 2018
   
-
   
$
-
     
100,664,819
   
$
10,067
     
-
   
$
-
   
$
75,549,283
   
$
(73,365,008
)
 
$
-
   
$
2,194,342
 
                                                                                 
Stock issued to consultants for services rendered or to be rendered
   
-
     
-
     
12,286
     
1
     
-
     
-
     
25,799
     
-
     
-
     
25,800
 
                                                                                 
Common stock issued upon conversion of debt
   
-
     
-
     
750,000
     
75
     
-
     
-
     
482,473
     
-
     
-
     
482,548
 
                                                                                 
Reclassification of note premium upon debt conversion
   
-
     
-
     
-
     
-
     
-
     
-
     
110,000
     
-
     
-
     
110,000
 
                                                                                 
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(953,869
)
   
-
     
(953,869
)
                                                                                 
Balance at September 30, 2018
   
-
   
$
-
     
101,427,105
   
$
10,143
     
-
   
$
-
   
$
76,167,555
   
$
(74,318,877
)
 
$
-
   
$
1,858,821
 

See accompanying notes to the unaudited condensed consolidated financial statements.
5

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


   
For the Nine Months Ended
 
   
September 30,
 
   
2019
   
2018
 
Cash Flows from Operating Activities:
           
Net loss
 
$
(3,451,371
)
 
$
(2,864,552
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization expense
   
4,672
     
853
 
Stock-based compensation
   
336,712
     
-
 
Common stock issued for compensation and consulting services
   
32,000
     
25,800
 
Bad debt recovery
   
(27,154
)
   
-
 
Impairment losses
   
118,058
     
-
 
Loss on equity method investments
   
350
     
-
 
Change in operating assets and liabilities:
               
Accounts and other receivables
   
(247,862
)
   
(360,315
)
Accounts receivable - related parties
   
-
     
(41,499
)
Prepaid expenses
   
(9,301
)
   
(15,777
)
Prepaid expenses - related party
   
175,000
     
(250,000
)
Accounts payable
   
253,372
     
95,741
 
Contract liability
   
20,000
     
-
 
Accrued expenses
   
285,754
     
48,554
 
Net cash used in operating activities
   
(2,509,770
)
   
(3,361,195
)
                 
Cash Flows from Investing Activities:
               
Investment in digital currencies
   
(100,000
)
   
-
 
Cash acquired from acquisition of Bullfrog Venture LLC
   
22,938
     
-
 
Cash paid for equity method investments
   
(350
)
   
-
 
Due from parent company
   
(23,770
)
   
-
 
Purchases of property and equipment
   
(10,075
)
   
(8,711
)
Net cash used in investing activities
   
(111,257
)
   
(8,711
)
                 
Cash Flows from Financing Activities:
               
Cash proceeds from sale of non-controlling VIE equity
   
1,000,000
     
-
 
Payments on parent advances
   
-
     
(16,492
)
Cash proceeds from sale of common stock
   
-
     
3,735,380
 
Cash proceeds from sale of Series B Convertible Preferred stock
   
-
     
1,500,000
 
Net cash provided by financing activities
   
1,000,000
     
5,218,888
 
                 
Change in Cash
   
(1,621,027
)
   
1,848,982
 
                 
Cash at beginning of period
   
2,297,902
     
-
 
                 
Cash at end of period
 
$
676,875
   
$
1,848,982
 
                 
Supplemental Disclosure of Interest and Income Taxes Paid:
               
Interest paid
 
$
-
   
$
-
 
Income taxes paid
 
$
-
   
$
-
 
                 
Supplemental schedule of non-cash investing and financing activities
               
Common shares issued in connection with the purchase of intangible assets
 
$
28,900
   
$
-
 
Series B Preferred stock redemption premium
 
$
310,345
   
$
-
 
Stock issued for debt conversion
 
$
-
   
$
482,548
 
Reclassification of note premium upon conversion of debt
 
$
-
   
$
110,000
 
                 
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 statements.

6


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


NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

The following is a summary of the organization and business of Rokk3r, Inc and subsidiaries (“we”, “our”, “us”, or the "Company")
 
We were formerly known as Eight Dragons Company, a Nevada corporation. Our 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, we changed our name to Rokk3r Inc. In connection with this name change, on June 18, 2018, our trading symbol was changed to “ROKK.”

We generate revenues primarily from consulting services agreements focused on education, consulting, development and growth. Our 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 September 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 September 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 September 30, 2019, Termo VB is not yet operational.
Tradera, Inc. (“Tradera”), a company incorporated in Delaware on August 14, 2019, and a wholly owned subsidiary of Rokk3r Ops. As of September 30, 2019, ROKKCB10 is not yet operational.
ROKKCB11, Inc. (“ROKKCB11”), a company incorporated in Delaware on September 13, 2019, and a wholly owned subsidiary of Rokk3r Ops. As of September 30, 2019, ROKKCB10 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 wholly owned subsidiaries, majority-owned subsidiary, which are inactive as of September 30, 2019, except Rokk3r Ops and Bullfrog, and variable interest entities (“VIE”) for which the Company has been determined to be the primary beneficiary. 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 September 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 nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year.

The Company consolidates its subsidiaries that are wholly-owned, majority owned, and entities that are variable interest entities where Rokk3r Ops is determined to be the primary beneficiary. The Company’s consolidated financial statements include the accounts of: Rokk3r Inc, Rokk3r Ops, Rokk3r Ai, Bullfrog, ROKKCB10, Termo VB, Tradera, Ai VB, B3riblock and Cargologik (collectively the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.

Variable Interest Entities

In accordance with ASC 810-10-25-22, a VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. The Company bases its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.
 
7

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


A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents, has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. Rokk3r Ops determines whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for Rokk3r Ops or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the business activities of Rokk3r Ops and the other interests. Rokk3r Ops reassesses its determination of whether it is the primary beneficiary of a VIE each reporting period. Significant judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIEs and general market conditions.
 
The Company evaluates its investments and financings, including investments in unconsolidated ventures and securitization financing transactions to determine whether each investment or financing is a VIE. Rokk3r Ops analyzes new investments and financings, as well as reconsideration events for existing investments and financings, which vary depending on type of investment or financing.

Ai Venture Builder, Inc. (“Ai VB”), B3riblock, Inc. (“B3riblock”) and Cargologik, Inc. (“Cargologik”) are entities which were determined to be VIEs, in accordance with ASC 810-10-25-22, under Rokk3r Ops, because the equity investors do not have the characteristics of a controlling financial interest and the initial equity investments in these entities may be or are insufficient to meet or sustain its operations without additional subordinated financial support from other parties. Rokk3r Ops is the primary beneficiary of these VIEs because it is the sole service provider (some through service agreements) which gives the Rokk3r Ops the rights to receive (and has received) the proceeds from the VIE operation. The consolidated VIEs have non-controlling interests (see Note 5) and the Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

Non-Controlling Interest

Majority-owned subsidiary:

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 additional equity which resulted in a further decrease of Rokk3r Ops’ equity ownership in Rokk3r Ai down 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 September 30, 2019 (see Note 5).

Variable interest entities:

On March 26, 2019, Rokk3r Ops entered into a Subscription Agreement (the “Subscription Agreement”) with Ai Venture Builder, Inc. (“Ai VB”), to purchase equity in Ai VB which gave Rokk3r Ops a 50% equity ownership (see Note 5).

On October 15, 2018, B3riblock was incorporated, as a wholly-owned subsidiary of Rokk3r Ops and its investment in B3riblock was consolidated during the quarter ended March 31, 2019. On June 5, 2019, B3riblock sold 60% equity ownership to a third-party investor which reduced Rokk3r Ops equity ownership form 100% down to 40% (see Note 5).

On May 3, 2019, Cargologik was incorporated, as a wholly-owned subsidiary of Rokk3r Ops. On May 28, 2019, Cargologik sold 50% equity ownership to a third-party investor which reduced Rokk3r Ops equity ownership form 100% down to 50% (see Note 5).

The Company presented non-controlling interest from the majority-owned subsidiary and VIEs as a component of equity on the Company’s unaudited condensed consolidated balance sheets under “Non-controlling interest in consolidated subsidiary and VIE” and reported non-controlling interest net income or loss under “Net (income) loss allocated to non-controlling interest in consolidated subsidiary and VIE” in the unaudited condensed consolidated statements of operations based on respective non-controlling interest ownership as of September 30, 2019.

8


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


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 nine months ended September 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 September 30, 2019 and December 31, 2018, respectively. The Company maintained its cash in various financial institutions during the nine months ended September 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 or direct write-offs 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 favorable and does not believe that an allowance for bad debt is needed.

During the three and nine months ended September 30, 2019, the Company wrote-off $67,145 and $80,525, respectively, of account receivable deemed uncollectible.

During the nine months ended September 30, 2019, the Company recovered $107,779 of an account receivable written off in 2018 reducing the allowance for bad debt balance to $0. As of September 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 uncertainties related to 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 currencies or 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 the Company’s accounting for digital currencies or 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 its digital currencies, and any increase in value will be recognized only upon disposition. The Company’s digital currencies are 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 September 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 nine months ended September 30, 2019, an impairment expense of $48,878 and $89,158, respectively, was recorded in connection with the impairment of the digital currencies.

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 September 30, 2019 and December 31, 2018.

9


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


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

Property and Equipment
 
Property and equipment 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 September 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).

In accordance with 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.

10


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


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 three and nine months ended September 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 loss 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 nine months ended September 30, 2018, there were no impairment losses incurred. During the three and nine months ended September 30, 2019, the Company recorded an aggregate impairment loss of $48,878 and $118,058, respectively, of which $28,900 was related to the impairment of intangible assets in a subsidiary (see Note 5) and $89,158 was related to the impairment of digital currencies as discussed above under “Investments in Digital Currencies” during the nine months ended September 30, 2019. The impairment for the three months ended September 30, 2019 was related to the impairment of 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.
 
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).
 

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


Basic Loss per Common Share

Basic loss per share is calculated by dividing the net loss attributable to common 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 per share is computed by dividing the loss available to common 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 September 30, 2019 and 2018:

   
September 30,
 
 
2019
 
2018
 
 
       
Series B Preferred Stock
 

4,085,938
     
2,343,750
 
     
4,085,938
     
2,343,750
 

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.

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 September 30, 2019, the Company did not have any operating or capital leases.

12


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


Reclassifications

The Company segregated the compensation, legal and professional expense for the nine months ended September 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 nine months ended September 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.

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 nine months ended September 30, 2019, the Company had a net loss of $3,451,371 and net cash used in operations was $2,509,770, respectively. As of September 30, 2019, the Company had an accumulated deficit of $78,304,430.

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.

13


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


NOTE 4 – INVESTMENTS

Rokk3r Labs, LLC

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 kept its investment in Rokk3r Labs at cost of $1,000,000 which represents the cash purchase price. At September 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 wholly owned 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 September 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 nine months ended September 30, 2019, Rokk3r Ops’ share of Rokk3r Flamingo’s net loss was $37,399. 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).

NOTE 5 – NON-CONTROLLING INTEREST

Rokk3r Ai, Inc.

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) a 12.5% ownership interest 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 nine months ended September 30, 2019.